NT2 keeps facing headwinds

As of Q2 2024, NT2 reported revenue of VND 2,186 billion, a slight increase compared to the same period last year. However, the sharp rise in the cost of goods sold led to a nearly 20% decline in the company’s gross profit, down to VND 130 billion. 

NT2's financial income over the time exceeded VND 19 billion, representing a 12% increase over the same period previous year. Financial expenditures quadrupled to over VND 9 billion, while administrative expenses increased slightly to more than VND 18 billion.

As a result, after deducting expenditures, NT2 recorded a post-tax profit of more than VND 122 billion, down 15% from Q2 2023. Nonetheless, this result represents a positive rebound from the record loss of VND 158 billion in the first quarter.

NT2's total revenue in the first half of 2024 was VND 2,448 billion, down 44% from the same time the previous year. In Q1, NT2 experienced considerable losses, resulting in a net loss of VND 36 billion in 1H 2024, compared to a profit of VND 378 billion the previous year.

NT2's revenue plummeted by 88% in the first quarter of 2024 compared to the same period the previous year, totaling just VND 262 billion. The firm attributed this in part to the fact that electricity output only reached 151.5 million kWh, whereas Q1 2023 production exceeded 1 billion kWh. Operating below cost resulted in a gross profit loss of VND 225 billion.

Assessing NT2's business performance in the first half of 2024, Phu Hung Securities (PHS) stated that NT2's business results significantly declined in the first half of this year, with revenue reaching only VND 2,448 billion, a near 44% drop compared to the same period and a recorded net loss of VND 36 billion.

According to PHS, NT2 had to suffer significant fixed expenses since power generation fell roughly 50% from the previous quarter, to 1,178.1 million kWh, despite the height of El Nino. Although NT2 may have profited from the sharp decline in hydropower, gas-fired power plants, particularly NT2, faced stiff competition from coal-fired power plants, which EVN preferred owing to their lower cost.

PHS also anticipates that NT2's output will be under substantial competitive pressure in the foreseeable future. The El Nino cycle peaked around the end of 2023 and the beginning of 2024 before gradually diminishing and entering a neutral phase in May-June 2024. As a result, in the near future, thermal power, particularly gas-fired power like NT2, will face major competition from hydropower, which EVN will prioritize by raising the alpha coefficient to a very high level, up to 98%, in order to react to the present financial demands.

Furthermore, during the period, EVN mobilized up to 88.3 billion kWh of coal-fired power, an increase of 32% compared to the same period, while gas-fired power witnessed a decline of about 15% compared to the same period. This indicates the dominance of coal-fired power over gas-fired power, particularly NT2, thanks to its lower cost, as the price of input coal has rapidly cooled since the second half of 2023 (the average global coal price in the first half of 2024 dropped by 36% compared to the same period).

In the context of reduced QC, the situation in the competitive electricity market is also unfavorable for NT2 as the average selling price (FMP) dropped by 17% compared to the same period. PHS believes that these difficulties will continue to surround NT2 as the cost of gas-fired electricity and input gas prices remain high.

Additionally, NT2 will face the issue of severely declining input gas sources in the Southeast region and may have to switch to using LNG in the near future. These issues undermine NT2's competitiveness, leading to a significant drop in commercial electricity output in the upcoming period.

As a result, the securities firm projects that NT2’s electricity production for the entire year 2024 will only reach 2,409.4 million kWh, a 17% decrease compared to the same period, continuing a sharp decline from the previous year's low base. Therefore, net revenue and post-tax profit are expected to drop significantly by 17.2% and 84.5% year-on-year, down to VND 5,288 billion and VND 73 billion for the entire year 2024. Moving into 2025, with the expectation of a slight decrease in gas prices and electricity selling prices, PHS forecasts that net revenue and post-tax profit will reach VND 4,959 billion and VND 83 billion, respectively.