Profits shrink for hydropower sector but rise for thermal plants

Hanoi (VNS/VNA) - Hydropower plants have seen poor business performance in the first quarter of 2019, which could give coal-powered and gas-powered thermo-electric plants more opportunities to produce electricity.

To ensure demand is met, the country's largest power group Vietnam Electricity (EVN) will need to mobilise more power from these plants and also from some solar projects that are expected to be operational in 2019.

At the end of the first quarter, the profits of most hydropower businesses slumped. Sa San 4A Hydropower JSC saw profit drop by 60 percent to 8.7 billion VND (372,000 USD). The company attributed the low profit to unfavourable weather conditions which made the machines less stable.

Southern Hydropower JSC and Vinh Son-Song Hinh Hydropower JSC also reported profit reductions of more than 50 percent. Gia Lai Hydropower JSC and Song Vang Hydropower JSC saw profits fall by 34 percent and 43 percent, respectively.

Some other units in the hydropower segment recorded modest profit growth including Nam Mu Hydropower JSC and Hydro Power JSC – Power No 3, up 3.3 and 4.4 percent, respectively.

The poor results could be due in part to the return of the El Niño weather phenomenon to Vietnam at the end of 2018, which caused widespread drought in the central region.

Over the last 10 years, there have rarely been three consecutive years of heavy rainfall. After lots of precipitation in 2017 and most of 2018, rainfall is likely to be down this year, according to Bao Viet Securities Co (BVSC). This would mean less power is generated by hydropower plants.

This provides an opportunity for thermal-power businesses as EVN faces the need to mobilise more power from other sources.

Some thermal power units enjoyed positive business results in the first quarter amid the hydropower downturn.

Pha Lai Thermal Power Co Ltd saw net profit increase by 27 percent to reach 242.6 billion VND (10.42 million USD) thanks to an improved gross profit margin, up from 14.7 percent to 19.4 percent.

Ninh Binh Thermal Power reported a net profit rise of 21 percent. PetroVietnam Power Corporation, which owns many coal and gas thermal power plants, reported profit of nearly 916 billion VND (39.4 million USD), up by 17 percent.

Electricity enterprises have also been focusing on solar power and other sources of renewable energy.

In the first quarter of the year, Gia Lai Electricity JSC recorded profit 16.8 percent higher than in Q1 2018. The opening of two solar power plants in the central province of Thua Thien-Hue and the Central Highlands Province of Gia Lai contributed to the higher profit. As much as 51 percent of the revenue came from solar power while the share from hydropower decreased from 87 percent to 47 percent.

To encourage the development of renewable energy in Vietnam, Prime Minister Nguyen Xuan Phuc issued Decision 11/2017/QD-TTg on April 11, 2017 about mechanisms to encourage solar power projects. It took effect on June 1, 2017 and will last until June 30, 2019.

For solar power projects connected to the national power grid before June 30, 2019, Vietnam Electricity (EVN) will buy the entire power output at 2,086 VND (9.35 US cents) per kWh for 20 years.

This means that if solar projects are not connected to the grid before the June deadline, the purchasing price of electricity they generate could be lower and will not be fixed.

As a result, a series of businesses such as Sao Mai Group, Thanh Thanh Cong and Bamboo Capital have rushed to finish solar projects to enjoy the preferential rate.-VNS/VNA