Year 2009

 April 2009

Egco revives plans for Laos power plants
Greater capacity to sustain growth intact

Business

By YUTHANA PRAIWAN

Egco Group Plc, the SET-listed power producer, plans to resume the development of two hydroelectric plants in Laos as it needs to expand power capacity to sustain revenue growth.

President Vinit Tangnoi, said the two projects had been delayed for one year after the Thai and Laotian governments signed development agreements, because of higher construction materials prices.

The original agreement would now need to be renegotiated, he said, while Egco also saw an opportunity to benefit from the decline in construction costs since the recession began.

Egco will be a shareholder in both ventures but the majority stakes will be held by the state power utilities of Thailand and Laos.

Egco early last year failed to win any of the new new independent power producer (IPP) licences up for bidding by the thai government, and is thus struggling to add capacity to build a larger revenue stream.

Egco reported a consolidated net profit of 6.92 billion baht for 2008, a drop of 18% from a year earlier.

It also faced more challenges when the Thai government decided to delay its power purchases from Laotian plants as power demand has slowed in line with the economy.

However, the upside of the recession is that construction materials are now much cheaper than they were a year ago, so building new power plants is an attractive proposition.

"We will try to convince the relevant parties to resume the projects, since this is such a good opportunity, the investment costs will be far lower than previous projections," Mr Vinit said.

"We will discuss the issue with Egat and the Energy Ministry to see if we could add these two power plants in the power development plan (PDP). But we have to see when the additional capacity should come online."

Egco still holds licences to operate three hydroelectric plants in Laos, including the 920-megawatt Nam Theun 2, where will be operational by the end of this year. The other two licenses are for the 525-MW NamTheun 1, to start operating in 2014, and the 1,300-MW Nam Ou, in 2015.

Egat, the country's sole power buyer, is talking with 11 hydropower developers about whether they can offer lower power rates in line with reduced construction costs. The results of the talks are expected in July.

Egco is also conducting a feasibility study for large-scale solar power projects in the central and northeastern parts of Thailand, with a result expected by the end of this year.

"Thailand has very strong sun, which should be developed into commercial-scale power production, although it would require a huge budget for research and development," Mr Vinit said.

Egco shares closed yesterday on the SET at 66.25 baht, unchanged, in trade worth 16.27 million baht.

By Bangkok Post

April 24, 2009

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