■ In Jan-Jun 2016, PPC was operating without a PPA, so the company sold a high proportion of its output on the nascent Competitive Generation Market (CGM).
■ PPC is at a disadvantage to other Vietnam power producers on the CGM because of its higher generation cost, so its earnings plunged last year.
■ PPC signed a new power purchase agreement (PPA) with Electricity Vietnam (EVN) that will limit the proportion of its output that it sells on the CGM to about 25%.
■ We maintain our Reduce rating on PPC, as we believe the stock’s high dividend yield (its main attraction) is not sustainable moving forward.
