Power utility POW to benefit from LNG expansion as Nhon Trach plants target profitability by 2028

PV Power (HoSE: POW) is expected to turn its flagship Nhon Trach 3 and 4 LNG-fired power plants profitable by 2028, as lower-than-expected construction costs and improving operating efficiency strengthen the economics of Vietnam’s first LNG-to-power plants.

The two plants, which began commercial operations early this year, could generate net profit of around VND1 trillion ($38 million) by 2028 after posting losses during their initial years of operation, according to a recent report by Vietcap Securities.

The improved outlook comes as the project's total investment cost is now expected to be about 10% below the original budget, enhancing returns at a time when competition in Vietnam’s power market is intensifying.

POW management recently told shareholders that commissioning and testing expenses came in lower than expected, helping reduce capital expenditure by approximately VND700 billion ($26.6 million).

The company plans to disburse around VND5 trillion ($189.8 million) for the project in 2026, following spending of roughly VND24 trillion ($910.9 million) between 2023 and 2025. Based on those figures, Vietcap estimates total costs will reach about VND29 trillion ($1.1 billion), compared with an earlier estimate of more than VND32 trillion ($1.2 billion).

The lower capital cost adds to what analysts already consider a key competitive advantage for Nhon Trach 3 and 4: superior fuel efficiency. The plants consume less fuel per kilowatt-hour generated than many existing gas-fired facilities, reducing operating costs and improving long-term profitability.

Industry experts cited by Vietcap described the project as Vietnam’s lowest-cost LNG power development, a notable achievement as global prices for LNG turbines and power-generation equipment have climbed sharply in recent years.

Reflecting the improved economics, Vietcap has lowered its projected 2026 loss for the project to VND304 billion ($11.5 million) from VND433 billion previously, primarily due to reduced depreciation expenses resulting from the lower investment budget.

The brokerage maintained its forecast that Nhon Trach 3 and 4 will generate 5.4 billion kilowatt-hours of electricity in 2026, supported by stronger demand linked to El Niño weather conditions despite elevated LNG prices.

Electricity output during the first four months of the year represented only 28% of Vietcap’s full-year forecast. The brokerage noted that if actual generation remains below expectations, the project could potentially avoid recording a loss in its first year of operation.

Beyond the Nhon Trach plants, POW is expected to receive a significant earnings boost from compensation payments by state utility EVN.

At its AGM, the company said EVN plans to reimburse approximately VND1.6 trillion ($60.7 million) in foreign-exchange losses incurred at the Vung Ang thermal power plant in previous years. The payment is expected during the third quarter of 2026.

Vietcap estimates that around 30% of the gain will be recognized in 2026, with the remaining amount booked in 2027. POW is also expected to recover roughly VND381 billion ($14.5 million) in operation and maintenance expenses related to the Ca Mau power complex.

Supported by these one-off gains and higher electricity production, Vietcap forecasts POW’s net profit will increase 32.5% to VND3.2 trillion ($121 million) in 2026 before rising another 32% to nearly VND4.25 trillion ($161 million) in 2027.

The company is simultaneously building one of Vietnam’s largest LNG power development pipelines as the country seeks to reduce dependence on coal while meeting rapidly growing electricity demand.

POW plans to expand installed capacity from approximately 5,800 MW today to 7,500 MW by 2030 and nearly 25,900 MW by 2050.

Among its largest upcoming projects is the 1,500-MW Quynh Lap LNG power plant, which carries an estimated investment value of VND59.4 trillion ($2.25 billion) and received investment approval earlier this year.

The company is also advancing the 1,500-MW Vung Ang III LNG project, valued at VND51.4 trillion ($1.95 billion). In May, POW signed a cooperation agreement with B.Grimm Power to jointly develop the facility.

Additional projects under consideration include a 1,500-MW LNG power plant in Quang Ninh and the Ca Mau 3 LNG project integrated with LNG import and storage infrastructure.

Outside power generation, POW is evaluating investments in electric-vehicle charging networks and energy projects in Laos as it seeks new long-term growth opportunities.