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AES Corp (AES) to Develop Son My 2 Power Plant in Vietnam

Zacks Equity Research

The AES Corporation AES received the government’s approval to develop a 2.2-gigawatt (GW) combined cycle gas turbine (CCGT) power plant — Son My 2 — in south-central province of Binh Thuan, Vietnam. The plant will have a 20-year contract with the government and is expected to begin operations from 2024.

Prospects in Vietnam

In the past few years, demand for electricity has rapidly increased in Vietnam. Per a Reuters report, Vietnam’s forecasted power generation reflects a rise from about 47,000 megawatts (MW) currently to 60,000 MW by 2020. Currently, the country has a population of around 100 million and annual GDP growth of nearly 7%. Coal dominates this country’s market as the primary source of electricity generation source. However, rising carbon pollution has compelled the government to undertake clean-energy initiatives, with CCGT as one of the primary sources of energy.  

To this end, the nation’s largest power plant — Phu My 1 — bears significance with a total combined cycle generation capacity of 715 MW.  The latest Son My 2 plant showcases the nation’s commitment to expand its CCGT portfolio. We may expect more construction of such plants in the upcoming days, which will provide opportunities to AES Corp.

Focus on Combined-Cycle Gas Turbines

With increasing awareness of promoting clean energy, the need for CCGT is high. AES Corp. currently has a total generating capacity of 36 GW. The company uses a range of technologies and fuel types that include coal, combined-cycle gas turbines, hydroelectric power and biomass. The ' Dominican Republic’s Andres and Los Mina units consist of combined cycle natural gas turbine. Andres has a combined cycle natural gas turbine with generation capacity of 329 MW and Los Mina has a capacity 368 MW.

Per a report from Energy Information Administration (EIA), the amount of generating capacity from natural gas-fired combined-cycle (NGCC) plants has grown steadily and surpassed coal-fired plants in 2018. We believe that AES Corp.’s latest contract win will enable it to expand its footprint in the expanding CCGT market.

Other electric utility companies like Southern Company SO, Duke Energy Corporation DUK and TransAlta Corporation TAC are also undertaking initiatives about combined cycle natural gas units to promote clean energy.

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