Equity Analysis /
Thailand

Thailand: Utilities - What EGAT’s financial numbers tell us

  • Gas price—Erawan’s output plays a bigger role than crude prices

  • EGAT reports profits, but are they real?

  • How long can EGAT eat the losses?

Bualuang Securities
1 July 2022

Taking a quick look at EGAT’s financial statements, we expect power prices to rise further and stay high for months. Greater output at the Erawan gas field will make for cheaper gas prices in 2023. Hence, SPPs’ operational performances should bottom out in 2Q22 or 3Q22, then start recovering, so we have upgraded our sector rating from NEUTRAL to OVERWEIGHT and raised our calls on BGRIM and GPSC from HOLD to BUY.

Gas price—Erawan’s output plays a bigger role than crude prices

The pooled gas price hit Bt449/MM btu in Apr, up by 126% YoY and 7% MoM, due to a high LNG price and low gas output at the Erawan field. The market is worrying that high crude prices (which are referenced in price calculations for gas supplied by fields in the Gulf of Thailand and Myanmar) will make for a gas price surge in 4Q22. However, if Gulf gas prices hit Bt250-300/MM btu in 4Q22 (from Bt198/MM in Apr), they would still be much cheaper than the cost of LNG (we assume Bt800-1,000/MM btu). Hence, if PTTEP could boost gas output at the Erawan field, reducing LNG import volume, the pooled gas price would decline.