泰国燃气与公用事业：廉价天然气的时代并未结束.docx

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1、EquitiesThailandOil Companies, MajorPiyanan PanichkulAnalyst +662-613 5753Simon PowellAnalyst +852-2971 7772Edward TeatherEconomist +65-6495 5965Peter Gastreich Analyst +852-2971 6121Tim Bush Analyst +852-2971 6113Global Research 19 February 2019Thailand Gas and UtilitiesEra of cheap gas is not endi

2、ng-and is not priced inIndustry-wide impacts of lower Thai gas price not fully priced inThe Thai governments recent gas auctions cut gas prices of the Bongkot/Erawan contracts 34%/8%. We expect this to drive a negative 7% CAGR in domestic gas prices in 2022-23. This has strong implications for the i

3、ntegrated gas chain industries. In 2022-23, we expect: 1) lower ASPs and ROICs for PTT Exploration & Production (PTTEP); 2) falling costs and higher margins for gas distributor PTT and gas-based chemical company PTT Global Chemical (PTTGC); 3) slower gas fuel cost inflation for the industrial, manuf

4、acturing and power sectors; and 4) lower electricity price inflation. We believe the market has not fully priced in the positive or negative impacts of the changes in gas price trends.No impact on power companies, positive for consumer and industrial sectorsGiven Thailands fuel-cost-pass-through pow

5、er price structure and fixed-return power purchase agreements, lower gas prices have no impact on power companies returns. Nonetheless, Thailands heavy reliance on gas as a fuel (64% of power generation) and lower average gas price increases should result in a 2019-24 residential power tariff CAGR o

6、f just 0.8% (versus 1.6% inflation in 2007-17). For the industrial sector, we expect the change in exploration and production (E&P) gas contracts to reduce the industrial gas cost CAGR to2.1% in 2022-23. This is in line with the Thai governments desire to keep inflation in check for consumers and ma

7、nufacturing companies.Market has not priced in margin upside on PTTGC and long-term risk on PTTEP Taking into account Thailands complicated gas price structure, rising gas deficits, and PTTs existing gas contracts, ourscenario analysis suggests upside risk in 2022 of: 1) 3- 10% to PTTs gas business

8、EBIT; 2) 3-6% to PTTs consolidated earnings; and 3) 3-5% to PTTGCs earnings. PTTGCs deep valuation discount versus its return and history suggests the market is underestimating its mid-term margin upside potential. We also think the market has not priced in the rise in long-term subsidy risk and low

9、er ROIC at PTTEP from the change in Thailands upstream market structure after the auction.Prefer EGCO to RATCH in the Thai utilities spaceWe believe the market has not priced in upside growth potential from EGCOs project pipelines and potential new investments from its excess cash. Meanwhile, we thi

10、nk Ratchaburi Electricity GeneratingJs (RATCH) premium valuation is notjustified, given the sharp slowdown in its EPS growth profile.Figure 1: ValuationsThailand gas and utilities companiesAbove data as of 18 February 2019. Source: Reuters, UBS estimatesCompanyRatingShare price (Bt)Price target (Bt)

11、Mkt cap (US$ m)PE(x)20I9E 2020EEPS CAGR 20I9-20EPBV (x)ROEDiv yieldEV/EBITDA (x)20I9E2020E20I9E2020E20I9E2020E20I9E2020EPTTNeutral48.5053.5044,33010.610.2-3%1.41.313.9%13.5%4.3%4.3%4.54.1PTTEPNeutral123.50131.0015,68914.011.09%1.21.18.5%10.2%2.9%3.2%3.22.5PTTGCBuy69.2588.009,9929.47.70%1.00.911.0%12

12、.7%5.7%5.8%5.64.6EGCOBuy267.00278.004,49813.012.54%1.31.29.9%9.7%3.1%3.2%12.512.0RATCHNeutral55.5052.002,57512.913.10%1.21.19.4%8.9%4.3%4.3%11.110.6This report has been prepared by UBS Securities (Thailand) Ltd. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 27. UBS does and seeks to d

13、o business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Figure 1

14、6: Thailand gas demand (9M18)Transport (NGV) 5%Industrial 16%GSPs(gas for chemicals and household LPG) 22%Power 57%Figure 17: Thailand gas supply (9M18)69%Source: Energy Policy and Planning Office, PTT PublicSource: Department of Mineral Fuels, PTT PublicDemand growth: we expect a gas demand CAGR of

15、 1.9% in 2019-24 (our base case assumption). Gas demand growth is driven mainly by consumption by the power sector, which grows with Thailands power consumption and changes along with the governments fuel source diversification strategy. According to the latest PDP draft, the difficulty of adding co

16、al-fired capacity is likely to drive higher demand for gas and renewable power. We discuss this in detail in our second Pivotal Question.Aside from power, the growing capacity of PTT Group*s GSPs and chemical plants has also supported growth in the past. Nonetheless, we expect demand from GSPs to be

17、 capped by limited gas supply and chemical capacitygrowth.Demand from the industrial sector will continue to grow along with economic growth. In the transportation sector (NGV), PTTs and the governments move to reduce subsidy losses by slowing station expansion should lead to slower demand growth.Ga

18、s supplyThailands gas supply comes from three sources: domestic gas production (69% of total supply), imported pipe gas from Myanmar (18%) and imported LNG (14%).Matured domestic gas fields: Thailands domestic gas production peaked in 2014. Production decreased at a CAGR of 3% in 2015-18, driven by

19、natural production decline and lower gas demand. The latter was due to subdued electricity consumption and the low LNG spot price in 2017-9M18, which encouraged PTT to reduce its domestic gas purchases. We estimate a domestic gas production CAGR of 1.6% in 2019-21, as PTT normalises its gas purchase

20、 after its long-term LNG contracts start. Nonetheless, we expect production to decline at a CAGR of 8% in 2022-24E, due to the governments intended volume cuts for the Bongkot and Era wan PSCs and natural production decline at other mature fields.The Thai government intends to reduce the targeted pr

21、oduction volume of Bongkot and Era wan from 2022 onward to prolong domestic gas reserve life. We believe this will help increase Thailands gas supply security in the long run (slowing the pace of dependence on imported fuels). This should also allow the government to better manage long-term inflatio

22、n, as domestic supply could be used offset to offset abnormal moves in imported gas prices at times.Bongkot and Erawans significant contribution to domestic supply: the fields accounted for 61 % of Thailands domestic gas supply and 45% of total gas supply in 9M18.Figure 19: Percentage of Thailands d

23、omestic and total supply gas (9M18)% of domesticgas supply% ofThailands total gas supply(including import) Bongkot+Erawan Other domestic fields Imported gasSource: Department of Mineral FuelsFigure 18: Bongkot and Erawan supply a significant portion of Thailands domestic gas5,0004,5004,000 3,500 mm

24、3,000 c 2,500 f 2,000 d 1,5001,000500 0LNG importErawan + BongkotSource: Department of Mineral Fuels, UBS estimatesFigure 21: Gas imports from Myanmar, by field (mmcfd, 1998-11M18)1,000Yetakun Yadana ZawtikaSource: Department of Mineral FuelsFigure 20: Thailand domestic gas production and MTJDA cont

25、ribution by field (mmcfd, 1986-11M18)4,0003,5003,0002,5002,0001,5001,00050001986 1990 1994 1998 2002 2006 20102014 11M18 Erawan Bongkot Pailin Arthit Tan tawan Phuihorm J DA othersDeclining supply from Myanmar: Gas imports from Myanmar reached a peak of 917mmcfd in 2015 and decreased at a CAGR of 3%

26、 in 2016-18. Despite the startup of the Zawtika field in 2013, the fast decline in production at the Yetagun field contributed to the decline. We expect pipe gas imports from Myanmar to continue to decline-at a negative 8% CAGR in 2019-24E. While gas production growth and new discoveries continue in

27、 Myanmar, the Myanmar government has restricted gas exports from future projects to lessen domestic gas and power supply shortages.4,500Note: MTJDA = Malaysia Thailand Joint DevelopmentArea.Source: Department of Mineral FuelsRising LNG imports: given declining domestic production and imports from My

28、anmar, growing gas demand in Thailand will likely be met by LNG imports. This has led to the Thai governments plan to significantly increase LNG receiving terminal capacity. PTT is expanding its LNG receiving terminal from 10mt (at the end of 2018) to a planned 19.5mt by 2022. Furthermore, the gover

29、nment plans to open a bid to further expand new terminals.Thailand gas price structureGas prices are strictly regulated in Thailand, with regulators setting the prices for almost all gas products except chemical gas. Prices are controlled directly through several gas-related laws (from upstream E&P

30、to downstream electricity and industrial sectors), and gas and power purchase agreements among related parties (E&P companies, PTT, and gas users including power and industrial companies). PTT, which is currently the sole distributor of gas in Thailand, works closely with the government and regulato

31、rs on gas supply management and gas price compliance.While PTT group is the only group of companies which have access to chemical gas, PTT (the parent company) also bears material subsidy burdens on LPG cooking gas and transportation gas (NGV).Two gas prices, based on actual supply sources: PTT has

32、two tiers of gas prices for its customers, categorised by the source of supply. As its GSPs and chemical customers consume only domestic gas (which has a high-value wet gas content), gas prices for these customers are based only on domestic gas prices (known as gas pool 15). Prices for other custome

33、rs, including the power, industrial, and transport sectors, are based on both domestic and import prices, weighted by the actual volume used from each supply source. PTT and the regulator call this gas pool 21 See the figure below for more detail.Figure 22: Thailands two-tier gas pricing system, bas

34、ed on actual supply sources and productsContract prices with PTT based on Gas pool 1 cost69% of total supplyPower57% of demand18% of total supplyGas pool 2weightedaverage priceof all supplysourcesUS$6.5/Mmbtu*Industrial16% of demand14% of total supply*Estimated gas price for 2018. Source: PTT, UBS e

35、stimatesNGV (Natural Gasfor Vehicle)57% of demandFuel cost pass through for power sector (57% of total gas demand): the gas price for the power sector is set under the fuel cost pass through mechanism. Based on PTTs actual gas cost (the gas pool 2 price), PTT charges power customers only a small pip

36、eline tariff and a supply margin. These margins are also regulated by the Electricity Price Regulatory Committee of Thailand. EGAT and independent power producers are subject to lower tariffs and supply margins than small power producers (SPPs) (see Figure 23).Partially regulated gas price for indus

37、trial users (16% of demand): for large industrial users including co-generation power plants and large heavy industrial users (refineries and chemical plants), gas prices are based on a cost-plus mechanism. PTT charges SPPs and large industrial companies comparable and relatively high margins. Forsm

38、allerindustrial gas consumers, PTT sets the gas price at a discount to the price of fuel oil, which is considered an alternative fuel.PTT subsidised prices for LPG cooking gas and NGV (12% of demand): the Thai regulator sets the NGV and ex-GSP cooking gas LPG prices at PTTs costs. We understand base

39、d on PTT5s financial statements and management comments that these prices fully cover PTTs cash costs but do not fully cover its depreciation. At the EBIT level, PTT continued to make a Bt3.6bn loss on NGV in 9M18.Commercial contracts for chemical gas (15% of total demand): PTTs GSPs separate high v

40、alue gas (ethane, propane, LPG and NGLs) and sell this to PTT Groups chemical companies, primarily PTTGC and also HMC Polymers.PTT sells gas to PTTGC under profit-sharing contracts, based on an equal IRR basis between the two companies (per investment in PTTs GSPs and PTTGCs petrochemical plants). A

41、ccording to PTTGCs disclosure, the current commercial contracts will be expiring from 2021 on. We believe negotiations on the new contracts will take place before 2021.PTT also sells LPG to HMC Polymers (41 % owned by PTTGC) at a net back price, which we understand based on management comments is at

42、 a discount to the market price. These contracts will expire in December 2020 and May 2021, respectively.Figure 23: Thailands gas price structure by customer group*9M18.Customers% of total demand*Gas price structurePower producers57%Fuel cost pass through to consumers-EGAT15%Average gas pool 2 price

43、 + supply margin (US$0.06/mmbtu) + pipeline tariff (US$0.7/mmbtu)-IPPs16%Average gas pool 2 price + supply margin (US$0.06/mmbtu) + pipeline tariff (US$0.7/mmbtu)-SPPs26%Average gas pool 2 price + supply margin (US$0.3/mmbtu) + pipeline tariff (US$0.7/mmbtu)GSPs22%Regulated for LPG, commercial price

44、 contracts for others-Petrochemical15%Ethane, propane, LPGprofit sharing with PTTGC, based on market price of petrochemicalsNGLreference to naphtha price-Local cooking gas (LPG)7%At GSPs cost, adjusted quarterly by regulator-Export LPGNo longer allow export (previously based on Saudi Aramcos contrac

45、t price)Industry16%Partially regulated as regulators monitor and approve price structure and change-Co-generation plantssame structure as SPPs-Industrial gas usersreference to fuel oil priceNGV5%Regulated at PTTs cost, adjusted quarterly by regulatorSource: PTT Public, UBS estimatesUBS Researchretur

46、n 个Thailand Gas and UtilitiesPIVOTAL QUESTIONSQ: Will lower domestic natural gas prices help keep power price inflation in check?UBS VIEWYes. We forecast an average residential power tariff CAGR in Thailand of just 0.83% CAGR in 2019-24. This is much lower than the 1.6% inflation in 2007- 17. The lo

47、wer power prices will be facilitated by lower than historical natural gas price inflation and the Thai power systems increasing generation efficiency.EVIDENCEThailands proposed PDP encourages more gas-based generation and discourages coal. In addition, domestic power consumers will benefit from PTTE

48、Ps recent win in domestic gas fields at a much lower quoted price. This raises the competitiveness of gas fuel relative to others. Thailand will therefore have more efficient natural gas based power plants coming online and being fired by cheaper natural gas. This will lead to lower then historical power pric