Electricity prices increase, power shortage due to drought, thermal power plants thought to benefit

In June 2023, one of the most prominent problems was the power shortage due to drought in the North. That meant hydropower faced many difficulties but on the other hand, thermal power benefited.

In particular, with the increase in electricity prices, thermal power has more benefits. However, in reality, thermal power stocks have not changed much. In fact, in the near future, this is not a stock that experts recommend investing heavily.

Thermal power stocks increase slowly

KBSV Securities Company provides data on electricity prices in recent times. Accordingly, competitive electricity market prices continue to remain high due to power shortages. CGM prices in May 2023 were recorded at VND 1,942.58/kWh (up 71% year-on-year). In the first 5 months of the year, the average CGM price reached VND 1,789/kWh (up 20% year-on-year).

The electricity price is increasing because of the heat stress, the old electric power plant is benefiting from the picture 1 — Electricity prices are rising, the North is lacking electricity due to drought. It seems that these reasons are enough to make the thermal power industry benefit. However, the reality is not exactly like that. Illustrative photo

“The weather conditions affect hydropower output, making the system unable to meet the increased load demand during the hot season. In particular, the North depends mainly on mobilization from hydropower and thermal power plants. This causes CGM electricity prices to increase dramatically because supply is not enough to meet demand, and some plants even have to add oil to run to ensure electricity supply, causing production costs to increase accordingly,” KBSV commented.

According to Yunta Securities Company, coal-fired thermal power, which accounts for 33% of system capacity, will benefit from this situation because thermal power will be mobilized more to compensate for the shortage of hydropower.

Although electricity prices have increased sharply and benefited from difficulties in hydropower, thermal power stocks have not "heated up" following electricity prices and power shortages.

Specifically, PPC of Pha Lai Thermal Power Joint Stock Company - the biggest player in the thermal power industry - has only increased slightly during the past time. Closing the trading session on July 5, PPC stopped at 16,100 VND/share, up 600 VND/share, equivalent to 3.9% compared to the last session of May.

BTP of Ba Ria Thermal Power Joint Stock Company also increased step by step. After more than 1 month of trading, BTP "closed" the session on July 5 at 15,800 VND/share after increasing by 200 VND/share, equivalent to 1.3% compared to the session on May 31, 2023.

HND shares of Hai Phong Thermal Power JSC increased slightly by 730 VND/share, equivalent to 4.9% to 15,700 VND/share.

NBP shares of Ba Ria Thermal Power Joint Stock Company even “shifted into reverse”. Closing the stock market session on July 5, NBP stopped at 13,700 VND/share, down 1,300 VND/share, equivalent to 8.7%.

POW shares of Vietnam Oil and Gas Power Corporation also fell from VND13,650/share to VND13,500/share.

Still not recommended for strong investment

In theory, when electricity prices increased and competitors (hydropower) faced many difficulties, thermal power was considered to have benefited in June. In the near future, this industry is still highly appreciated.

KBVS maintains its view on the prospect of differentiation among power source groups in the third quarter of 2023, with the advantage leaning towards the electricity industry.

Specifically, according to KBSV, in the near future, for the hydropower industry, unfavorable weather will reduce the output of hydropower plants. This means that the business results of hydropower plants will be greatly affected, especially during peak hot periods.

Regarding thermal power, KBVS commented that hydropower is facing difficulties, opening up more room for mobilization for the thermal power group. In particular, plants in the North will benefit a lot because mobilization depends on 2 main groups of sources without many alternative sources.

Besides, the cooling trend of coal and input gas prices is also a positive factor for this group.

“Although still having a positive view on the industry, KBSV believes that investors should only open positions with electricity stocks when prices experience a deep correction and create upside levels attractive enough to suit each investor's taste,” KBSV does not highly appreciate thermal power stocks.

Source