Power Sector | Initiation Report, Strong Growth From Structural Transition Amid Rising Demand & Market-Based Reforms

Overview

Vietnam’s power sector plays a foundational role in sustaining the country’s economic growth. As electricity is both a basic input and a binding constraint to economic activity, the sector remains central to Vietnam’s long-term growth strategy and energy security objectives. In the context of accelerating industrialization and the government’s ambition to achieve double-digit GDP growth from 2026 onward, ensuring adequate, reliable, and affordable power supply has become a key macro priority.

 

Outlook

Vietnam’s power sector is expected to remain on a structural growth trajectory during the 2026–2030 period, supported by strong electricity demand and continued investment in generation capacity and grid infrastructure. From an investment perspective, the electricity sector is considered a demand-driven and relatively defensive industry.

1. Strong Growth in Electricity Demand

Vietnam’s electricity demand is expected to grow at a robust 10–11% CAGR over 2026–2030, broadly aligned with long-term GDP growth and supported by structural economic transformation. Demand visibility remains high, underpinned by strong industrialization momentum as Vietnam continues to benefit from China+1, driving sustained FDI into manufacturing, industrial parks, and data centers, which are key sources of stable base-load demand.

At the same time, rapid urbanization, rising household incomes, and increasing electrification (EVs, automation, digital infrastructure) are steadily lifting electricity intensity and residential consumption. These structural drivers collectively reinforce long-term demand growth while reducing sensitivity to short-term macro fluctuations.

2. Supply Faces Rising Pressure as Installed Capacity Has Expanded Rapidly, but Effective Supply Lags Demand

Vietnam’s installed power capacity has grown quickly over the past decade, especially during the FIT-driven renewable boom. However, actual supply is still constrained by issues like intermittency, grid bottlenecks, fuel shortages, and curtailment. As a result, capacity growth has not fully translated into reliable, dispatchable power, leaving ongoing pressure on baseload and flexible generation during peak demand. Within the mix, hydropower is now a mature segment with limited growth, mainly providing stable cash flow, while coal is becoming less important due to ESG pressure and financing constraints, with little room for new capacity going forward.

Under the revised PDP8, Vietnam is significantly accelerating investment in renewable energy, LNG-to-power, and nuclear energy to meet rapidly growing electricity demand and strengthen long-term energy security, with total installed capacity is expected to rise sharply toward 183–236 GW by 2030, with a clear shift in the generation mix.

3. Rising Pricing

Electricity tariffs are widely expected to increase in 2026, as the prolonged disconnect between regulated retail pricing and underlying system costs has become increasingly unsustainable. A tariff adjustment would represent a key inflection point, supporting sector-wide cash flow recovery, alleviating balance sheet pressure at EVN, and improving payment discipline under PPAs. Historically, tariff hikes have also served as a clear re-rating catalyst, driving improved earnings visibility and reducing policy overhang, which in turn supports sector outperformance.

4. Regulatory Reforms

The Revised PDP8 signals a clear policy pivot toward a more flexible, market-oriented, and decarbonized power system. Importantly, the plan rebalances the generation mix as accelerating renewables, positioning LNG as a key transition fuel, and reintroducing nuclear, while gradually reducing reliance on coal.

Vietnam is gradually moving toward a more market-based power sector. Under Decree 57, the government has introduced the DPPA mechanism, allowing large consumers to buy renewable electricity directly from generators. This helps improve contract reliability, pricing transparency, and reduces reliance on the traditional single-buyer model. At the retail level, the shift to a two-component tariff (capacity + energy) is an important step toward more realistic pricing. It better reflects the true cost of electricity and encourages more efficient usage.

Meanwhile, at the generation level, the government is adjusting tariff caps to better account for fuel costs, capacity value, and system flexibility. This creates clearer investment signals, especially for LNG, flexible power plants, and energy storage.

5. Valuation Re-Rated

As electricity becomes a strategic sector, power utilities and infrastructure assets are likely to see a valuation re-rating. Rising demand from AI, data centers, and broader electrification, along with Vietnam’s growing focus on energy security, is increasing the sector’s importance and improving earnings visibility.

As a result, the power sector is no longer viewed simply as a regulated utility but as critical national infrastructure supporting industrial growth and digital transformation. This shift could reduce valuation discounts for companies with long-life assets and stable cash flows, while attracting more long-term investors such as pension funds, ESG funds, and infrastructure investors seeking stable and defensive returns.

 

Recommendation

We recommend an Overweight stance on the power sector, favoring companies with diversified generation portfolios, strong balance sheets, low marginal cost assets, and clear alignment with PDP8 and market-based mechanisms. In this new cycle, asset quality, execution discipline, and pricing exposure matter more than sheer capacity growth.

We also favor the following stocks:

POW (PV Power) – Support by a strong earnings growth cycle driven by the commissioning of NT3 & NT4 LNG plant.

GEE (Gelex Electric) – A key beneficiary of grid expansion and rising industrial electricity demand through its leading electrical equipment platform (CADIVI, THIBIDI, EMIC).

REE (REE Corp) – A high-quality renewable-focused platform with over 1,000 MW capacity, shifting toward hydro and wind.

NT2 (PV Power Nhon Trach 2) – Entering a high-margin phase as depreciation declines sharply

PC1 (PC1 Group) – Positioned to capture both grid investment and renewable growth, supported by a construction backlog