A Series of Publication by

Market Research and Consulting Division, FiinGroup

Sector Preview | Vietnam Water Supply

Strong Upside Potentials

on Water Demand
For Publication | Date of Issue: 02 April 2024
82% of clean water in Vietnam is serving the residential sector’s demand
including household, administrative & commercial users

Raw water Processing Distribution Consumption

Water sources Treatment entities Distributors End-users  Residential demand
remains the key driver
for piped water
Irrigation & consumption in Vietnam,
drainage primarily thanks to steady
management
46% company population growth, rapid
Surface Water Agriculture urbanization, and
increasing piped water
82% penetration rate.
8.4mn  Most water suppliers
Water treatment plants m3/day participate in both the
156 WSCs – 10.2mn
m3/day
production and
Water distribution company/system distribution of piped
50%
Ground & Household, water. Meanwhile, only a
Surface Water administrative & few players specialize
commercial users solely in wholesale
activities
In-house Water Treatment Plants
(The number of in-house WTPs in IPs 18%
is not available)
4%
Ground Water

Breakdown of WSCs by Untreated sources Industry

raw water source
Vietnam water supply sector recorded a solid growth
CAGR 2011-21 = 6.9%, reaching 8.4mn m3 per day
Figure 1: Piped Water Production Volume of WSCs in Vietnam (mn m3/day)

Production volume = Sales volume + Non-revenue water volume

11.7 12.1
12.0 NRW volume 10.9 11.3 • Major driving factors for the sector’s
10.2
Sales volume solid growth include the expansion of
10.0
8.0
population and rapid urbanization,
industrial development, and the active
6.0
participation of the private players.
4.0
• WSCs managed to improve
2.0
operational efficiency and decrease
- NRW rates in recent years, facilitated
2015 2016 2017 2018 2019 2020 2021 2022E 2023F 2024F 2025F
by the adoption of smart water
Source: FiinGroup
management. The implementation of
Figure 2: Average Non-revenue Water Ratio of WSCs in Vietnam smart water management tools
Non-revenue Water = Physical losses + Commercial losses including meters & sensors,
Supervisory Control & Data
27.8%
Acquisition (“SCADA”), Geographic
17.5% Information Systems (“GIS”), and
software, allows water suppliers to
improve water quality, leak control,
consumption habits assessment, and
other vital parameters
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: FiinGroup

Financial Information • Business Information • Market Research • Credit Ratings 3

Key growth drivers for the water supply industry
Driving forces: population growth, urbanization, and industrial development fueling piped water demand

Household Consumption Industrial Consumption

The household-level clean water demand is driven by (1) the population growth, The clean water demand from industrial use is driven by (1) FDI inflow, (2)
(2) the piped water penetration rate, and (3) the urbanization rate industrial park areas and (3) the occupancy rate of industrial parks

Figure 3: Population Growth & Penetration Rate (2015-2025F) Figure 4: New Registered FDI Capital (US$bn) by sector (2020-2022)
Population Piped Water Penetration Rate 19.0
67.30
15.2
53.19
12.7 Manufacturing
102.1 Utilities 75.8%
98.5 Construction
Agribusiness
Mining
Others

2015 2016 2017 2018 2019 2020 2021 2022E 2023E 2024F 2025F
2020 2021 2022
Source: FiinGroup Source: FiinGroup
• Increasing piped water penetration rate:
• Resilient FDI inflows
3% - 4% p.a 2021 2030
• Population expansion & Rapid Urbanization: • IP development 90.8 210.9
(thousand
ha)
Population expansion, especially within urban areas, leads to higher
demand due to active consumption of F&B, tourism, etc.
• IP occupancy rate: 59.8% in 2021
Financial Information • Business Information • Market Research • Credit Ratings 4
Urban and industrial provinces emerge as prime targets for water projects
thanks to their substantial populations, high urbanization, and extensive industrial park
Bubble Size:
Y: Leasable Land Area (ha)
Piped Water Sales Volume • In additionwith
Provinces to Hanoi and Ho Chi
significant
9,500 Minh City,forprovinces
potential sector such as
Dong Nai, Binh
development, Duong,
namely and
Binh
Provinces possessed great severaland
Duong other industrial
Dong Nai, posstial
expansion potential for the
Binh Duong provinces arehigh
populations, being recognized
urbanization
7,500
water supply market
as potential
rates, locations
low water for new
penetration
Dong Nai water and
rates, supply projectsindustrial
extensive in the
future.
park This is attributed to their
areas.
sizable populations, relatively
5,500 low water penetration rates, and
zzzzzzzzzzzzzzzzzzzzzzzzz
extensive industrial park given the
areas.
increasing population with access to
• Zoom
piped waterinacross
Dong Vietnam,
Nai,
Hai
3,500 Phong numerous
• Piped industrial provincesrate
water penetration
HCMC exhibit aranked
potential
theupside
51 outdemand
of 63 of
provinces in40%.
up to approximately Moreove6r,
Vietnam,
these provinces
staying boast the highest
at 51.0% in 2020.
1,500 availability of industrial land areas for
Ha Noi • surpassing
lease, Leasable other
area regions
of 6,871.7ha

X: Piped Water Penetration Rate

-500 0% 20% 40% 60% 80% 100% 120%
Source: FiinGroup’s analysis

Financial Information • Business Information • Market Research • Credit Ratings 5

Urban and industrial provinces emerge as prime targets for water projects
thanks to their substantial populations, high urbanization, and extensive industrial park

Figure 5: WSCs in Vietnam by Number of Company and by Ownership, 2020 Figure 6: Breakdown Number of Private Companies by Installed Capacity
Range (mn m3/day)

28% Installed capacity # private companies Installed capacity

45 WSCs By installed capacity
Range (m3/day) (mn m3/day)

By number of WSCs > 100,000 9 2.3

61%
30%
50,000 - 100,000 19 1.3
39%
33%
9% Wholly SOE
13 WSCs 25,000 - 50,000 19 0.6

Partial SOE
87 WSCs 0.3
Private company 0 - 25,000 37

Source: FiinGroup
Note: Wholly SOE is a company with 100% state capital; Partial SOE is a company with 50% state capital or above; Private company is a company with state capital less than 50%
Disclaimed:
• The figure is calculated based on a sample of 145 companies, which contributed to 97% of the market share by sales volume in 2020.
• Among 87 private WSCs, there are 3 companies without information on designed capacity.

Financial Information • Business Information • Market Research • Credit Ratings 6

Vietnam has upside demand of an additional 7.7mn m3…
On the ground of rising demand from both residential and industrial sectors

WATER SUPPLY SECTOR’S CURRENT SITUATION UPSIDE POTENTIAL

• The increasing demand for piped water in
Industrial Vietnam is driven by several factors,
Total designed Total Total piped Upside
capacity production water sales
including the population segments lacking
reached volume reached volume of all
2.7mn access to piped water and the expansion of
11.8mn 10.2mn WSCs in industrial parks in Vietnam.
Vietnam
NRW ratio 7.7mn
reached ✓ Residential upside potential is mainly
stayed at m3/day
17.5% 8.4mn Residential
driven by the unsatisfied demand from
Utilized Upside
volume
5.0mn household use. Vietnam still has 46%
of its population has yet access to
Sold
NRW volume Volume piped water, leading to additional
demand of 5mn m3/day in the time to
18% of industrial
customers come.
✓ Industrial upside potential is
associated with the under-construction
82% of residential area of planned industrial parks and the
customers
projected demand for the current
(including
households, vacant area of existing industrial
administrative & facilities
commercial
customers)

DESIGNED CAPACITY
Designed Capacity PRODUCTION
Production Volume SALES
Sales VOLUME
Volume
(m3 per day) (m3 per day) (m3 per day)
Source: FiinGroup’s analysis
Financial Information • Business Information • Market Research • Credit Ratings 7
Key drivers incl. favorable demographic factors, low penetration and active
Industrial park development

Figure 7: Low piped water penetration rate in Vietnam

Growing water demand from the residential segment to tap on
100%
❑ Strong upside potential for piped water
81% in Vietnam, driven both from residential
66%
75%
55%
and industrial sector
51% 53%
46% 49%
50% ❑Low penetrate rate of 58%

25%
❑Favourable demographic factors (population growth,
rising disposal income, increasing piped water
0%
2018 2019 2020 2021 2022 2025F 2030F consumption per capita, etc.)
Source: FiinGroup
❑Active industrial park developments
Figure 8: Total IP's leasable area (thousand ha) in Vietnam
Robust IP development & FDI flows to support water demand from
the industrial segment ❑ Potential investment opportunities (with
120 105.5 private players only via debt/equity
73.9
82.6 87.1 financing)
80 65.8
63.2
❑M&A opportunities with leading water supply groups
40
❑Business collaboration in greenfield water supply projects
0
2018 2019 2020 2021 2022 2025F
Source: FiinGroup

Financial Information • Business Information • Market Research • Credit Ratings 8

Robust M&A activities in the private sector and greenfield investment
are expected the major market trends in Vietnam’s water supply market
Figure 9: Major M&A Transactions in Vietnam’s Water Supply Sector in Recent Years

Deal Value
Acquirers Nationality Target Year Stake
US$mn

2022 24% 40.6

Non-
2020 guaranteed 16.0
Loan

2019 34% 82.0

Convertible
2018 Loan 24.9
Source: FiinGroup

Financial Information • Business Information • Market Research • Credit Ratings 9

How can we assist potential
investors in unlocking the
potential of the Vietnam water
supply market?
FiinGroup at a glance / Business Portfolio

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Investor Services/ How can we assist potential investors in unlocking the potential of the Vietnamese market?
We support our clients to penetrate or expand their business in Vietnam, looking for investment targets or trusted trading partners via comprehensive
and in-depth expertise

1 Industry Report
On-the-shelf industry reports providing clients with comprehensive information and in-depth analysis about market Main Clients:
size, historical and forecasted growth, market share, market segmentation, competitive landscape, regulatory and
policy framework, key growth drivers and key development trends, key player in-depth analysis to help assess the ▪ Foreign and local corporate
market's attractiveness and growth potentials. clients
▪ Institutional investors
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Customized market study upon specific requirements by clients in addition to value-added services including Usage:
investment target sourcing, company visits, and/or business matching.
▪ Market potential assessment
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In-depth analysis of target company’s market environment, competitive landscaping, its business attractiveness, ▪ Trade connection/Business
and market positioning in M&A transaction. Thorough assessments of business risks and their impacts on the Matching
target’s assumptions and business plans

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Support of investors and/or entrepreneurs to explore investment or trading opportunities and develop optimal
market entry strategies (i.e. M&A, Joint Venture, Minority Equity Investments, Foreign Direct Investments, Trading
or any other partnership structure with local partners) with actionable recommendations for all stages in their
business journey in Vietnam.

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Investor Services / Track record in Water Sector
Client’s request
➢ Understanding the current situation of the water
supply industry to identify potential targets for
business expansion
Name of service
▪ Customized Market Research
FiinGroup’s deliverables
✓ Market research on the water supply sector in
Vietnam including background and overview of water
business in Vietnam, supply and demand of water
supply market, financial performance of companies in
the sector, main regulatory issues, and policy
development
✓ Common practices for EPC contractor selection and
project development
✓ Investment target screening: identification of
potential collaborations (in terms of investment &
EPC/O&M) for Samsung Engineering
✓ FiinGroup’s recommendation on optimal market
entry strategy
Result
✓ In June 2022, Samsung Engineering successfully
acquired 24% stakes in DNP Holding and developed
strategic partnership with DNP Water. Please refer to
this Link for more details
Financial Information • Business Information • Market Research • Credit Ratings
Client’s request
➢ Understanding Vietnam’s water supply market to
identify potential financing projects within the
industry
Name of service
▪ Customized Market Research
FiinGroup’s deliverables
✓ Background & overview of the water supply sector;
major regulatory issues & policy developments; and
water supply development plans in each target
province.
✓ Specific information about each target water supply
company, including operation & financial
information and future development plans.
✓ Meeting arrangements: liaison and identification of
potential water supply companies and financiers for
collaboration.
Result
✓ FiinGroup identified and arranged meetings with
potential water supply companies as well as
potential co-financiers including World Bank, ADB,
Agribank, Bac A Bank, BIDV.
Client’s request
➢ Assessment of the water supply sector and a
Target company in Bac Giang province
Name of service
▪ Commercial Due Diligence
FiinGroup’s deliverables
✓ Comprehensive analysis on water supply sector in
Bac Giang province
✓ Key growth drivers and potential water demand in
the province
✓ Projected water sales volume, water consumption
per capita and water tariff trends.
✓ Benchmarking the Target company’s water plant vs
other water supply companies in the province
Result
✓ Olympus invested US$ 20mn in DNP Corporation
on 1st March 2019, one month after the completion
of the CDD on water supply sector in Bac Giang
province by FiinGroup
13
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Service Offerings
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