MoIT’s new decision benefits gas producers

Illustrative image (Photo gaspetrolimex.com.vn

Hanoi (VNA) – Gas and oil
power plants are expected to benefit from the new decision of the Ministry of
Industry and Trade (MoIT) 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/QD-BCT 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 percent. 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 fourth-quarter production by 25 percent 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 15-20 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 VND (71 million USD) in net profit last year.

Ba Ria Thermal Power Company is running
a gas power plant with capacity of 388.9 megawatts. 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 October 12 at 10,700 VND (47.5 US cents) per share and NT2
has jumped 25 percent in the last one month to close at 29,000 VND 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.-VNA



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