Thai power generation stocks saw a significant decline on Friday after the LNG JKM price surged to a yearly high due to the temporary shutdown of Chevron’s Wheatstone LNG facility.
As of 11:50 local time in Thailand, prices of B.Grimm Power Public Company Limited (SET: BGRIM) plunged 6.17% to THB21.30 per share. Meanwhile, Global Power Synergy Public Company Limited (SET: GPSC) fell 4.12% to THB40.75 per share and Gulf Energy Development Public Company Limited (SET: GULF) dropped 2.48% to THB39.25 per share.
Chevron Corporation (CVX), an integrated oil and gas company, has suspended operations at Australia’s Wheatstone liquefied natural gas (LNG) project. The two-train facility, which has a capacity of 8.9 million tons per annum, is currently not operational to undergo repairs on the fuel system located on the Wheatstone offshore platform. In addition to this, CVX was also compelled to shut down production at its Wheatstone domestic gas project, known as domgas, late on Monday.
Krungsri Securities (KSS) stated that the plant is expected to resume operations on June 27, 2024. This has caused LNG prices to remain high, thus putting pressure on the cost of single pool gas price (import LNG accounts for approximately 40-45% of all gas) to increase in 4Q24, which would diminish the IU margin of the SPP segment.
KSS added that for BGRIM, there are specific factors such as concerns about IU demand in the auto sector, which account for 40% of total demand, due to a 11% YoY decrease in vehicle production to 105,000 units, the lowest in three years. It is expected that vehicle production in 2024 will be the lowest in 14 years, which may result in a stagnation or decline in BGRIM’s overall IU demand growth.
Additionally, KSS stated that it prefers CK Power Public Company Limited (SET: CKP) as its top pick in the group as 2Q24 earnings are expected to rebound to profitability due to increased power generation at NN2 and XPCL, and the positive impact of La Nina, which is expected to begin in the third quarter onwards. This will cause profits to return to an upward cycle again from 2024-2025. Additionally, the risk of a significant increase in single pool gas costs is relatively limited.
The brokerage firm gave a “BUY” recommendation on CKP with a target price at THB4.50 per share.
