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Vietnam's electricity price increased by 4.5%: Which enterprises' business activities were affected?

Industry context update: The country's commercial electricity output recorded a steady slight increase each year, reaching 268 billion kWh in 2022 (+6% YoY). Of which, coal power accounts for the largest share with 39%, hydropower ranks second with 35% of total output, gas power accounts for 11% and other power segments account for a low proportion including wind power, solar power,... (Figure 1).

Vietnam's electricity consumption capacity
Figure 1

In this group, wind power recorded the most impressive growth with +179% compared to the previous year, and only coal power and solar power recorded a decrease.

According to EVN's assessment, the country's commercial electricity output in 2023 increased by 5.4% over the same period and is still recording an average loss of 180 VND/kWh.

Faced with this situation, EVN has continued to increase the average retail electricity price to 2,006.79 VND/kWh (excluding VAT), an increase of 4.5% compared to the old level. (Figure 2)

Vietnamese electricity price from 2009 - 2023
Figure 2

Impact of increasing electricity prices:

There is still no clarity from a positive perspective. When companies have agreed to sign long-term contracts, the short-term average electricity price does not have much impact on the revenue of manufacturing enterprises.

For electricity distribution businesses, a price increase can have a positive impact because long-term contracts are cheap, but now selling at a higher price helps improve profits.

Negative effects:

For fields and industry groups such as steel production, chemicals, cement, paper, etc., electricity costs account for a significant proportion and there is also an estimate of the impact on the business activities of the enterprise as follows: Figure 3.

Vietnamese electricity
Figure 3

With the assumption that when costs increase that businesses cannot pass on to consumers, the total profit before tax of each industry will decrease quite a lot. Especially in the cement and steel group (Figure 4) => shows that the increase in electricity prices leads to a decline in operating efficiency.

Vietnamese electricity
Figure 4

In general, EVN's increase in retail electricity prices causes manufacturing enterprises to face many difficulties and affects their operations. For businesses that directly produce electricity, there is no significant benefit in the short term and electricity distribution businesses will enjoy this joy.



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