• We attended POW’s annual general meeting (AGM) on May 23, 2024. Management’s key announcements were VND1tn of insurance compensation for Vung Ang and delays in the COD of Nhon Trach 3 & 4 (in line with our expectation), but also positive developments in its PPA approval progress and land lease price dispute. 
• POW set its 2024 business guidance with a sales volume of 16.7 billion kWh (+16% YoY, ~100% of our full-year forecast) and revenue of VND31.7tn (+12% YoY, ~98% of our forecast) with NPAT before MI of VND824bn (-36% YoY, ~58% of our forecast). We note that POW keeps its conservative guidance unchanged since its first release in January 2024 despite 4M 2024 strong performance. We also note that POW’s actual NPAT before MI has beaten its guidance by an average of 70% in the past 7 years.
• Shareholders approved to pay zero dividends for 2023 in 2024, which is within our expectation as POW needs cash to fund its capex-heavy Nhon Trach 3 & 4 projects. 
• We see insignificant changes to our 2024/25F earnings forecasts as the higher-than-expected insurance compensation may offset the potential higher 2025F loss from Nhon Trach 3 & 4 and potential 2025F loss from Nhon Trach 1, pending a fuller review. We currently have a BUY rating for POW with a target price of VND13,200/share. (see more in our POW Update, dated May 16, 2024)

POW announces that insurers have agreed to VND1tn of compensation for the Vung Ang power plant, exceeding our VND300bn projection and posing upside potential to our earnings forecast.

We see potential downside risk to our Nhon Trach 1’s 2025F earnings forecast based on POW’s 2024 guided sales volume of 740 million kWh (25% lower than our 2024F projection) and depleting domestic gas supply for this plant in 2025. 

On May 22, 2024, POW and EPTC finalized the PPA contract and submitted it to EVN/MOIT for approval, which POW expects to receive in H2 2024. The fixed component is not yet disclosed but management shared that it ensures an IRR of at least 10% and a payback period of 14 years. POW expects contracted sales volume ratio Qc for Nhon Trach 3 & 4 at 65%-75% vs our projection of 80%, giving slight downside risk to our earnings forecast for Nhon Trach 3 & 4. Management estimates the full market price (FMP) at ~VND1,800-VND1,900/kWh, which is able to compete in the southeast and southwest generation markets due to the potential lower sales volume from other gas-fired power plants (following the decreasing domestic gas supply). Based on these estimations, POW expects Nhon Trach 3 & 4 to record minimal loss in the first two years of operation.

Nhon Trach 3 & 4 to operate later than management’s target but in line with our forecast. By end-February, the Nhon Trach 3 & 4 projects lagged behind the company’s plan, in which the overall progress of the EPC package reached 83% vs the plan of 89%, and the procurement progress completed 98% compared to the target of 100%. POW’s management expects the delays in Nhon Trach 3 and Nhon Trach 4’s test runs by ~ 6 months to October 2024 and April 2025, which is in line with our COD forecast for Nhon Trach 3 (middle-2025) while it is six months earlier for Nhon Trach 4 (end-2025). As a result, there is a slight downside risk to our 2025F earnings forecast due to higher loss recognition from Nhon Trach 3 & 4 in 2025F. 

POW has announced promising developments in negotiations over land lease prices with Tin Nghia Corp. POW is confident to finalize the land leasing price for 37.2 hectares in the Ong Keo industrial park at USD50/sqm to USD66/sqm for 29 years (including 4 construction years and 25 operating years) vs Tin Nghia’s request of USD100/sqm, which is in line with our expectation of ~USD50/sqm. Additionally, the expected services costs represent a significant reduction of 35%-50% compared to the previous rate of USD3.5/sqm/year for 11.6 hectares, resulting in savings of between USD13mn to USD19mn for POW. 

POW expects its charter capital increase plan to be approved in 2024. It will be implemented through stock dividends and via the reallocation of development investment funds.

POW’s 2024 guidance vs Vietcap’s forecast

Source: POW, Vietcap

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