Year 2010

 February

Egco looking to Asean for growth

Firm sets aside B14bn to expand abroad

By YUTHANA PRAIWAN

Egco Group Plc, the country's second-largest private power producer, has allocated 14 billion baht to expand investments in Southeast Asia's power sector and renewable energy in Thailand this year, says president Vinit Tangnoi.The company is now in talks with two power producers in Asean countries to acquire about 25% to 30% of each project. One is a 500-megawatt coal-fired plant in Indonesia, the other is a 1,000 MW gas-fired plant in the Philippines.

Mr Virat said most of the investment capital would be sourced from Egco's operating cash and loans from financial institutions.

The company failed in the Energy Ministry's second round of bids for Independent Power Producer (IPP) licences in 2006.

The next round of bids for IPP licences would not take place for at least six to seven years. But, as the SET-listed Egco Group needs to maintain its revenue growth, he said it must seek other ways of doing so by looking for mergers and acquisitions in Asean countries.

"Thailand's second round [of IPPs] opened in 2006, now all three winning bidders are preparing for construction and will be ready to operate from 2011 to 2014," said Mr Virat.

According to the current power development plan (PDP), the third round of IPP bidding would likely to open in 2020 at the earliest.

Under the PDP, from 2010 to 2020, Thailand's additional annual capacity will come from importing nearly 4,000 MW from Laos, and from the Electricity Generating Authority of Thailand's domestic output of 5,000 MW.

This year Egco expects its pre-tax earnings to drop slightly from last year's figure of 7.5 billion baht, despite the fact that supply from the Nam Theun 2 hydropower plant in Laos, in which Egco is a joint-venture partner, will come online this March.

"In fact, pre-tax earnings last year were higher than the expected 6.9 billion baht," said Mr Virat.

The company's licences for its two oldest power plants in Rayong and Khanom are close to expiry. Income from plants tend to decline during the final years of a licence, he said.

Power purchase contracts will end in 2014, the company is now studying renewing its contract and operating licences.

The two old power plants now generate about 25% of the company's total revenue.

The Nam Theun 2 hydropower plant is scheduled to start producing in March after technical problems caused its original launch date last December to be delayed.

"We expected the Nam Theun 2 hydropower will generate sales of about 400 million baht this year, but this could not offset the huge decline in sales from the Rayong and Khanom plants," he said.

EGCO shares closed yesterday on the Stock Exchange of Thailand at 79 baht, down 50 satang, in trade worth 8.89 million baht.

By Bangkok Post

February 4, 2010

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