I don't think any YTL company owns any shares in SEA group. The historical share price plunge in SEA last night was due to its chairman's statement of possible venturing into new markets and incurring losses in coming quarters.

As far as I know, SEA's online shopping business is still thriving, growing at over 20% from last year. I am not sure about its livestreaming business. In any case, SEA requires large data centres for its operations whether online shopping or livestreaming businesses. I see no impact on YTLP's data centre business from SEA's share price plunge.

@moncmondo87, how could it possible for USEP to hit $4,500/MWh two days ago after TPC kicked in?

@Alex Chua, as mentioned before, I am looking at Bonia and Padini besides YTL/YTL Power

I think Tan Sri meant RM1 billion dividend if utilities and construction & cement divisions perform well as expected

But overall this is positive to the share price rally of YTLP, as Kenanga TP of RM1.85 currently is based on a very conservative earnings projection for FY2024. If YTLP proves that its earnings from Q1 FY2024 is not much impacted by TPC, then analysts will upgrade the earnings for FY2024 and raise TP further.

Kenanga may have got it right for the 4Q FY2023 earnings which will be higher than 3Q, but they have got it wrong on FY2024 earnings which show lower numbers than FY2023. This does not make much sense to me unless they predict a 50% drop in PowerSeraya earnings in FY2024 along with the 55% drop in USEP. If so, then it shows that they do not understand how the business works in Singapore competitive electricity market.

Power companies in Singapore make the bulk of the profits from generation which is over 95% hedged with retails contracts and vesting contracts. This is made very clear from Sembcorp result presentation slides which show that the company will rake in more longer term contracts and leave spot exposure to just 4%.

Secondly, YTL chairman is confident of giving out RM1.0 billion dividend a year for FY2024 and FY2025, which means the company forecast strong earnings from PowerSeraya to continue at least for another 2 years to 2025. There will be new baseload new generating units coming online in 2026 so supply tightness will be eased and so it may impact the retails contract margin. How much it will impact retails margin will depend on how much long term contracts Sembcorp and Keppel will sign up for their new capacity and how much high pressure steam sale to third parties they will have (which will reduce the net generation output).

@cgtan2020, pls check the presentation video at 09.08, the slide shows that as of 30 June 2022, Sembcorp spot exposure for its gas plants was 8% and as of 30 June 2023, the spot exposure was 4%.

So my earlier assumption of 6% spot exposure in generation volume seems appropriate.


https://webcast.openbriefing.com/Sembcorp_1H2023/player/?player_id=51514
From the CFO comments, 1:16:00 onwards, if TPC is implemented on H1Y23, to take care of the spike, it will have S$60Million impact on the S$435Million net profit, or 13.7%. Just to be fair to @hng33, USEP will have impact to YTLP net profit in coming quarters, some say 8%, some say 10% of the power sectors, it depend on their spread on contracted customer. Hopefully other sectors can cover the reduction profit in power generations. Overall the CEO did say with TPC in place, efficient power generator like them will still make a decent profit onwards.

Having said that, I am still happy to see if PowerSeraya could have made extraordinary gain of S$30 million from long generation into the pool in the upcoming Q4 results.

@cgtan2020, in the case of Sembcorp, the CFO said there would have been a 13.7% impact on its net profit in 1H 2023 should TPC have been implemented in 1H 2023. Pls take note that the stated impact is on dollars terms which was S$60 million out of net profit of S$435m in 1H.

The impact in dollar terms could be as high as 13.7% but in electrical power (GWh) terms it could have been much lower. Take an example, say Sembcorp base load generation hedged with retails and vesting contracts for 1H 2023 was 5,000 GWh (vs 6,600GWh for PowerSeraya) and it secured an average non-fuel margin of S$75/MWh in 1H (vs S$80/MWh in Q3 for PSeraya), so the base generation margin would have been:
5,000 GWh x S$75/MWh = S$375 million

Then Sembcorp could have sold long generation (assumed 6%) into the pool at much higher margin of say S$200/MWh, so it could have earned a gross margin of:
300 GWh x S$200/MWh = S$60 million by selling long into the pool taking advantage of power price surges

You can see in terms of long generation volume, it could be just 6% (with remaining 94% hedged with retails and vesting contracts) but the financial impact was 13.7% as power prices were very high in 1H 2023.

Now with TPC in place, power prices have been remaining low close to SRMC of CCGT so gencos are not able to realise any big extraordinary gain from long generation. It will impact at most 5% to 6% of gencos' generation. I am not worried about the loss of such long generation gain, as long as the base load generation continue to get decent margin, just like what Sembcorp CFO said with their efficient fleet of machines.

@cgtan2020, the industry people who are familiar with the electricity sector in Singapore do not bother much about the fluctuations in USEP as they know most of the companies' profit is hedged through retails contracts and vesting contracts with almost 100% hedged gas costs.

Only consumers and independent retailers care about USEP, as they take the risks on the typical norm of USEP being at a discount to the retails contract price.

Why USEP is normally trading at a discount to the retails contract price or vesting contract price? It is because the retails contract price and vesting contract price have incorporated in a non-fuel margin on top of the fuel costs (or we call it short run marginal cost SRMC). When the supply is tight and demand high, this non-fuel margin tends to be high like we are seeing now. Historically this non-fuel margin may hit S$60-80/MWh during tight supply. When there is over-supply of capacity, gencos dump the prices and non-fuel margin may get to as low as S$20-30/MWh like in the period of 2017-2019. During 2014-2016 when there was severe over-supply of capacity coupled with the Take-or-Pay clauses in the gas supply agreements, gencos dumped prices to extreme low in order to keep their machines running and all made losses then.

In the wholesale electricity market (or we call it the electricity pool), gencos typically bid their selling prices at the SRMC of their most efficient units (which are combined-cycle gas plants CCGT) first then the less efficient open-cycled gas units followed by heavy fuel oil steam plants. Under normal situation where the demand supply is quite balanced where the most efficient CCGTs are enough to meet the demand, then USEP will be cleared at the SRMC of CCGT units. This appears to be the situation from July 2023 onwards (after TPC is in place and EMA intervened) when we see USEP trading at S$160-180/MWh which coincides with the SRMC of CCGT units. Only when there is a CCGT unit down or a sudden demand surge then USEP may clear at the SRMC of a less efficient open-cycled gas unit or fuel oil-fired steam unit which is above S$200/MWh. There is the reason why we are seeing USEP being at a discount to retails contract price (which is above S$250/MWh) or vesting contract price, as USEP does not include a non-fuel margin.

Whether or not this situation will encourage more independent retailers to come in to buy power from the pool at USEP and sell to consumers at a margin depends on the risk appetite of the retailers. Some have already gone bankrupt after a period of power price surges in Q1 & Q2 2023. Furthermore, the EMA has tightened regulations to ensure retailers will not go bankrupt so easily by forcing them to hedge at least 80% of their electricity purchases, and not 100% subject to USEP fluctuations.

Will consumers choose these independent retailers to buy cheaper? Consumers will need to assess the risks with these independent retailers and product offerings by them. If these independent retailers are not able to offer fixed price contracts for 12 months or so because their cost of purchase is not fully hedged (as it depends on USEP which fluctuates every 30 minutes), then not many consumers will sign up with them as they have experienced power price surges in Q1 & Q2 when these consumers paid much higher electricity prices than other fixed-price retails contract. This is especially so for corporate and industrial consumers who need to do a budget of their utility bills.

So yes, there will be consumers who will switch to independent retailers and take risks on USEP fluctuations but I think the number is not big.

@Muyutin, I am not trying and not able to push YTLP to RM5.00. We can just wait for it to run its course and time will tell. Along the way there will be skeptical people and remarks, YTLP just needs to demonstrate that the company will be able to make EPS of 30 sen or more a year and declare dividends of 15 sen or more for FY2024 and FY2025. Then only analysts and fund managers will be convinced of its earnings power and strong cashflows.

We talk so much now, there is no use. It is not for us to prove anything, but for the company to prove and its Chairman to prove his claim of paying RM1 bil dividends every year.

If you believe in your analysis and the company prospects, just hold tight for 2 years. Who knows? It may hit RM5.00 one day.

Singapore has about 2 million households, and if 5% has EVs then the potential demand is for 100,000 EVs. If 10% households have EVs then the demand will go up to 200,000 EVs and 2,000MW power demand

@Muyutin, EV car charging can have a big impact on power demand especially in a country like Singapore.

For example, if there are 100,000 EVs charging at night using a 10kW charger at home, the power demand will go up by:
100,000 x 10 kW = 1,000 MW

The average power demand at night in Singapore is about 6,000-6,500MW, so an additional 1,000MW power demand would be a significant 15% increase in night demand.

hng33, you can blame me on trying to defend the stock causing you not able to buy back at lower prices.

But the volume is so big that the share price does not go up just bcoz a few words that I said, or the share price will go down just bcoz of the few remarks you made. YTL share price rally from RM0.70 when I first made the buy call last May until RM1.50 today is because YTLP has shown the numbers and big funds are getting to recognise it. Today 32 million shares of volume is no small fish playing.

@xiaochen, well said.

PS高盈利的关键，是在于电力高需求，导致电供量吃紧。
PS高盈利的关键，是在于电力高需求，导致电供量吃紧。
PS高盈利的关键，是在于电力高需求，导致电供量吃紧。

我个人是不放大USEP的因素，因为2021年，10-12月USEP也是非常的高。2021年，PS并没有高获利。

2022下半年，7-12月，和20231-3月的分别也都差不多一样。但是为何2023 1-3月的盈利会暴涨？电供吃紧咯。

@hng33, you missed the point and missed the fact. The exposure to wholesale market is less than 10%, never at 30%.

Vesting contract price is adjusted every 3 months according to gas prices and FX, and all gencos hedge almost 100% of their vesting contract requirement on both forward gas prices and FX, so gas price fluctuations never affect gencos' earnings from vesting contracts which thelselves are just a form of Contract-for-Differences (CfD). You may want to download the relevant documents on vesting contracts from EMA website to understand better.


It may be right to say that wholesale prices for July-Sept 2023 quarter will be lower than that of April-June 2023 quarter as TPC kicked in from 1st July 2023. Again, it will affect the margin from long generation that sells into the wholesale market, which I estimate is lower than 5% of overall PowerSeraya earnings.

For any stock in a multi-month rally, it is normal to have healthy corrections along the way so that the rally becomes sustainable. When it hits a new high, some will take profit and when it has corrections, it allows others to come in.

YTLPower had a similar correction after it hit a new year high of RM1.36 on 31st May 2023, the next day it went down as much as 10 sen.

Thank you hng33 for giving us the chance to buy low again.

Sembcorp has already announced its results for June 2023 quarter and the result showed that its Singapore power division made good profits. Most of the analysts' reports on Sembcorp following the quarterly result has upgraded the company with higher profit projections and acknowledged that its Singapore power division will continue doing well in next 2 years. You can check and verify this from the various reports available online.

I see today action as a healthy correction to force out weak holders and hence a good buying opportunity for long term investors. It is just like the incident on 20th June 2023 when the news of the EMA introducing the TPC was out and some traders sold the shares of YTL Power down by 15 sen to RM1.15. I managed to scoop up a lot at 1.16-1.18 then. Those who were brave enough on 20th June to buy cheap are now sitting on good profits, despite the healthy correction today

first, PowerSeraya typically hedge over 90% of generation with retails contracts, so the exposure to the wholesale market will never reach 30% as claimed by some quarters.

Secondly, a few small retailers have gone bankrupt and the remaining retailers are mostly have own generation arm. The remaining retailers will not dare to go long on buying all generation from wholesale market and sell to customers. In fact, the EMA has already set regulations to force all retailers to hedge their electricity purchase to 80% minimum. No retailer can buy cheap from wholesale market and sell high to customers in a big way now.

The wholesale electricity prices will naturally soften after the TPC is in place to cap the prices to 2x to 3x Long Run Marginal Costs, which they estimated to be SG$450-700/MWh.

In fact, I am happy to see more steady wholesale electricity prices (without a lot of surges beyond SD$1,000/MWh) so that some smaller retailers can survive and there will not be much complain from consumers. The EMA will also not introduce more drastic measures to intervene in the competitive market.

This leaves gencos to steadily earn decent profits from the retails contracts.

I have said a few times, the fluctuation in wholesale electricity prices does not have much impact on PowerSeraya profits as over 90% of its generation is hedged by retails contracts which last from 6 months to 2 years. PowerSeraya said in end May that the company had managed to lock in retails contracts at good margin for 2 years and locked in gas supply at attractive prices.

Why the rush to sapu 2.8m shares at 1.55 last minute?

This news article mentions that Sembcorp has contracted with Singtel and Micron for long term PPA for 10 year, 80MW and 18 years, 350MW respectively. That partly explain the need for Sembcorp to build a new cogen plant of 600MW. So a big portion of the existing cogen plants has been contracted for long term supply to big clients, leaving not much for the surging peak demand.

https://www.theedgesingapore.com/capital/brokers-calls/analysts-optimistic-sembcorp-industries-all-keep-buy-raised-target-prices

you see both Keppel and Sembcorp are like Government-linked Corporation (GLC) which may be forced to do some sort of national service, hence both have committed to invest in new power plants to meet the power demand growth in next few years. The big 3 (Senoko, Seraya and Tuas) have been privatised and owned by foreign investors who are less likely to invest big money in the competitive market after suffering losses in 2014-2017 when there was an over-capacity in Singapore. Investors are scared of the EMA doing too much intervention and flooding the market with too much capacity hence crashing the power prices.

Hence I am skeptical of the proposed 600MW capacity being solicited by the EMA. It is a free competitive market. When power players think that there will be power demand, they will make a business decision to invest in new capacity. If they think there will be a lot of new capacity coming in, then they will hold back on any new investment. So I am not sure how the EMA is going to solicit this new 600MW plant to be up by 2028. Will there be any incentive offered by the EMA for this new plant? Any guarantee on capacity uptake or profit guarantee? obviously no.

I just hope that the power players in Singapore will be conservative enough not to be too aggressive in new plantups which will hurt everybody in the game.

@Sslee, yes the total power output from the gas turbines and steam turbine will be 600MW. What I wanted to point out was that a cogen plant has other outputs like high pressure steam and demineralised water besides electrical power. Part of the power output is used to generate the high pressure steam which is piped away to nearby industrial plant uses. Hence the net electrical power output is typically lower than the nameplate capacity of the gas turbines + steam turbine.

In fact, Sembcorp already has a cogen plant running, the nameplate capacity is 765MW (if I remember correctly), but the net electrical power output available for export to the power grid is about 500MW. Part of the high pressure steam is piped away for export to nearby industrial plant, instead of all going into the steam turbine to generate electrical power.

I could have missed this Sembcorp cogen plant. Being a cogen plant, part of the power output will be used to generate high pressure steam and demineralised water, so the net power output will be lower than 600MW, typically around 2/3 of nameplate capacity or around 400MW.

So now we have 2 firm new plants coming online in 2026 and another to be solicited by the EMA (not firm). If we factor in all three, total new capacity would be 600+400+600 = 1,600MW coming online by 2028. This would be just enough to meet the projected peak demand growth of 1,500MW - 3,800MW in next 5 years.

@xiaochen, yes based on recent news flows, it appears to be 2 new power units announced so far, one being the 600MW hydrogen-fuel ready unit, another 600MW unit as an open unit solicited by the EMA targeting completion by 2028.

The one tendered out by the EMA is still not certain yet as I am not sure if there is enough interest from private developer to pour in hundreds of millions dollars to develop a big plant when there is no visibility as to when and how much the EMA will bring in RE import. I expect this bidding process itself may take few months to conclude then another few months for the winner to achieve Final Investment Decision, followed by 30-36 months of construction and commissioning.

The Star news article mentions about bullish projections by the EMA of the peak demand in Singapore over the next few years, with peak demand projected to rise by 1,500MW to 3,800MW from currently 7,800MW to 9,300MW - 11,600MW by 2028. So even the proposed 600MW new capacity coming in at end of 2027 and Keppel's 600MW new unit coming in 2026 may not be enough to meet the increase in peak demand in 2028.

That's good development. It shows that the current electricity market in Singapore is very tight and no private developer has any plan to build new power plant besides Keppel. EMA definitely sees the need for a new power plant and hence seeks bid to build a new plant by 2028. But what's the incentives of building a new power plant while the capex of building one is quite high, and there is no certainty that the new power plant can make much money after running in 2028?

No worries. YTL is a bluechip stock that you can hold on and sleep well. Both fundamentals and technical signals look promising for greater heights in coming months

The news reinforced my earlier view that SEM was grossly undervalued.

I have also asked but nobody seems to know what was happening at Tokyo

Heavy volume today and share price closed flat. Good sign

cahsflows wise it will be more straightforward. It will be just cash coming in, even half of PPA payments may be just enough to service the debts

@bullrun2025, if Nepco only pays half of the PPA payments to YTLP Jordan Power, then the other half may be classified as trade receivables and get capitalised in the balance sheet, while the full payment is recognised as profits in the P&L. This is one way of accounting treatment.

On the other hand, if the other half payment is no way in sight of receiving from Nepco, then Jordan Power may not recognise the full PPA payments as revenue in the P&L and hence will book in some losses as its operating costs are more than half the PPA payments.

@Johnzhang, glad that you still have strong conviction in Bplant fair value of above RM2.00.

To be fair, either its 9,000+ ha of strategic landbank (which is conservatively valued at RM4.00 psf) or its 63,000+ ha of plantation estates (which is conservatively valued at RM70,000 per ha) alone should fetch over RM4.0 billion valuation or over RM1.80 per share.

cannot find any news, could be some deal involving Niseko land bank or a corporate deal involving the listed shares in Japan

@goody99, you may probably be right, as I am also looking at around 6 sen EPS for Q4 partly due to your 2 reasons above.

As interest rates got raised by another 0.5% in the past quarter, I suspect there may be more provision in Wessex' index-linked bonds.

Jordan power as you mentioned might incur some start-up costs as the 2nd unit was commissioned. Furthermore, recent news suggests that Nepco had only been paying half of the fees recognised in the PPA.

Zhuge_Liang, I am looking at Genm, Genting, Bonia and Padini besides YTL & YTLPower.

I think the first 2 may have more meaningful rebounds after the state elections.

Bonia and Padini are good consumer plays, both at net cash position and have strong operating cashflows.

thanks bullrun2023. That is about 9% increase as approved

@bullrun2025, what is this 504 pounds with Wessex?

Finally a take-over of BPlant is happening 15 months after my suggestion in this article, coming too late?

@moncmondo87, yes it will then down to which plants having a lower BTU/kWh which depends on the efficiency of the plant itself and the fuel cost.

I suspect even when Keppel new gas plant comes online in 2026, it will not be much more competitive than existing CCGTs as hydrogen fuel will still be more expensive than LNG then.

However, everything is relative in Singapore competitive market, whether or not PowerSeraya has secured cheap LNG prices for next 3 years. If other major players like Senoko and Tuas have also secured LNG prices at about the same price as PowerSeraya, then it won't make much difference in 2025-2026 as to how much LNG prices will be. Everyone will then be still on level playing ground, and the situation will come back to the tight market conditions again to determine the retails margin and wholesale electricity prices.

Until a new generating plant comes online in 2026, the supply market will remain tight.

Hong Leong report mentioned about potential dividend of 15 sen per share for YTLPower for FY2024 and FY2025, guided by YTL chairman's forecast of RM1 billion dividend for YTL for FY24 & FY25. This is in line with my earlier calculations.

The report mentioned about PowerSeraya having secured cheap LNG supply for next 3 years. I am a bit wary of that, especially on the definition of "cheap". If the company secured it during the trough period of COVID in 2020-2021, then the LNG price then can be considered cheap and would cover generation for the 3 years to 2023-2024. If the company secured it after gas prices had recovered in 2022, then it might run some risks as crude oil and LNG prices may fall below its secured price in 2024-2025.

Anyway, for whatever LNG price it has secured, PowerSeraya should have hedged it against the retails contracts for next 2 years, ensuring good retails margin. The challenge may come in after the expiry of the 2-year retails contracts if LNG prices then drops significantly below its secured price.

@stockprincess, got the HL report, thanks

Apparently this Star article was reporting a research report from RHB on YTLPower. Has anyone got this RHB research report? Please PM me, thanks.
Posted by xiaochen > 3 hours ago | Report Abuse

Earnings of utility firms likely to be sustained
This could potentially ensure higher dividend payout for YTL Power (given the stronger profits and cash flow) to 15 sen a share (yielding 11.9%) in financial year 2024 to 2025 versus the house’s conservative assumption of only eight sen a share.
https://www.thestar.com.my/business/business-news/2023/07/11/earnings-of-utility-firms-likely-to-be-sustained

FY2024&25
YTL 9.5 sens
YTLP 15 sens

that's right @probability.

When I first saw the news of these super rich people trying to bring in RE power all the way from Australia via some 5,000km under sea cables, I thought the project would be doomed to fail. Indeed, it did not take off as it did not make any business sense at all.

Where else can you bring in RE power to Singapore cheaper than from Peninsular Malaysia especially from Johor where you can just pull over a 50km overhead transmission line??

@hng33, it is typical of local analysts being slow in doing a drastic upgrade, as it will slap their own face. To me it is okay for CIMB to retain its projected 6 sen dividend for FY2024 and FY2025 and tp of RM1.28. They will have to see substantial earnings improvement in coming quarters before they will convince themselves of what Tan Sri Francis Yeoh was saying on prospects of higher dividends.

In particular, I am excited to see how YTL is going to unlock value of its vast assets in coming years.