Fitch affirms ratings of EVN units at BB+ with stable outlook, expects retail tariff up 2% yearly

Fitch Ratings on Tuesday affirmed the long-term foreign-currency issuer default rating (IDR) of five power distribution units under state utility Vietnam Electricity (EVN) at “BB+” with a stable outlook.

They are Central Power Corporation (EVNCPC), Southern Power Corporation (EVNSPC), Northern Power Corporation (EVNNPC), Ho Chi Minh City Power Corporation (EVNHCMC), and Hanoi Power Corporation (EVNHanoi).

The five power distribution companies' (PCs) ratings are equal to that of EVN, their parent with 100% ownership.

The credit rating agency also noted the standalone credit profiles (SCP) of the five PCs at “bb,” the same as that of EVN.

Fitch expects Vietnam's strong growth prospects to continue to drive power demand and revenue growth for the PCs over the medium term. The rating agency estimates electricity demand for the PCs to rise by 6-11% in 2024 and 4-7% from 2025-2027.

The agency also noted its ratings were made with a key assumption that the weighted-average retail tariffs can increase by 4-6% in 2024 and 2% annually in 2025-2027, while the bulk-supply tariffs can rise by 4-7% in 2024 and 2-5% annually from 2025 to 2027. Fitch also expects distribution losses to remain stable at around 1-4% in 2024-2027.

Fitch emphasized electricity tariff increases in Vietnam would continue to be influenced by the government's socio-political considerations. EVN can raise retail electricity tariffs every three months under the regulatory framework.

However, tariff hikes of up to 5% face scrutiny from authorities, while rises between 5% and 10% require approval from the Ministry of Industry and Trade, and larger increases need the Prime Minister's approval, Fitch clarified.

In January-July, Vietnam's electricity generation reached 179.44 billion kWh, up 11.5% year-on-year. Coal-fired power accounted for the biggest portion of 96.4 billion kWh, or 53.7% of the total. Hydropower made up 40.9 billion kWh, or 22.8%.

Other major sources were renewable energy with 24.02 billion kWh, or 13.4%, including 16 billion kWh of solar energy and 7.3 billion kWh of wind energy; gas-fired power with 14.65 billion kWh, or 8.2%; and imported energy with 3.07 billion kWh, or 1.7%.