New pol­icy to ben­e­fit gas pro­duc­ers

The Jakarta Post - - BUSINESS - Viet Nam News/ANN

Gas and oil power plants are ex­pected to ben­e­fit from the new de­ci­sion of the Min­istry of Industry and Trade that has sus­pended the op­er­a­tion of the com­pet­i­tive elec­tric­ity gen­er­a­tion mar­ket.

The com­pet­i­tive elec­tric­ity gen­er­a­tion mar­ket (CGM) was launched in July 2012 to di­ver­sify power sources, re­duce the coun­try’s de­pen­dence on hy­dropower plants and make the power mar­ket more com­pet­i­tive.

MoIT De­ci­sion No 3698/QDBCT that took ef­fect on Oc­to­ber 1 sus­pends the CGM op­er­a­tion to max­imise the con­sump­tion of gas-based power pro­duc­tion, thus ben­e­fit­ing gas power pro­duc­ers at least in the fourth quar­ter, ac­cord­ing to HCM City Se­cu­ri­ties Co (HSC).

Un­til now, the Elec­tric­ity of Viet­nam (EVN) bought power from plants through bid­ding com­pe­ti­tions based on the plants’ costs. EVN will now buy power from the plants based on the prices stated in the power pur­chase agree­ments (PPAs) it signed with power pro­duc­ers.

For ther­mal power pro­duc­ers, the PPA price is cal­cu­lated on the fixed cost plus op­er­a­tion and main­te­nance costs, vary­ing cost and ma­te­rial trans­porta­tion cost.

The PPA price for ther­mal power plants would be higher than the av­er­age CGM price. How­ever, the vol­ume of power EVN pur­chases from those plants will be lower once EVN gives pri­or­ity to gas power prod­ucts, thus mak­ing earn­ings of those pro­duc­ers de­cline, HSC said.

For hy­dro and gas power plants, the PPA price is cal­cu­lated by the fixed cost plus op­er­a­tion and main­te­nance costs.

Of the two types of power pro­duc­ers, HSC as­sumes hy­dro power plants would suf­fer as they have the low­est pro­duc­tion cost, pulling the PPA price be­low the CGM av­er­age price by 20-30 per cent. EVN will also buy less from hy­dro power plants, there­fore, their in­come will be badly af­fected, HSC said.

The gas power pro­duc­ers that could ben­e­fit from the de­ci­sion are PetroViet­nam Power Nhon Trach 2 JSC (Nhon Trach 2), Ba Ria Ther­mal Power JSC and PetroViet­nam Power Com­pany (PV Power), HSC added.

Nhon Trach 2 is run­ning a gas power plant with ca­pac­ity of 750 megawatts (MW). The de­ci­sion could in­crease the plant’s fourthquar­ter pro­duc­tion by 25 per cent year on year to 1.5 bil­lion kWh.

Viet­nam’s big­gest op­er­a­tor of gas power plants, PV Power, is man­ag­ing the op­er­a­tion of three gas power plants. Two of its plants – Nhon Trach 1 and Nhon Trach 2 plants - used to sell 15 to 20 per­cent of their pro­duc­tion on the CGM.

Nhon Trach 2 con­trib­uted 60 per­cent of post-tax profit in 2016 for share­hold­ers of the par­ent com­pany PV Power. PV Power earned 1.6 tril­lion dong (US$71 mil­lion) in net profit last year.

Ba Ria Ther­mal Power Com­pany is run­ning a gas power plant with ca­pac­ity of 388.9 MW. Shares of those com­pa­nies are ex­pected to rise in the near fu­ture.

Ba Ria Ther­mal Power Co and Nhon Trach 2 are list­ing their shares on the HCM Stock Ex­change un­der code BTP and NT2, re­spec­tively.

BTP stocks rose 1 per­cent in the last two ses­sions to end Thurs­day at 10,700 dong per share and NT2 has jumped 25 per­cent in the last one month to close at 29,000 dong per share.

In ad­di­tion, PV Power is ex­pected to make its ini­tial pub­lic of­fer­ing (IPO) in De­cem­ber 2017 and the prospects of higher earn­ings could make PV Power’s shares more at­trac­tive, HSC said.

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