Credit Suisse stated that there will be no change in Thailand’s Power Purchase Agreement (PPA) for Independent Power Producers (IPPs) under the new government this year, citing historical traits of all governments after taking the stage as liability is too high to make change of the contracts that private companies have won through competitive bidding.
On the policy front, Credit Suisse expected to see continued push for renewable capacities for cheaper and greener while reducing marginal gas consumption.
Credit Suisse also expected pressure on gas costs to ease amid falling prices continuously, ramping up of low-price G1 project in the Gulf of Thailand and delayed impact of lower spot LNG prices (now $12/mmbtu vs 1Q23 of over $25/mmbtu.) Tariffs are expected to fall in the next review in July, which would take effect in September to December.
The Swiss banking firm stated that with lower production in the Gulf of Thailand even after G1 is fully ramped up in 2024, and falling Myanmar imports, Thailand will rely more on expensive LNG. Pool gas prices in Thailand are expected to stay above THB300/mmbtu for the long term, suggesting an energy cost of more than THB2.5/kWhr.
Meanwhile, recent costs of EGAT to buy renewable and hydro power are below the energy cost of gas-based power. The promotion of renewables will help reduce marginal gas consumption for the country and reduce carbon emission in the grid.
Credit Suisse maintained its Outperform rating on Gulf Energy Development Public Company Limited (SET: GULF), expecting the company to continue to deliver superior growth vs its peers with lower cost of capital and bigger benefits from scale. More contract signings are expected with EGAT and/or make acquisitions of projects in Thailand and overseas both in renewable and gas-based capacities. Credit Suisse eyed target price of THB63.00/share.
