PetroVietnam Power (POW) [BUY +24.

9%] Update Report

Industry: Utilities 2022 2023F 2024F 2025F 10% POW VNI

Report Date: February 15, 2023 Rev Growth 14.9% 24.4% 29.9% 19.7% 0%
18 March 2011 -10%
Current Price: VND11,850 Rpt EPS Y/Y 6.4% 24.0% 44.2% -3.3%
VND14,800 Adj NPAT-MI(1) 1,398 2,119 3,279 3,275 -20%
Target Price:
-30%
Last Target Price: VND14,400 Rpt NPAT-MI(2) 1,894 2,348 3,386 3,275
-40%
Upside to TP: +24.9% EV/EBITDA 5.4x 5.5x 4.2x 3.4x
-50%
Dividend Yield: 0.0% Adj P/E(1) 20.4x 13.4x 8.6x 8.6x Feb-22 May-22 Aug-22 Nov-22 Feb-23
TSR: +24.9% Rpt P/E(2) 15.0x 12.1x 8.4x 8.6x
Market Cap: USD1.2bn POW Peers VNI Company Overview
Foreign Room: USD553mn TTM P/E(2) 14.7x 8.6x 13.5x PV Power is the fourth-biggest electricity producer in
Vietnam. It possesses a 4.2 GW power portfolio, which is
ADTV30D: USD4.0mn P/B 0.9x 1.0x 1.7x 10% of national capacity. Its strengths center on gas-fired
State Ownership: 80% Net D/E -2.7% 65.9% N/A power plants (Ca Mau plant – 1,500 MW, Nhon Trach 1 –
Outstanding Shares: 2,342 mn ROE(2) 6.3% 9.3% 14.1% 450 MW and NT2 – 750 MW), which account for 64% of
Fully Diluted Shares: 2,342 mn ROA(2) 3.5% 2.7% 2.2% its total capacity. Coal thermal (Vung Ang – 1,200 MW)
and hydropower (Hua Na – 180 MW and Dakdrinh – 125
EPS CAGR(3) 20% (1) Adjusted for one-off income and FX losses (VND bn); (2) Reported
MW) make up the remaining capacity.
earnings (VND bn); (3) 2022-2025

Man Bach Full operation of Vung Ang plant to boost 2023 growth
Analyst
man.bach@vcsc.com.vn • We raise our target price (TP) for POW by 3% to VND14,800/share and maintain our BUY
+848 3914 3588 ext. 135 rating. We view POW as a solid play on Vietnam’s resilient power consumption and structural
transition to LNG with its future Nhon Trach 3 & 4 LNG-fired plants.
Duong Dinh • Our higher TP is due to our 3% higher 2023-2027F aggregate NPAT forecast as our increased
Senior Manager
duong.dinh@vcsc.com.vn
profit projections for the Ca Mau, Vung Ang and NT2 plants outweigh our lower profit projection
+848 3914 3588 ext. 140 for Nhon Trach 1. One of the reasons we raise our aggregate NPAT for the Ca Mau and NT2
plants is our lower gas price assumptions (see page 13).
• We are optimistic on POW’s near-term growth with 2023 and 2024 projected EPS growth of
24% YoY and 44% YoY, respectively. We forecast 2023 NPAT to be driven by +26% YoY
volume growth (13% higher than POW’s guidance) after three consecutive annual declines due
to COVID and technical issues. Meanwhile, the sector’s outlook is bright with resilient projected
national electricity consumption (+8% YoY), a tighter national supply, less competition from
hydropower and a strong competitive generation market (CGM) price outlook (+7% YoY).
• POW looks attractive at a 2023F projected P/E of 12.1x, implying a PEG of 0.6 and TTM P/B
of 0.9x.
• Upside risk: Higher-than-expected insurance compensation (we estimate at least VND300bn)
for the Vung Ang plant’s technical issue. Downside risk: Lower-than-expected contracted
volume; gas/coal shortage risks; capex cost overrun/delay of Nhon Trach 3 & 4 project.
We believe Vung Ang’s earnings will significantly rebound in 2023F. POW has stated that
Vung Ang’s generator 1 will come online in mid-March and return to full operation at the end of that
month, which is better than our previous expectation. Therefore, we maintain our volume projection
for the Vung Ang plant at 5.8 billion kWh (+75% YoY), which is more aggressive than the company’s
guidance; however, we believe it is reasonable as we see a higher risk for a power shortage in
northern Vietnam (where the Vung Ang plant is located) compared to southern and central Vietnam.
We also believe the Vung Ang plant has cost advantages compared to gas-fired plants. We
estimate Vung Ang’s NPAT will be VND934bn in 2023F, contributing ~35% of POW’s 2023F NPAT.
We also expect the plant will receive VND300bn of insurance compensation in 2023.
Ca Mau faces lower-than-expected competition from renewable energy. This plant’s volume
surged 83% YoY in Q4 2022, and its 2022 volume beat our forecast. Despite the new pricing
mechanism for transitional renewable power putting more competition on Ca Mau, we believe its
utilization rate will recover to 40% in 2023 and normalize at 62% in 2024-2025 with its gas cost
advantage (compared to gas-fired plants located in the southeast that will partly use imported LNG
starting in 2024) and stronger national electricity consumption. We raise Ca Mau’s 2023F volume
by 5% to 5.1 billion kWh (+41% YoY) and forecast its NPAT at VND493bn (+54% YoY).
See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 1
 2022 Recap: Strong adjusted NPAT despite poor
performances from Ca Mau and Vung Ang plants
Figure 1: POW's 2022 results
HOLD
Explanation for
% of old
VND bn Q4 2022 YoY 2022 YoY (1) % of previous forecast
2022F
(2) YoY growth %
(1) Due to the outperformance of Ca Mau and Nhon
Output (million kWh) 3,980 59% 14,078 -4% 97% Trach 1 as well as hydropower plants, which offset
the underperformance of NT2 and Vung Ang.
Ca Mau 1,203 83% 3,687 -15% 105%
Nhon Trach 1 414 N.M. 1,403 215% 120%
Nhon Trach 2 992 21% 4,065 28% 94%
Vung Ang 880 47% 3,318 -40% 82%
Hua Na 233 37% 829 47% 110%
Dakdrinh 258 3% 776 25% 118%

(2) 15% YoY growth due to an increase in power

purchase agreement (PPA) prices — which were
driven by higher gas and coal prices — and strong
CGM prices, outweighing the slight volume
Revenue 7,669 113% 28,235 15% 99%
decrease. This revenue included ~VND584bn that
EVN Power Trading Company (EPTC) paid for 2019-
2020 FX losses and ~VND340bn of compensation
for NT2’s 2016-2020 FX losses.
COGS -6,561 67% -24,468 11% 96%
(1) Due to the higher-than-expected contribution
Gross profit 1,108 N.M. 3,767 48% 121% from hydropower plants, whose COGSs mainly
includes fixed costs.
Selling exp 0 N.M. 0 N.M. N.M.
(2) Due to more provision expenses in 2022 that were
mainly related to receivables from EVN/EPTC instead
G&A -420 N.M. -1,124 772% 100%
of a reversal as in 2021 (see page 11 for details of
NT2).
Operating profit 688 873% 2,643 10% 133%
Financial income 211 97% 435 -38% 131%
Interest income 118 31% 318 0% 100%
(1) Mainly due to lower-than-expected FX losses
Financial expenses -95 -43% -636 -5% 88% because of the lower-than-expected USD/VND
exchange rate in 2022.
Interest expense -123 12% -437 -14% 103%
Other non-operating
68 N.M. 123 N.M. 14%
income
PBT 871 N.M. 2,564 11% 104%
- Income tax exp -140 N.M. -241 -16% 104%
NPAT before MI 732 N.M. 2,323 14% 103%
- Minority interest -48 -22% -429 70% 81%
(1) Due to higher-than-expected adjusted NPAT-MI
and lower-than-expected FX losses. This did not
include VND300bn of insurance compensation for
the technical issue at the Vung Ang coal-fired plant.
Reported NPAT-MI 684 N.M. 1,894 6% 110%
(2) Driven by 94% YoY growth of adjusted NPAT-MI
and Ca Mau no longer recording provision reversal
as in 2021.

(1) Adjusted NPAT-MI slightly beat our expectation

as higher-than-expected profit from Hua Na and
Dakdrinh outweighed NT2’s lower-than-expected
NPAT.
Adjusted NPAT-MI
(2) The stronger result was mainly due to a higher
(excluding one-off 590 N.M. 1,398 94% 112%
contribution from hydropower plants (Hua Na and
item)
Dakdrinh’s NPAT surged 4.6x and 50% YoY,
respectively) and the better earnings of Nhon Trach
1 and NT2 outweighing the poorer performances of
the Ca Mau and Vung Ang plants.
Source: POW, VCSC

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 2
 2023F: Robust earnings outlook as Vung Ang’s generator
1 returns to operation in mid-March
Figure 2: VCSC’s 2023F forecast
HOLD
2023 Explanation for:
VND bn 2022 2023F YoY Revised vs (1) 2023 Revised vs Previous forecast
Previous (2) YoY growth %
(2) We forecast strong volume growth due to the reoperation of
Sales volume (million
14,078 17,681 26% -5% Vung Ang’s generator 1, in addition to further volume growth
kWh)
from other thermal plants.
Ca Mau 3,687 5,183 41% 5% (1) We increase by 5% due to 2022 higher-than-expected volume.
(1 & 2) We expect Nhon Trach 1’s sales volume will no longer benefit
Nhon Trach 1 1,403 1,165 -17% -45% from Ca Mau’s gas shortage in 2022 and Vung Ang’s technical issue
from September 2021.
NT2 4,064 4,456 10% -4% (1) Due to NT2’s lower-than-expected sales volume in Q4 2022.
(2) We expect the utilization rate will return to 2021’s level due to the
Vung Ang 3,318 5,815 75% 0% reoperation of Vung Ang’s generator 1 and a lower coal shortage
risk compared to 2022.
Hua Na 829 569 -31% 3% (2) We expect more neutral weather in 2023 (i.e., less rainfall) (see
Dakdrinh 776 493 -37% 0% page 13).
(1) We decrease our USD/VND exchange rate assumption by
9%.
Revenue 28,235 35,121 24% -9%
(2) Driven by sales volume and higher CGM prices (see page
12)
Ca Mau 8,084 10,812 34% -5%
Nhon Trach 1 2,810 2,500 -11% -54%
NT2 8,786 9,535 9% -19%
Vung Ang 6,265 11,163 78% 23%
Hua Na 1,176 595 -49% 4%
Dakdrinh 896 459 -49% 0%
Others 218 57 -74% 0%
(1) We raise our 2023F NPAT forecast by 7% mainly due to our
higher volume forecast for Ca Mau and delayed expectation for
receiving VND300bn of insurance compensation for Vung
Reported NPAT-MI 1,894 2,348 24% 7%
Ang’s technical issue from 2022 to 2023.
(2) We expect the Vung Ang and Ca Mau plants to drive POW’s
2023 earnings growth.
Ca Mau 320 493 54% 39%
Nhon Trach 1 56 14 -76% -94%
(1) We expect NT2 to book an additional VND210bn bad debt
NT2 433 487 13% -14%
provision in 2023.
(1) We expect Vung Ang to book VND300bn of insurance
Vung Ang 3 1,174 N.M. 26%
compensation.
Hua Na 506 112 -78% 8%
Dakdrinh 503 165 -67% 0%
Holdco G&A expenses* 72 -97 N.M. N.M.
(1) We cut our earnings for Nhon Trach 1, which outweighs our
higher earnings projections for Ca Mau and Hua Na.
Adjusted NPAT-MI 1,398 2,119 52% -4%
(2) We forecast earnings of thermal plants to jump in 2023,
outweighing lower earnings from hydropower.
(2) We expect a lower risk for a gas shortage and a rebound in
Ca Mau 320 493 54% 39% contracted volume. We also have a lower gas price forecast and
expect lower YoY maintenance expenses.
(1 & 2) Nhon Trach 1’s sales volume will no longer benefit from Ca
Nhon Trach 1 56 14 -76% -94% Mau’s gas shortage in 2022 and Vung Ang’s technical issue that
started in September 2021. NT1 also has high production costs.
(2) Supported by sales volume rising 10%, higher CGM prices and
NT2 376 479 27% 0%
a surge in interest income outweighing higher gas prices.
(2) Supported by a higher utilization rate from the reoperation of
Vung Ang 22 934 N.M. 0% generator 1 and our assumption for a lower coal shortage risk
compared to 2022.
Hua Na 506 112 -78% 8%
Dakdrinh 503 165 -67% 0%
Holdco G&A expenses* -385 -77 N.M. N.M.
Source: POW, VCSC. (*) Includes financial income and a negligible profit contribution from other smaller business segments.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 3
 2023-2027F forecast summary
We forecast a 20% EPS CAGR in 2022-2025F that is mainly driven by (1) the Vung Ang plant
HOLD
recovering from its technical issue that began in September 2021, (2) higher utilization rates for
Nhon Trach 1 and NT2 due to less competition from hydropower and (3) contributions from Nhon
Trach 3 in 2025F (and Nhon Trach 4 in 2026F onward)
We increase our aggregate 2023-2027F NPAT forecast by 3% due to higher earnings forecasts
for the Ca Mau, NT2 and Vung Ang plants that outweigh our lower earnings forecast for Nhon Trach
1. For the Ca Mau plant, we raise its 2023F earnings by 39%, which is partly driven by our 5%
higher sales volume assumption due to 1) the lower risk for a gas shortage compared to 2022 to
support the plant’s contracted volume to rebound and 2) lower-than-expected competition from
renewable power, which allowed the plant’s 2022 sales volume to beat our expectation.
Furthermore, we raise the Ca Mau and NT2 plants’ aggregate 2023-2027F earnings because of
our lower gas price assumption (see page 13) compared to previous forecasts in our Energy Sector
Report – Oil prices to remain higher for longer, dated July 20, 2022.
Our higher aggregate earnings forecasts for the Vung Ang plant are mainly supported by our
expectation of this coal-fired plant to receive VND300bn of insurance compensation in 2023 for its
technical issue that began September 2021. We previously forecast this compensation would be
received in Q4 2022.
We believe Nhon Trach 1’s 2022 high sales volume benefited from Ca Mau’s 2022 gas shortage
and Vung Ang’s technical issue, which are unlikely to repeat in 2023. We are optimistic about the
lower gas shortage risk for Ca Mau in 2023 and Vung Ang returning to full operation in Q2 2023.
Therefore, we decrease Nhon Trach 1’s 2023F sales volume by ~45% and its 2024-2025F sales
volume by 12%-10%. Due to our lower gas price assumption mentioned above, we lower Nhon
Trach 1’s aggregate 2023-2027F NPAT by 21%.
Figure 3: VCSC’s 2023-2027F earnings forecast summary for POW
VND bn 2023F 2024F 2025F 2026F 2027F Aggregate
Reported NPAT-MI (New) 2,348 3,386 3,275 4,500 4,571 18,080
Ca Mau 493 641 758 765 681 3,339
Nhon Trach 1 14 385 392 440 440 1,672
Nhon Trach 2 487 742 583 755 751 3,318
Nhon Trach 3 0 0 234 346 379 959
Nhon Trach 4 0 0 0 346 379 725
Vung Ang 1 1,174 1,460 1,506 1,470 1,401 7,011
Hua Na 112 111 117 113 114 567
Dakdrinh 165 164 234 234 162 958
Holdco G&A expenses and
-97 -117 -549 29 264 -469
financial income

Reported NPAT-MI (Old) 2,202 3,145 3,171 4,347 4,620 17,485

Change % 7% 8% 3% 4% -1% 3%
Source: POW, VCSC

Valuation
We continue to employ a 100% DCF approach to value POW as we believe the discounted cash
flow method is well suited to reflect the stable cash flow of POW’s existing power plants as well as
the potential value contribution from POW’s new capacity expansion pipeline. We continue to apply
a 15% discount to our valuation to set our target price in order to reflect our view that the sector
currently offers somewhat limited transparency of information to investors. As Vietnam is
liberalizing its power sector, there is scope for improving the available information about the
pricing/operation mechanism of the competitive generation/wholesale/retail market, in our view.
We raise our target price by 3% to VND14,800/share as we increase our aggregate 2023-2027F
NPAT by 3%.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 4
 Figure 4: POW’s valuation
VND per share
Fair value (DCF)
Discount for sector’s limited transparency
17,378
15%
HOLD
Target price 14,800
Upside % 24.9%
Dividend yield % 0.0%
TSR % 24.9%
2023F Reported P/E at TP 15.1x
Source: VCSC forecast

Figure 5: DCF valuation

Cost of Capital Previous Revised FCFF (10-year) VND bn
Beta 1.0 1.0 PV of Free Cash Flows 22,232
Market Risk Premium % 8.0% 8.0% PV of Terminal Val (2% g) 20,284
Risk-Free Rate % 6.0% 6.0% PV of FCF and TV 42,516
Cost of Equity % 14.0% 14.0% + Cash & ST investments 9,901
Cost of Debt % 8.0% 8.0% - Debt -9,017
Debt % 22.0% 22.0% - Minority Interest -2,702
Equity % 78.0% 78.0% Equity Value 40,698
Corporate Tax Rate % 10.0% 10.0% Shares (million) 2,342
WACC % 12.5% 12.5% DCF value per share, VND 17,378
Source: VCSC forecast

Our heavy projected capex in 2023-2025F is mainly due to Nhon Trach 3 and 4, which should
come into commercial operation in late 2024F and H1 2025F, respectively. We currently assume
capex of VND28tn (USD1.2bn) for these two new LNG-fired power plants.
Regarding capital for further capacity expansion, management does not expect any capital
raising in the near term as the company estimates it has ~VND9tn-10tn of cash and short-term
investment to finance the equity component of Nhon Trach 3 & 4 (VND7.5tn), a 30% stake
(~VND2tn-3tn) in the Quang Ninh LNG terminal & power plant project, and other projects such as
the Luang Prabang hydropower project in Laos (equity contribution), Thanh Hoa LNG (central
Vietnam; equity contribution), Nam Du LNG (southern Vietnam; equity contribution) and buildings
for its headquarters.
If POW has more projects such as LNG Son My and LNG Mien Trung in central Vietnam, LNG Ca
Mau 3 in the Mekong Delta and 800 MW of offshore wind projects, the company will then consider
capital raising; however, POW will consider raising additional bank loans and issuing bonds before
raising more equity.
Figure 6: Cash flow (VND bn)
Year 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F
EBIT 2,585 4,226 4,988 6,471 6,150 6,135 5,990 5,546 5,423 5,462
+ Depreciation 2,829 2,849 3,803 4,217 4,237 4,257 4,277 4,297 4,167 4,187
- Tax -241 -476 -381 -753 -777 -883 -893 -803 -893 -1,017
- Working capital 304 -2,068 2,732 -1,049 104 -10 -15 -76 -16 -46
- Capex -7,300 -11,935 -8,935 -300 -300 -300 -300 -300 -300 -1,800
Free Cash Flow -1,823 -7,404 2,207 8,586 9,414 9,200 9,059 8,664 8,381 6,786
Present Value of FCF -1,620 -5,850 1,550 5,359 5,223 4,537 3,971 3,376 2,902 2,089
Cumulative PV of FCF -926 -6,776 -5,226 133 5,357 9,894 13,865 17,241 20,143 22,232
Source: VCSC forecast

Regional peers
We select regional peers that own stakes in several power plants (power holding companies) or a
single power plant. All of these companies are power generators, but they are not perfectly similar

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 5
 to POW due to differences in power types, capacity and market mechanisms. However, we have
chosen peers for POW based on market cap, capacity, revenue and NPAT size. We note that we
only compare POW with power holding company peers, whereas single power plant peers are just
used as a reference. HOLD
Figure 7: Peer comparables
Mkt TTM
TTM Net NET Div TTM TTM EV/
Cap YoY NPAT YoY ROA ROE
Short Name Country sales D/E yield P/E PBR EBITDA
(USD (%) (USD (%) (%) (%)
(USD mn) (%) (%) (x) (x) (x)
mn) mn)
Power holding companies
GLOBAL POWER Thailand 5,721 3,518 64 26 -88 80 0.9 2.3 1.8 216.8 1.8 20.9
MANILA ELECTRIC Philippines 6,510 7,621 37 477 24 17 5.5 30.1 5.1 13.3 3.7 10.1
RATCH GROUP PCL Thailand 2,754 1,985 109 243 5 66 4.9 9.3 4.9 8.8 0.9 18.0
BANPU POWER PCL Thailand 1,508 475 204 98 59 30 8.9 12.9 4.5 8.1 1.0 27.8
YTL POWER INTL Malaysia 1,372 4,427 61 285 N/A 146 2.7 10.0 6.8 4.4 0.4 6.9
TATA POWER CO India 7,930 5,747 31 234 55 170 1.6 7.8 0.9 29.6 2.9 14.1
CIKARANG LISTRIN Indonesia 711 539 6 90 -10 22 6.1 11.8 9.7 8.4 1.0 4.2
FIRST PHILIP HLD Philippines 544 2,996 31 203 1 40 2.7 9.0 3.5 2.8 0.2 4.1
MMC CORP BHD Malaysia N/A 1,141 7 89 100 90 2.1 5.6 N/A N/A N/A 8.8
Median 2,131 2,996 37 203 14 66 2.7 9.3 4.7 8.6 1.0 10.1
Single power plants
GUANGZHOU HENG China 800 619 11 25 N/A 102 -0.2 -0.7 2.3 N/A 1.1 44.1
GEPIC ENERGY D China 1,276 314 1 40 18 109 1.7 4.5 0.7 23.3 1.0 13.5
GUIZHOU QIANYU China 933 407 16 36 47 166 2.6 13.2 1.0 13.4 1.7 11.4
CHINA SOUTHERN China 7,145 1,072 7 2 39 68 5.9 17.0 0.1 38.3 3.4 90.8
VIVANT CORP Philippines 272 115 94 36 28 -5 6.1 9.3 3.0 7.7 0.9 16.3
SAHACOGEN Thailand 163 155 31 3 N/A 47 -2.8 -6.7 1.3 N/A 1.5 13.6
Median 867 361 13 30 34 85 2.2 6.9 1.1 18.3 1.3 14.9
POW Vietnam 1,192 1,206 15 81 5 -3 3.5 6.4 N/A 14.8 0.9 4.9
Source: Bloomberg, VCSC (data as of February 13, 2023)

Figure 8: Historical median trailing P/E on reported earnings of POW vs peers, NT2 and
PPC (x)
60
Average four-year median P/E of power holding companies is 12.3x
50

40

30

20

10

0
Feb 2019 Aug 2019 Feb 2020 Aug 2020 Feb 2021 Aug 2021 Feb 2022 Aug 2022 Feb 2023

PPC NT2 POW Peers (Holding) Peers (Single)

Source: Bloomberg, VCSC (data as of February 13, 2023)

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 6
 Figure 9: Historical median trailing EV/EBITDA of POW vs peers (x)

14
Average four-year median EV/EBITDA of power holding companies is 9.8x HOLD
12

10

POW NT2 Peers (Holding)

2

Source: Bloomberg, VCSC (data as of February 13, 2023)

Recommendation History
Figure 10: Historical recommendations and target prices (VND/share)
25,000

O-PF
O-PF O-PF
20,000 18,500
BUY 18,000 16,600 BUY
BUY BUY
O-PF 15,700 16,000 14,400 BUY
15,400
14,700 14,800
15,000

10,000

Market price Target price

5,000

0
Jun-22
Jun-21
Jul-21

Jan-22

Jul-22

Jan-23
Feb-21
Mar-21

Feb-22
Mar-22

Feb-23
Aug-21
Sep-21

Nov-21
Dec-21

Aug-22
Sep-22

Nov-22
Dec-22
May-21
Apr-21

Oct-21

Apr-22
May-22

Oct-22

Source: Bloomberg, VCSC

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 7
 Financial Statements
P&L (VND bn) 2022 2023F 2024F 2025F B/S (VND bn) 2022 2023F 2024F 2025F
Revenue 28,235 35,121 45,619 54,622 Cash & equivalents 8,277 14,276 HOLD
22,809 22,236
COGS -24,468 -31,746 -40,793 -48,671 ST investment 1,624 1,624 1,624 1,624
Gross Profit 3,767 3,375 4,826 5,951 Accounts receivables 12,284 11,066 14,373 12,720
Sales & Marketing exp 0 0 0 0 Inventories 2,086 2,174 2,794 3,334
General & Admin exp -1,124 -790 -599 -963 Other current assets 414 414 414 414
Operating Profit 2,643 2,585 4,226 4,988 Total Current assets 24,685 29,555 42,014 40,328
Financial income 435 519 904 1,079 Fixed assets, gross 69,854 70,154 84,454 98,754
Financial expenses -636 -426 -705 -1,953 - Depreciation -40,699 -43,528 -46,377 -50,180
- o/w interest expense -437 -366 -641 -1,776 Fixed assets, net 29,155 26,626 38,077 48,574
Associates 63 0 0 0 LT investment 887 887 887 887
Net other income/(loss) 61 300 0 0 LT assets other 1,914 8,914 6,549 1,184
Profit before Tax 2,564 2,977 4,425 4,114 Total LT assets 31,956 36,427 45,513 50,646
Income Tax -241 -241 -476 -381 Total Assets 56,642 65,982 87,528 90,974
NPAT before MI 2,323 2,736 3,948 3,733
Minority Interest -429 -388 -562 -458 Accounts payable 9,278 8,452 10,311 11,929
NPAT less MI, reported 1,894 2,348 3,386 3,275 Short-term debt 5,635 5,205 6,126 6,126
NPAT less MI, adjusted(1) 1,398 2,119 3,279 3,275 Other ST liabilities 3,393 3,393 3,393 3,393
Total current liabilities 18,307 17,050 19,830 21,449
EBITDA 5,452 5,414 7,076 8,791 Long term debt 3,382 11,242 26,059 24,153
EPS reported, VND 792 983 1,417 1,370 Other LT liabilities 1,847 1,847 1,847 1,847
EPS adjusted (1), VND 581 885 1,371 1,370 Total Liabilities 23,535 30,139 47,736 47,449
EPS fully diluted, VND 581 885 1,371 1,370
DPS, VND 0 0 0 0 Preferred Equity 0 0 0 0
DPS/EPS (%) 0% 0% 0% 0% Paid in capital 23,419 23,419 23,419 23,419
(1) Excluding FX loss, bad debt provisions and delayed FX payments Share premium 0 0 0 0
RATIOS 2022 2023F 2024F 2025F Retained earnings 6,986 9,333 12,720 15,994
Growth Other equity 0 0 0 0
Revenue growth 14.9% 24.4% 29.9% 19.7% Minority interest 2,702 3,091 3,653 4,112
Op profit (EBIT) growth 9.9% -2.2% 63.5% 18.0% Total equity 33,106 35,843 39,791 43,524
EPS growth, reported 6.4% 24.0% 44.2% -3.3% Liabilities & equity 56,642 65,982 87,527 90,973
EPS growth, adjusted 98.9% 52.4% 55.0% -0.1%
Y/E shares out, mn 2,342 2,342 2,342 2,342
Profitability Y/E treasury shares, mn 0.0 0.0 0.0 0.0
Gross Profit Margin 13.3% 9.6% 10.6% 10.9% CASH FLOW (VND bn) 2022 2023F 2024F 2025F
Op Profit, (EBIT) Margin 9.4% 7.4% 9.3% 9.1% Beginning Cash Balance 8,224 8,277 14,276 22,809
EBITDA Margin 19.3% 15.4% 15.5% 16.1% Net Income 1,894 2,348 3,386 3,275
NPAT-MI Margin, reported 6.7% 6.7% 7.4% 6.0% Dep, & amortization 2,809 2,829 2,849 3,803
ROE, adjusted 4.7% 6.7% 9.5% 8.7% Change in Working Cap -1,954 304 -2,068 2,732
ROE, reported 6.3% 7.4% 9.8% 8.7% Other adjustments 429 388 562 458
Cash from Operations 3,178 5,870 4,729 10,268
Efficiency
Days Inventory On Hand 29 25 25 25 Capital Expenditures, net -2,562 -7,300 -11,935 -8,935
Days Accts, Receivable 117 115 115 85 Investments, net -805 0 0 0
Days Accts, Payable 109 75 75 75 Cash from Investments -3,367 -7,300 -11,935 -8,935
Cash Conversion Days 37 65 65 35
Dividends Paid -199 0 0 0
Liquidity ∆ in Share Capital 0 0 0 0
Current Ratio x 1.3 1.7 2.1 1.9 ∆ in ST debt -66 -431 921 0
Quick Ratio x 1.2 1.6 2.0 1.7 ∆ in LT debt 626 7,861 14,817 -1,906
Cash Ratio x 0.5 0.8 1.2 1.0 Other financing C/F -119 0 0 0
Debt / Assets 15.9% 24.9% 36.8% 33.3% Cash from Financing 241 7,430 15,738 -1,906
Debt / Capital 21.4% 31.5% 44.7% 41.0%
Net Debt / Equity 2.2% 6.1% 23.6% 18.5% Net Change in Cash 53 6,000 8,532 -573
Interest Coverage x 6.0 7.1 6.6 2.8 Ending Cash Balance 8,277 14,276 22,809 22,236
Source: POW, VCSC

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 8
 Appendix: Updated sector assumptions
POW to invest 30% stake in the Quang Ninh LNG-fired power plant
HOLD
* The Quang Ninh power project is a USD2bn LNG-fired power project located on a 56 ha in Cam
Pha, Quang Ninh Province. The project includes a 1,500 MW LNG-fired power plant, 71,500 DWT
LNG terminal and two LNG storage facilities with a total capacity of 200,000 cbm. The power plant
is designed to generate approximately 9 billion kWh of electricity annually (designed load factor of
70%).
* On October 24, 2021, Quang Ninh Province held a kick-off ceremony for POW’s LNG-fired Quang
Ninh power project.
* On November 2, 2022, Quang Ninh LNG Power was established. This power project is a
consortium of contractors, including POW, Vietnam Mechanical Assembly JSC (COLAVI), Tokyo
Gas (TYO: 9531) and Marubeni Corp (TYO: 8002) with a charter capital of VND100bn. POW
contributed 30%. Moreover, POW expects to inject VND2.0tn into this JSC in 2024-2026.
* We have yet to account for this new project in our earnings forecasts.

POW is negotiating contracted volume for Nhon Trach 3 & 4

POW announced that Samsung C&T and local contractor LILAMA won the engineering,
procurement and construction (EPC) contract (signed on March 14, 2022, and valued at
USD940mn) for the Nhon Trach 3 & 4 LNG-fired projects. Regarding the long-term maintenance
agreement (LTMA), the company successfully signed a deal with GE Global Parts & Products
GmbH and GE International Inc. (GE – General Electric) on November 28, 2022. These projects
will use GE turbines & generators and are set to come online in late 2024-2025. In addition, the
new technology of Nhon Trach 3 & 4 will bring its efficiency rate up to 62% compared to 55%-58%
of existing gas-fired plants in Vietnam.
Nhon Trach 3 & 4’s capex budget is USD1.4bn (including 25% equity and 75% debt). The project’s
debt source includes an export credit agreement of ~USD600mn, foreign bank loans of
~USD300mn and local bank loans of ~USD200mn in VND. Foreign banks include Citi (US), ING
(Netherlands) and SMBC (Japan). Management explained that it will use corporate loans that will
be paid for with the company’s cashflow (based on its in-house business plan in 10-15 years) and
not through a project financing method. In addition, POW is the only PetroVietnam subsidiary that
has received a Fitch BB rating with a positive outlook — which is similar to Vietnam’s rating.
Therefore, POW is confident it will receive financing with favorable rates despite the current rising
interest rate environment.
Construction progress of Nhon Trach 3 & 4. Land clearance for this project is 100% finished.
POW is conducting ground filling and soil improvement and is waiting for the detailed design to be
approved by the Ministry of Industry and Trade (MoIT). POW paid VND2.2tn to EPC contractor as
of December 31, 2023.
POW is still negotiating contracted volume for Nhon Trach 3 & 4 with EVN Power Trading
Company (EPTC). Per POW, the company finished the power purchase agreement (PPA) in early
2023. POW expects to finish the gas sales agreement (GSA) for Nhon Trach 3 & 4 in 2023. POW
is negotiating the contracted volume with the expectation that it will be ~80%-90% of designed
volume in 15 years to ensure the profitability of the project. However, EPTC has not accepted this
offer and has engaged in further negotiations. There is not a complete legal framework for LNG
imports in Vietnam; however, the Prime Minister has approved an LNG passthrough cost
mechanism for the project.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 9
 NT2 recorded VND240bn provision of bad debt from EVN under SG&A
expenses in 2022
This bad debt occurred starting in 2019; NT2 estimated it to be ~VND360bn for 2019-2021. Before HOLD
2019, the Government granted approval for GAS to build the Phu My - Ho Chi Minh gas pipeline to
supply electricity for the Hiep Phuoc power plant, and GAS was approved to collect a transportation
tariff of USD0.52/MMBTU from power plants in the Phu My and Nhon Trach areas (including NT1
& NT2). These power plants paid the transportation costs and included these costs into the PPA
price’s variable component despite not using the gas pipeline. However, EVN did not agree to pay
this tariff, resulting in late payment and bad debt for NT2. Now, based on the State auditor’s request,
NT2 must book provision expenses until there are further instructions from the Government; these
expenses were VND187bn in Q3 2022 and VND52bn in Q4 2022. NT2 expects to reverse provision
for this bad debt in the future. In our view, we estimate the bad debt to be VND450bn for the 2019-
2022 period and expect NT2 to book another VND210bn as the provision expense for the rest of
the bad debt in 2023. Meanwhile, we expect the power plant to reverse VND225bn in 2023 and the
rest in 2024 (see more details in our NT2 Update Report, dated February 8, 2023).

We forecast Vietnam’s electricity consumption to increase ~8% YoY in 2023

Vietnam’s electricity consumption to rise ~8%-9% p.a. in 2023F-2026F. COVID-19 and the
Russia-Ukraine conflict remain two sources of uncertainty in macro forecasting; however, our base-
case scenario continues to be that the global economy — along with Vietnam — will continue to
recover progressively from the disruptions of COVID-19 that occurred in 2021. As such, we assume
that Vietnam’s GDP growth rate will return to pre-COVID-19 level of around 6%-7% in 2023-2026F.
Using our assumption for Vietnam’s energy elasticity of ~1.3, we estimate that Vietnam is likely to
see electricity consumption growth of ~8%-9% p.a. in 2023-2026.
Figure 11: Vietnam’s electricity consumption growth vs GDP growth forecasts

Electricity consumption (billion kWh)

13.8% 15.5%
500 Electricity consumption growth - RHS 7.4% 16%
12.9% Real GDP growth - RHS 7.4%
450 11.8% 7.4% 14%
12.5% 11.5%
400 11.4% 11.4% 7.4%
10.1% 8.7% 12%
350 10.5% 9.0% 9.3% 8.9% 9.4% 8.7%
300 8.1% 10%
7.5%
250 8%
200 6%
3.8%
150 3.1%
4%
100
50 2%
0 0%
2023F
2024F
2025F
2026F
2027F
2028F
2029F
2030F
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Source: EVN, VCSC

Potentially tighter electricity market in 2023F — especially in northern

Vietnam
Industry players expect a slightly tighter national electricity market in 2023, which is mainly due to
potential national capacity growth of ~4% YoY and 10% YoY in 2022 and 2023, respectively,
compared to 10%-20% in 2020-2021, in addition to expected neutral weather conditions with less
rainfall in 2023 compared to 2022 (see Figure 12). We see more risk for northern Vietnam
compared to southern and central Vietnam. Northern Vietnam’s power capacity CAGR in 2016-
2021 was 3% vs its electricity consumption of 10%-12% p.a., which implies a gap between demand
and supply in this region. Additionally, guidance for 2020-2025G installed capacity growth in
northern Vietnam is ~8% p.a., which is lower than 2020-2025G consumption growth of ~9% p.a.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 10
 Figure 12: VCSC’s forecast of Vietnam’s power generation capacity (MW)
MW 2020 2021 2022E 2023F
Hydropower
Coal-fired power
20,990
20,431
21,485
22,831
22,485
24,761
HOLD 24,121
26,677
Gas-fired power 7,097 7,097 7,097 7,097
Solar power (farm) 8,736 8,736 8,736 8,736
Solar power (rooftop) 7,904 9,654 9,654 10,654
Wind power 539 4,539 4,539 8,539
Others 3,605 3,605 3,605 3,605
Total capacity 69,302 77,947 80,877 89,429
YoY growth 22.5% 12.5% 3.8% 10.6%
Source: EVN, MoIT, VCSC forecast

Prime Minister approved 20% higher price bracket for new retail electricity
price
On February 3, 2023, the Prime Minister approved Decision 02/2023 regarding the price range to
regulate the new retail electricity prices. According to this decision, the minimum and maximum
retail electricity prices are set to be VND1,826/kWh and VND2,444/kWh, respectively. This is
roughly 20% higher compared to the previous range of VND1,606-1,906/kWh
Currently, EVN is asking for the Government to increase the retail electricity price by 10% in 2023
from the current price of VND1,864/kWh, which is mainly to support it to recover from its estimated
losses of VND30tn in 2022 and VND65tn in 2023.

We expect 2023F average CGM price to increase 7% YoY

Per EVNGENCO3 (UPCoM: PGV) and industry players, the average CGM price in 2022 surged
54% YoY to VND1,539/kwh due to high coal and gas prices.
We forecast 2023F average CGM prices of VND1,641/kWh (+7% YoY), which will be driven by
strong electricity consumption, higher gas & coal prices and a higher guided SMP cap (+11% YoY).
For 2023-2026F, we assume CGM prices will increase at an average of 2.6% p.a. due to growth in
demand and higher gas prices.
Figure 13: CGM (also known as FMP) price outlook (VND/kWh)
2,500
2,138 2,138
2,028
SMP CAN SMP cap FMP
2,000 1,779
1,602 1,708 1,708 1,708
1,641
1,504 1,539
301

301

301
301

1,342
1,500 1,280 1,280 1,266 1,280 1,319
379

1,168 1,171
1,046 1,208 1,001
141

1,030 886
1,000 857 806
214
188

150
64

676
129

638
1,408

1,408

1,408
1,341
179

1,160
1,068
97

459 179

500
851
841

831

823
727

627
579

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2026F
Source: EVN, MoIT, VCSC estimates. FMP = full market price.
Note: CGM/FMP = SMP + CAN; SMP: the highest auction price needed to be employed in order to balance
with the system supply/demand; CAN: the extra price paid for the best new entrant power plant to break even.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 11
 Weather forecast suggests high probability of neutral weather in H1 2023
The weather forecast illustrated in Figure 14 (as of January 2023) indicates that Vietnam
experienced heavy rainfall in December 2022 (the probability of La Niña was 95%) and predicts HOLD
that the probability of La Niña will decline to 10%-11% in April-August 2023, while the probability of
neutral weather will be around ~40%-80% in H1 2023. Furthermore, the weather forecast points
out the potentially gradual appearance of El Niño with its probability to reach 51% by August 2023.
Figure 14: Probability for weather conditions as of January 2023

El Niño Neutral La Niña

100%
14% 10% 10% 10% 10% 11%
27%
80%
60% 44% 38%
51%
60% 62%
95% 74%
82%
40%
73%

46% 51%
20% 40% 39%
28%

0% 5%
Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23

Source: International Research Institute for Climate and Society, VCSC

Figure 15: Probability for weather conditions as of August 2022

El Niño Neutral La Niña

100%

22% 16%

80% 38%
54%
65%
60% 80%
91% 89%
97% 67%
68%
40%
59%
47%
20% 33%
20% 17%
9% 11% 9% 14%
3% 6%
0%
Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23

Source: International Research Institute for Climate and Society, VCSC

Gas price outlook

Our current forecasts for benchmark gas prices in Vietnam are illustrated in Figure 16. Please see
our GAS Update Report, dated February 8, 2023, for more details.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 12
 Figure 16: Gas price outlook for power plants in southeastern Vietnam (USD/MMBTU)

Average Brent crude price assumption - RHS (USD/bbl) HOLD

Southeast Vietnam's gas price - LHS (USD/MMBTU)
13 120
99 11.8
12 11.5
90 10.9 11.4 100
11
71 10.0 80
10 64
75 75
8.5 75 75
9 60
43
8 7.1 40
7
6.1 5.8 20
6

5 0
2019 2020 2021 2022 2023F 2024F 2025F 2026F 2027F
Source: GAS, industry players, VCSC

Coal price outlook

Our current forecasts for benchmark coal price for power stocks under our coverage are illustrated
in Figure 17. Please see our 2023 Vietnam Strategy Report - Challenging H1, H2 to anticipate
global recovery, dated January 6, 2023, for more details.
Figure 17: Forecast of average prices of 5a domestic coal and its mixed coal equivalent
VND mn/tonne 2020 2021 2022E 2023F 2024F 2025F
Domestic coal, 5a (5,500 kcal/kg) 1,845 1,845 1,845 2,030 2,030 2,030
YoY growth 2.1% 0.0% 0.0% 10.0% 0.0% 0.0%
Mixed coal, 5a equivalent 1,874 2,053 2,373 2,622 2,628 2,410
YoY growth -1.7% 9.5% 15.6% 10.5% 0.3% -8.3%
Mixed coal, 5a equivalent (USD/tonne) 81 89 98 108 108 99
Source: MoIT, Bloomberg consensus, VCSC forecasts (FOB price does not include transportation cost and
VAT)

Differences between previous Ca Mau PPA and revised PPA

(from July 1 2021)
Figure 18: Ca Mau’s previous PPA mechanism in 2008-2019
Revenue = (Capacity component + Fuel Cost) * USD/VND exchange rate + Others
In which:

• Capacity component = Reliable capacity (kW) * Cost of capacity (USD/kW)

• Fuel cost: Natural gas cost + Fuel oil cost (if any)
Source: POW, VCSC

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 13
 Figure 19: Ca Mau revised PPA (Normal power plant mechanism based on Circular 56,
dated December 19, 2014)
Revenue = Pc* Qc + Pm*Qm + Others
HOLD
In which:
• Pc: contracted price, also called PPA – power purchase agreement
• Pm: CGM price
• Qc: contracted volume
• Qm: market volume, volume sold to CGM
• Q: actual volume of a power plant in a year = Qc + Qm
Source: MoIT, EVN, POW, VCSC

Figure 20: PPA price formula based on Circular 56, dated December 19, 2014

Fixed Price Variable Price PPA price

(VND/kWh)

Fixed, O&M Regulated return Material Cost Transportation

Components (Gas/Coal) Cost

• Fixed price covers depreciation, interest expense and operation and maintenance expense, based
on regulated IRR of 10%-12%.
• Gas/coal expense is 100% passed through to the buyers.

Source: MoIT, EVN, POW, VCSC

Please find our detailed comparison between these mechanisms in our POW Initiation Report,
dated March 5, 2018.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 14
 VCSC Rating System
Stock ratings are set based on projected total shareholder return (TSR), defined as (target price – current price)/current
price + dividend yield, and are not related to market performance.
HOLD
Equity rating key Definition

BUY If the projected TSR is 20% or higher

OUTPERFORM If the projected TSR is between 10% and 20%

MARKET PERFORM If the projected TSR is between -10% and 10%

UNDERPERFORM If the projected TSR is between -10% and -20%

SELL If the projected TSR is -20% or lower

NOT RATED The company is or may be covered by the Research Department but no rating or target
price is assigned either voluntarily or to comply with applicable regulation and/or firm
policies in certain circumstances, including when VCSC is acting in an advisory capacity
in a merger or strategic transaction involving the company.
RATING SUSPENDED, A rating may be suspended, or coverage terminated, if fundamental information is
COVERAGE TERMINATED deemed insufficient to determine a target price or investment rating or due to a
reallocation of research resources. Any previous investment rating and target price are
no longer in effect.
Unless otherwise specified, these performance parameters are set with a 12-month horizon. Movement in share prices may
cause a temporary mismatch between the latest published rating and projected TSR for a stock based on its market price
and the latest published target price.

Target prices are generally based on the analyst's assessment of the stock’s fair value over a 12-month horizon. However,
the target price may differ from the analyst’s fair value if the analyst believes that the market will not price the stock in line
with assessed fair value over the specified time horizon.

Risks: Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely
affect the value, price or income of any security or related instrument mentioned in this report. For investment advice, trade
execution or other enquiries, clients should contact their local sales representative.

See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 15
 Disclaimer
Analyst Certification of Independence HOLD
We, Man Bach and Duong Dinh, hereby certify that the views expressed in this report accurately reflect our personal views about the subject
securities or issuers. We also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed in this report. The equity research analysts responsible for the preparation of this report receive
compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall
firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

VCSC and its officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment)
and may from time to time add to or dispose of any such securities (or investment).VCSC may have, within the last three years, served as
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relation to the investment concerned or a related investment.

Copyright 2023 Viet Capital Securities Company “VCSC”. All rights reserved. This report has been prepared on the basis of information
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See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> February 15, 2023 | 16
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HOLD
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Hoan Kiem District, Hanoi
+84 24 6262 6999
Transaction Office Ham Nghi
16th Floor, Doji Tower, 81-83-83B-85 Ham Nghi Street
District 1, HCMC
+84 28 3914 3588 (400)
Transaction Office ABS
Sailing Tower, 8th Floor
111A Pasteur Street, District 1, HCMC
+84 28 3914 3588 (403)
Alastair Macdonald, Head of Research, ext 105
alastair.macdonald@vcsc.com.vn
Macro
Luong Hoang, Senior Manager, ext 364
- Nguyen Truong, Senior Analyst, ext 132
Oil & Gas and Power
Duong Dinh, Senior Manager, ext 140
- Ngan Ly, Analyst, ext 532
- Man Bach, Analyst, ext 135
Materials and Industrials
Vy Nguyen, Manager, ext 147
- Vinh Bui, Senior Analyst, ext 191
Quynh Chau Dung Nguyen
Managing Director Director
Brokerage Institutional Sales & Trading
+84 28 3914 3588, ext 222 +84 28 3914 3588, ext 136
quynh.chau@vcsc.com.vn dung.nguyen@vcsc.com.vn
February 15, 2023 | 17