Strategy Note /

Thai Market Strategy: Big fuel tariff hike coming—spotting winners and losers

  • Heavy LNG imports set to push up Sep-Dec Ft rate to a new record

  • Higher power prices would eat into some firms’ margins …

  • …but would be a big boost for SPP-heavy Utilities stocks

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Bualuang Securities
1 August 2022

The ERC is very likely to set the Sep-Dec Ft charge on electricity bills at a new record of Bt0.6866/kWh, which will mean record high power prices for that billing period. The majority of Thailand’s generating capacity is gas-fired. Persisting low gas output at the Erawan field and lower volumes delivered from fields in Myanmar meant that a lot more LNG had to be imported at very high prices.

Higher power prices will eat into some firms’ earnings. The profits of ICT, consumer-related, Transport, and Food players will be squeezed. But SPP-heavy Utilities stocks will mark steeply higher bottom-lines. At company level, we have compiled lists of the likely winners and losers of higher electricity tariffs (Figure 4).

Our SET EPS forecasts remain 98 for 2022 and 108 for 2023 (the consensus numbers are 98.1 and 107.3, respectively), as we believe the upside from strong recoveries in general business activity and tourism will more-or-less offset the impact of high power prices.

Heavy LNG imports set to push up Sep-Dec Ft rate to a new record

High gas fuelstock costs are very likely to prompt the ERC to raise the Ft rate to 0.6866/kWh for the Sep-Dec billing period, making for a mean electricity price Bt4.69/kWh up 17% (from an Ft of Bt0.2477/kWh and a mean price of about Bt4.00/kWh for the May-Aug billing period). The pooled gas price has risen steeply since late 2020—the prices of gas from Thailand, Myanmar, and the JDA have increased, but the killer is that persisting very low production at the Erawan field (Thailand’s biggest gas field) and lower gas volumes delivered from fields in Myanmar have meant much heavier LNG imports, which were much more expensive (and were particularly high, Jan-Apr 2022). The pooled gas price, which is updated monthly, was Bt369.66MM btu in June, up by 17% YTD and 75% YoY (albeit down significantly from a peak of Bt449.51 in April).