A water treatment plant in Quang Binh province, which has been built with an initial outlay of 193 billion VND and supplies clean water to nearly 90,000 people. (Photo: VNA) Nguyen Ngoc Diep, Chairman of the Vietnam Water Supply andSewerage Association (VWSA), reveals that water suppliers are categorised intotwo groups: one comprising companies that run water distribution systems andthe other including those that operate water treatment plants.
Companies in the first group fall under the management ofprovincial authorities, thereby having a monopoly on water distribution. Theirperformance depends solely on the water loss ratios of their systems and thepopulation density of their localities.
Those companies, according to the securities firm SSI, areforecast to have their revenues increase by 8% this year, supported by a 6%rise in total water consumption and a 3% rise in water prices.
For companies of the second group, VWSA estimates the totalcapacity of their water treatment plants at about 11.5 million cu.m per day,against the total consumption of around 8.6 million cu.m per day in 2023, up 6%year-by-year.
SSI forecast that water usage would continue to rise by 12%annually in Hanoi between 2025 and 2030 and about 8% in HCM City during theperiod, adding to water suppliers' revenues.
Meanwhile, water suppliers are operating more efficiently thanksto regular system upgrades and the installation of advanced water leakdetectors. On such a ground, water loss ratios are expected to fall to 16.5%this year, from 17.5% in 2022, raising their profit margin by 1.1%.
SSI also forecast that water prices would climb by around 5% inHanoi and HCM City, and by 3% in Binh Dinh province this year. However, theprices would remain unchanged in Hai Phong city and Dong Nai province.
Additionally, price rises would be more evident in industrialparks as a result of the growing demand for basic utilities among FDIinvestors.
The securities firm VCSC shares this view, saying that waterconsumption would soar in Binh Duong province as several new industrial parksare expected to come into operation between 2022 and 2025.
Two of the industrial parks are the Industrial Park VSIP III at TanUyen district and Cay Truong Industrial Park in Bau Bang district, which coversan area of 1,000ha each and are expected to give a huge boost to water pricesin the province.
SSI believes that M&A activities in 2022 among water supplierswould add to their operational success this year, allowing them to outperformthe market's average growth.
For instance, Binh Duong Water Environment JSC took over Can ThoWater Supply - Sewerage JSC and Gia Tan Water Plant to expand its waterdistribution systems to rural areas in the two provinces, significantlyimproving its market reach.
However, good news goes only as far. SSI is concerned that theenactment of the Law on Water Resources and Environment in 2023 would incurhigher costs to water suppliers because the environmental taxes imposed on themwill be recalibrated from capacity-based to output-based taxes.
Such a rise in the environmental taxes would, under SSIestimation, reduce their profit margins by between 0.2 to 0.4%. Fortunately,these slight drops in profits would be overwhelmed by the rise in revenues andwater prices, resulting in strong positive growth eventually.
According to the Ministry of Construction, Vietnam had 750 waterplants in 2022 with an aggregate capacity of 11.2 million c.m per day. On thedemand side, household consumption rose by 5% year-by-year and industrialconsumption by about 8%, against an annual rise of 3% in water prices./.
VNA
