KIS Vietnam Securities believes that the domestic coal supply for power plants will continue to be short.

In 2019, the coal demand for thermopower plants is estimated at 60 million tons, of which 36.5 million tons is provided by the Vietnam Coal and Mineral Industries Group (Vinacomin), while the remaining 23.5 million tons are from imports from Australia and Indonesia.

The coal demand for thermal power in 2020 is expected to rise to 69 million tons. Meanwhile, under the approved coal industry development plan, the domestic amount of commercial coal would be 47-50 million tons in 2020, of which 40 million tons would be reserved for power generation.

Therefore, the coal amount to be imported is expected to increase to 29 million tons.

The prices of oil and coal have been decreasing, which is expected to improve the profits of power companies.

Thermopower plants in 2020 will use 50 percent of domestic coal and 50 percent of import coal, instead of the 70/30 ratio in 2019. KIS Vietnam Securities believes that the world’s coal price would have considerable influences to the business performance of power companies.

The lower demand in the world market is believed to force the prices down. KIS Vietnam Securities estimated that the coal average price would stay at $70 per ton in 2020. This would help coal-fired thermopower plants to improve their profit margin.

The company praised the thermopower plants which successfully signed long-term contracts on coal supply with Vinacomin, including Pha Lai and Hai Phong Thermopower Plants.

The HSFO (high sulphur fuel oil) price decrease is also believed to benefit power generators.

HSFO price decreasing

The gas output from domestic gas fields has decreased sharply, while the amount of gas from newly added fields is not significant. The first gas stream of Sao Vang - Dai Nguyet field (expected to go into operation in Q4 2020) will only provide about 90 million cubic meters, much lower than the previously estimated 500 million cubic meters.

However, PV GAS plans to provide no less than 7,200 million cubic meters of gas to power plants in 2020. With the predicted lower HSFO price, plus the sharp decrease in gas output, the gas-fired thermopower plants in the south, which has low production costs such as Ca Mau 1 and 2, Nhon Trach 2 will get priority in gas supply.

IMO new regulation would force FO prices down

The new regulation of the International Maritime Organization (IMO) on ship emissions, which takes effect on January 1, 2020, is expected to force HSFO prices down to $350/MMBTU by 2020. If so, Nhon Trach 2 and POW would benefit from this. 

Kim Chi

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