Thai Power Generation Under Pressure With Election Outcomes

The Thai Power generation and construction companies’ shares have come under immense pressure as the market goes on to factor in the result of the general election in the country on May 14.

While the election commission of the kingdom has not officially endorsed the result, the parties have already begun coalition talks so as to begin the formation of the next government. Move Forward, which apparently won the greatest number of seats when it comes to the lower house parliamentary election, as well as its seven other coalition partners, happen to be the closest to securing the required number of seats so as to be able to elect the next prime minister of Thailand.

It is well to be noted that Move Forward’s prominent policies curtailed power bills as well as enhanced the minimum wage. As the coalition moves towards forming the new government, investors, as expected, have started to become increasingly sceptical of the impact these policies are going to have on the industry’s profitability.

Apparently, the shares of the largest independent power generation company in Thailand, Gulf Energy, dipped 7.6% on May 23 as compared to the rates prior to the election. BGrim Power dipped by 5.1%, and the integrated renewable energy producer as well as electrical systems operator, Gunkul Engineering, saw a decline of 10.5% within the same period.

As per an analyst at a research centre, the major market players who went on to sell these Thai shares happened to be investors from abroad who were looking to avoid risks. The analyst went on to add that the foreign players had gone on to sell almost 10 million baht in terms of Thai shares on May 15. As per the analysts, Gulf Energy as well as other major power organisations are anticipated to reel under the pressure as Move Forward under its pledge during the election campaign that it will go on to restructure the overall formula of power prices so as to bring them down as well as aid in supporting households that happen to be poor.

As per one of the security firms, the big companies happen to be targeted, especially the Gulf since its business happened to surge in no time during the previous regime. The analyst also added that the major policy of Move Forward was to ensure the promotion of fair competition.

It is well to be noted that the Gulf Market capital increased to 595 billion baht prior to the election, which was up 520% from 95.5 billion baht when its IPO was launched in 2017. Significantly, the power company is believed to be in close contact with the current prime minister’s administration. That said, the post-election selloff during the last week went on to cut Gulf’s market capitalization by almost 58 billion baht.

In addition to Gulf, other prominent power companies saw increases in profits in recent years after sealing power purchasing deals with the government that helped secure long-term revenues. As per Move Forward, the policy to cut the power bills has been deemed urgent, i.e., to be executed within 100 days of taking the power. The party has gone on to vow to renegotiate the agreement pertaining to power purchasing so as to make the prices of electricity cheaper.

It is well to be noted that the construction companies, which happen to rely pretty heavily on cheap labour, have also seen their shares take a beating since the election took place. Move Forward apparently pledged to increase the minimum wage to 450 baht every day from the 330 baht that is given at present. Notably, the shares of Sino-Thai Engineering have gone on to see a plunge of 21.7% since the time the election took place. The vice chairman of the Employers’ Confederation of Thai Trade and Industry, Tanit Sorat, said that not only large construction companies but small as well as medium-sized companies would take a beating because of the wage increase since it is indeed going to be tough for them to function with a high cost of labour, and that too at a time when the economy hasn’t fully recovered from COVID-19.