Global Power Synergy: Ft rate cut looming over the remainder of 2025F
- 1Q25 net profit came in at THB1.14bn (+32% y/y, +14% q/q), lifted by Gheco One performance improvement and operating expense drop
- Potential margin squeeze from Ft rate cut for the remainder of 2025
- Expect a one-time gain of c.THB800mn from AEPL’s c.3% share divestment in 3Q25F
- Maintain HOLD with unchanged TP of THB31
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Total EBITDA came in at THB4.69bn (+2% y/y, +7% q/q).
1Q25 key operating metrics
- Sales volume: Total sales volume came in at 4,628 GWh (-6% y/y, -5% q/q). The drop in sales volume was due to a) a lower dispatch rate from EGAT, b) a one-month shutdown of the Gheco One project, and c) softer independent utility (IU) demand due to scheduled maintenance.
- Tariff and cost: Ft rate inched down to THB0.3672/unit (-THB0.03/unit both y/y and q/q) whereas SPP natural gas and coal costs this quarter averaged THB344/mmbtu (+3% y/y, +6% q/q) and USD121/tonne (-15% y/y, -10% q/q), respectively. Gross profit was THB5.29bn (+4% y/y, -2% q/q) while gross profit margin was in line with our estimate at 14% (vs. 12% in 1Q24 and 12% in 4Q24).
- Equity income is projected to be THB80mn (vs. 1Q24 loss of THB12mn and 4Q24 profit of THB229mn). The q/q drop would be caused by a) lower power generation from XPCL hydro power plant, and b) forex loss from CFXD project.
- 1Q25 extra items included a) a forex loss of THB126mn, and b) a gain on financial instrument of THB69mn.
Looking ahead
(-) Negative impact to SPP as the new tariff is slashed to TH3.98 for May-Aug 2025. The Energy Regulatory Commission (ERC) announced a new electricity tariff of THB3.98/unit for May-Aug 2025 (from the current level of THB4.15) on 30 Apr 2025. This is achieved by cutting the Ft rate from THB0.3672/unit to c.THB0.1972/unit. This will adversely affect SPP power players, and we deem limited impact to GPSC as c.60% of its SPP power plant is gas-link based while the change in Ft rate will not affect the electricity tariff.
Despite peak power demand in Apr, we expect 2Q25F core performance to be pressured from margin squeeze after the Ft rate cut. Based on our study, every satang (THB0.01/unit) change in the Ft rate will result in a net profit change by c.THB54mn a year. This assumes a total annual electricity sales volume of 13.6Ghw.
As a result, we finetuned our FY25F net profit projection by c.THB460mn – from THB5.25bn to THB4.81bn – as we cut our average tariff rate by THB0.16/unit for May-Dec 2025, based on an assumption of i) total electricity sales from SPP of 13.6Ghw, and ii) a c.40% Ft-link SPP tariff portion.
(-) Headwind risk ahead after recent government announcements. In Apr 2025, the government laid out plans to lower electricity tariffs through direct cuts (as mentioned previously), renegotiation of power purchase agreements (PPAs), and reforming the pooled gas price mechanism. Our analysis of each of these is as follows:
- (-) To reform/amend existing PPAs within 45 days: Changes and/or amendments to the PPAs will focus on i) subsidies such as Adders and Feed-in-Tariffs (FiTs); and ii) availability and energy payments (AP, EP; note that IPP-type power plant accounts for c.30% of total power portfolio). Such changes are to help EGAT and the government reduce unnecessary costs and associated expenses. We believe both IPP and VSPP (mostly renewable) will be affected by this announcement. However, we also believe any changes/amendments to existing PPAs are less likely, with any changes likely applying only to PPAs not yet in operation.
- (+/-) Pooled gas price reform: The last announcement concerned pooled gas price reform, which would enable electricity tariff reductions in Sep-Dec 2025. This reform aims to reduce natural gas costs for power producers by reallocating the cheapest gas sources to power plants instead of pooled gas, which is more expensive (influenced by LNG prices). We are neutral on SPPs, despite the cheaper gas cost, as tariffs will also drop, leaving SPP margins unchanged.
Estimate a c.THB800 gain to be booked in 3Q25F from c.3% of AEPL’s shares being sold. On 6 May, GSPC announced that GRSC, a subsidiary that holds 42.93% stake in Avaada Energy Private Ltd (AEPL), has sold 3.03% of its holding in AEPL to Avaada Ventures Private Ltd (AVPL) for c.USD79mn. This transaction will be executed within 3Q25F and GSPC will have a one-time after-tax gain of c.THB800mn.
Note that AEPL’s total installed solar capacity increased from 3,744MW at end-2021 to 20,558MW at end-March 2025.
Note that we factored in this one-time gain of THB800mn into our FY25F net profit projection – from THB4.81bn to THB5.61bn.
Maintain HOLD. We foresee higher regulatory risk on the domestic front given uncertainty over electricity tariff cuts by the government, as the mechanism and/or subsidy remains unclear. Moreover, it is highly likely that the new Ft rate for May-Aug will be either lower than the current level or unchanged, while natural gas cost is expected to remain high. Thus, we maintain a HOLD rating with an FY25F TP of THB31 based on a DCF valuation with a WACC of 10.07%.
FY Dec | 1Q2024 | 4Q2024 | 1Q2025 | % chg y/y | % chg q/q |
Revenue | 23,773 | 22,168 | 21,414 | (9.9) | (3.4) |
Cost of Goods Sold | (20,996) | (19,428) | (18,443) | (12.2) | (5.1) |
Gross Profit | 2,776 | 2,739 | 2,971 | 7.0 | 8.5 |
Other Oper. (Exp)/Inc | (509) | (1,019) | (605) | 18.8 | (40.6) |
Operating Profit | 2,267 | 1,720 | 2,366 | 4.4 | 37.6 |
Other Non Opg (Exp)/Inc | 337 | 476 | 383 | 13.7 | (19.6) |
Associates & JV Inc | (11.9) | 299 | 80.0 | nm | (73.3) |
Net Interest (Exp)/Inc | (1,401) | (1,473) | (1,380) | 1.5 | 6.3 |
Exceptional Gain/(Loss) | 4.14 | 421 | (57.1) | nm | (113.6) |
Pre-tax Profit | 1,195 | 1,443 | 1,391 | 16.4 | (3.6) |
Tax | (135) | (250) | (66.7) | (50.7) | (73.3) |
Minority Interest | (196) | (194) | (185) | 5.9 | (4.7) |
Net Profit | 864 | 1,000 | 1,140 | 31.9 | 14.0 |
Net profit bef Except. | 860 | 579 | 1,197 | 39.2 | 106.7 |
EBITDA | 4,919 | 5,140 | 5,153 | 4.8 | 0.2 |
Margins (%) |
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Gross Margins | 11.7 | 12.4 | 13.9 |
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Opg Profit Margins | 9.5 | 7.8 | 11.0 |
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Net Profit Margins | 3.6 | 4.5 | 5.3 |
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