POW – Analyst Meeting updated on December 22, 2021 – Flashnote

• At the moment, Nhon Trach 3&4 are in ground filling process, POW will decide EPC contractor in Jan 22 and start the construction in 1Q22.
• The board has set a conservative revenue and NPAT target for FY22F of VND24,242bn and VND743bn, respectively.

Notable information from the Analyst meeting on Dec 22, 2021

• The management expected FY21 revenue and NPAT to reach VND25,100bn (89% full-year plan) and VND1,917bn (145% full-year plan), equivalent to a loss of VND100bn in 4Q21, and 19% lower than our recent update. The board of directors (BOD) explained that maintenance costs and Vung Ang 1 incident as the main influences on 4Q21 results.
• About the new PPA Ca Mau 1&2: Having a partially fixed gas price mechanism and low depreciation costs will improve the plants’ competitiveness due to more attractive offering prices when joining the generation market than other plants with higher input prices.
• Nhon Trach 3&4’s EPC package will be finalized on Jan 22, and the construction is expected to start in 1Q22. Furthermore, the PPA contract is proceeding in line with our forecast. With a capacity of 1,500MW and a total investment of US$1.4bn, Nhon Trach 3&4 will be Vietnam’s first LNG gas power plant. We believe the project will be the primary driver of POW’s revenue growth when operating from FY23.
• Fitch Ratings initiated credit rating, assigned PVPower a “BB” with positive outlook, enhancing the company’s negotiating and funding ability. On Dec 14, AIIB Bank and Natixis Bank inked a credit agreement for US$95m with DakDrinh hydropower project with purpose of a restructuring loan, allowing the firm to prolong its debt obligation to ten years. It is positive news since it will aid firms in improving cash flow and reducing debt burden in the future.
• POW and its partners are planning to form a joint-stock company for the Quang Ninh LNG project with a capacity of 1,500MW and a total investment of US$2bn, in which PVPower is projected to hold 30% stake. The project has been approved recently, and we will provide an update as soon as further information becomes available.

The BoD set a cautious business plan for 2022

POW’s revenue and NPAT for FY22F are VND24,242bn and VND743bn, respectively, much lower than the 2021 plan and 23%/78% lower than our FY22F forecast due to:

• The repair of Unit 1 of Vung Ang 1 will be longer than expected (3Q22). We estimate the incident will lower its revenue by about VND2,700bn in FY22F. Along with other Operations and Maintenance (O&M) plans such as: Ca Mau 1 overhaul (Jul-Aug/2022), DakDrinh overhaul (Jul-Aug/2022).
• Moreover, the BOD believes that the recovery rate of the electric load has not caught up with capacity growth. Besides, the company has not completed the Qc negotiation for its power plants.

We consider this to be a rather conservative plan given the prospects for gas-fired recovery next year from a low base, and the management also presented at the meeting that they will strive to achieve no lower than NPAT in 2021.

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