GLOW Energy

GLOW Energy Plc (GLOW)

What’s new? Dr Direk Lavansiri, Chairman of the Energy Regulatory Commission, suggested that the Ft charge may be revised up by Bt0.30/unit at the next scheduled adjustment review in May to reflect higher gas costs, according to Thanhoon newspaper.
Our thoughts: We expect an Ft rate increase, but the scale of the adjustment proposed by Dr Direk would our best-case scenario. A Bt0.30/unit rise in the Ft would cover not only previous fuel cost increases for power generation (particularly gas), but would make up for some of the anticipated upward adjustment to the gas price at the next scheduled review in April. We think it would be premature to assume that the proposed Ft charge increase will be implemented at the scale suggested by Dr Direk—the PM must first endorse it.
Action: While this news is too soon to play out, the Ft charge looks set to be increased at the next review (the question is by how much?), we believe. The news should generate positive sentiment toward GLOW, as we believe the market has not yet priced in anticipation of an upward Ft adjustment. Every Bt0.10/unit rise in the Ft charge would boost our FY12 GLOW profit forecast by 4% and our DCF-based YE12 target price by Bt3/share.