Fitch expects electricity demand in Vietnam to continue increasing at an average rate of 9.5% per annum, driven by rising industrialization, urbanization and affluence.
EVN's status, ownership and control by the Vietnam sovereign is “very strong”, Fitch Ratings has said in a note sent to Hanoitimes where the agency affirmed Vietnam Electricity's (EVN) Long-Term Foreign-Currency Issuer Default Rating at 'BB' with a positive outlook.
The state fully owns EVN, appoints its board and senior management, directs investments and approves tariff hikes in excess of 5%, the rating agency explained.
The support track record and Fitch’s expectations of state support for EVN are 'Strong' as the company has received guarantees, step-down loans, loans from state-owned banks at preferential rates, subsidies for strategically important projects and tax incentives.
“We expect support to be available if needed, even though the government intends to lower direct support for state-owned enterprises and contain sovereign debt levels,” Fitch Ratings said.
The socio-political implications of a potential EVN default are 'Strong' as a default by EVN would lead to service disruption in light of the company's entrenched position across the electricity-sector value chain. It would also be difficult to fund new power investments.
“We see the financial implications of a potential default by EVN as 'Very Strong' as this would significantly affect the availability and cost of domestic and foreign financing options for the state and government-related entities because EVN is one of Vietnam's key borrowers.”
In March 2019, the government increased the average electricity tariff by 8.36% to VND1,864/kWh. Fitch expects the higher tariffs to support EVN's financial profile. However, the increase in March was the first since a 6.1% jump in December 2017. Delays in implementing tariff increases are expected to continue due to the effect on inflation and economic growth.
EVN is a monopoly in Vietnam's electricity transmission and distribution sector. The company owns and operates about 58% of the country's total installed generation capacity, including large strategic hydropower assets, which the government uses to generate electricity, control floods and for irrigation.
EVN also operates the national power-dispatch system, selling electricity to more than 25 million customers across the country. The group has steadily augmented its generation capacity and cut transmission and distribution losses over the previous few years.
Fitch expects electricity demand in Vietnam to continue increasing at an average rate of 9.5% per annum, driven by rising industrialization, urbanization and affluence.
Vietnam has a solid national electrification ratio of about 99%, with the ratio reaching almost 100% in urban areas. Management has said all electricity consumers are billed regularly and collection rates are between 99% and 100% across EVN's five power-distribution companies.
The headquarters of EVN in Hanoi
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The state fully owns EVN, appoints its board and senior management, directs investments and approves tariff hikes in excess of 5%, the rating agency explained.
The support track record and Fitch’s expectations of state support for EVN are 'Strong' as the company has received guarantees, step-down loans, loans from state-owned banks at preferential rates, subsidies for strategically important projects and tax incentives.
“We expect support to be available if needed, even though the government intends to lower direct support for state-owned enterprises and contain sovereign debt levels,” Fitch Ratings said.
The socio-political implications of a potential EVN default are 'Strong' as a default by EVN would lead to service disruption in light of the company's entrenched position across the electricity-sector value chain. It would also be difficult to fund new power investments.
“We see the financial implications of a potential default by EVN as 'Very Strong' as this would significantly affect the availability and cost of domestic and foreign financing options for the state and government-related entities because EVN is one of Vietnam's key borrowers.”
In March 2019, the government increased the average electricity tariff by 8.36% to VND1,864/kWh. Fitch expects the higher tariffs to support EVN's financial profile. However, the increase in March was the first since a 6.1% jump in December 2017. Delays in implementing tariff increases are expected to continue due to the effect on inflation and economic growth.
EVN is a monopoly in Vietnam's electricity transmission and distribution sector. The company owns and operates about 58% of the country's total installed generation capacity, including large strategic hydropower assets, which the government uses to generate electricity, control floods and for irrigation.
EVN also operates the national power-dispatch system, selling electricity to more than 25 million customers across the country. The group has steadily augmented its generation capacity and cut transmission and distribution losses over the previous few years.
Fitch expects electricity demand in Vietnam to continue increasing at an average rate of 9.5% per annum, driven by rising industrialization, urbanization and affluence.
Vietnam has a solid national electrification ratio of about 99%, with the ratio reaching almost 100% in urban areas. Management has said all electricity consumers are billed regularly and collection rates are between 99% and 100% across EVN's five power-distribution companies.
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