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报告摘要

Summary of Philippines Power Document

Core Content

The document provides an analysis of the Philippines power sector, with a focus on key players and future growth prospects. It highlights the importance of near-term capacity growth and the potential of renewable energy (RE) as a long-term theme. The analysis also includes current market valuations, share price performance, and risks associated with the sector.

Main Viewpoints

Sector Rating: The overall sector is rated Neutral due to Hold ratings on Aboitiz Power (AP) and Manila Electric Co (MER).
Buy Ratings: Semirara Mining & Power (SCC), First Gen Corp (FGEN), Energy Development Corp (EDC), and Trans-Asia Oil & Energy Development Corp (TA) are rated Buy.
Capacity Growth: The document emphasizes the importance of companies with significant near-term capacity additions, including SCC, FGEN, and TA.
RE Development: Renewable energy is a growing theme, supported by government incentives like the Feed-in Tariff (FiT). EDC is highlighted as the best way to play the RE theme.
Fuel Cost Disparity: Natural gas is cheaper than oil-based generation, and the shift to natural gas is expected to displace more pollutive and costly oil plants.
El Niño Risk: There is a risk of El Niño causing reduced rainfall, impacting hydro and geothermal generation, and potentially leading to higher WESM prices in 4Q15.
Ancillary Services: Natural gas plants are better suited for ancillary services, which are essential for grid stability and have a large market.
Valuation and Dividend Yield: Companies with Hold ratings offer higher dividend yields but are considered fairly valued. Buy rated companies have lower valuations but higher growth potential.

Key Information

Near-Term Capacity Growth

SCC: Expected to increase attributable capacity by 55% to 845MW with the commissioning of a 300MW coal-fired power plant in 2015. Additional 700MW from St Raphael in 2018.
FGEN: Commissioning of Avion (97MW) in September 2015 and San Gabriel (414MW) in June 2016. These will increase nat-gas capacity by 34%.
TA: Expected to end 2015 with 629.4MW of gross owned and contracted capacity, a 75% increase from the beginning of the year.

Renewable Energy (RE) Growth

The government is accelerating RE development through FiT incentives.
EDC is the leading player in the RE theme, having commissioned the Burgos Wind Project (150MW) in late 2014.
FiT rates for RE projects range from PHP5.90/kWh (run-of-river hydro) to PHP9.68/kWh (solar), with a degression rate of 0.5% or 6% depending on the technology.
EDC is expected to benefit from transmission improvements and the Bac-Man 3 geothermal project, which could add up to 270MW.

WESM Prices

WESM prices for January-July 2015 were PHP4.7/kWh, significantly lower than PHP6.7/kWh in the same period in 2014.
The risk of a price spike in 4Q15 due to El Niño is noted, with SCC expected to be the biggest beneficiary in such a scenario.
Oil-based plants are the most expensive to operate, with fuel costs at PHP6.0/kWh compared to PHP3.0/kWh for natural gas.

Ancillary Services

Regulating reserve required is 4% of demand (300MW).
Contingency reserve required is 647MW, equal to the largest unit on the Luzon grid.
Dispatchable reserve required is 647MW, the second largest unit.
Natural gas plants are more suited for these services compared to coal-fired plants.

Market Data and Performance

Aboitiz Power (AP): Share price is PHP43.35, with a target price of PHP46.60 (+7%). Market cap is $6.8B, and the stock is rated Hold.
EDC: Share price is PHP5.62, with a target price of PHP7.35 (+30.8%). Market cap is $2.2B, and the stock is rated Buy.
FGEN: Share price is PHP22.90, with a target price of PHP31.30 (+36.7%). Market cap is $1.8B, and the stock is rated Buy.
TA: Share price is PHP1.69, with a target price of PHP2.58 (+52.7%). Market cap is $175M, and the stock is rated Buy.
SCC: Share price is PHP130.00, with a target price of PHP175.62 (+35.1%). Market cap is $2.96B, and the stock is rated Buy.

Key Risks

El Niño may lead to reduced rainfall, affecting hydro and geothermal output.
Execution risks for new power projects due to the long lead time for coal-fired power plant construction.
Potential oversupply of baseload capacity by 2019 if demand growth remains low.

Conclusion

The Philippines power sector is poised for growth, particularly in companies with near-term capacity additions and those involved in renewable energy development. While the sector as a whole is rated Neutral, specific companies like SCC, FGEN, EDC, and TA are seen as Buy opportunities due to their growth potential. The shift towards natural gas and renewables is expected to play a crucial role in the sector's future, driven by government incentives and environmental concerns. However, there are risks related to El Niño and project execution, which could impact performance.