True to its 'grow or die' motto, Ratchaburi is looking for opportunities in the region to double its output
Saturday February 09, 2008
UMESH PANDEY
Bangkok Post
Within just a week after announcing a joint venture to produce 3,660 megawatts of electricity in Cambodia, Ratchaburi Electricity Generating Holding Plc (RATCH) is already seeking investment opportunities in other parts of the region such as Vietnam, Burma and even as far as Bangladesh, be it in power plants or in coal mines.
"We are looking at various countries but our aim is to enter new markets only if we have a partner and at this point we have found that right partner," managing director Narong Sitasuwan said in an interview.
Ratchaburi on Jan 23 said that it had signed an agreement with Italian-Thai Power Co, a 99.99%-owned subsidiary of Italian-Thai Development Plc (ITD) to study an investment in the 3,660-MW Koh Kong power project in Koh Kong province, Cambodia.
Under the initial shareholding structure that has been tentatively agreed, Electricity Generating Plc and Ratchaburi will hold 70% and Italian-Thai Power will hold the balance.
The thermal facility at the Ratchaburi power plant is one of the company's main installations. Ratchaburi aims to achieve 8,000 megawatts of electricity-generating capacity, more than double its current capacity, by 2016.
"Currently, we are in the process of negotiating the power sale details with the Electricity Generating Authority of Thailand (Egat)," said Mr Narong.
Although Mr Narong stopped short of saying how large a holding Ratchaburi aimed to take in the Cambodian venture or whether it would be more than 40%, the positive answer came with his broad smile and a nod.
Ratchaburi, he says, aims to achieve 8,000 MW of electricity-generation capacity by 2016 and therefore it has to make quick decisions over the next three to four years on which power plants it wants to undertake.
"Our target is set at 8,000 MW and that means that within five years we'll have to double our capacity," he said, adding that the current capacity of 3,997 MW was too small to ensure a long-term survival.
Ratchaburi, which operates under a "grow or die" motto, says that its aim is to have a sizeable operation in order to be competitive in the market, and to build a platform for its future growth.
Mr Narong, who is a firm believer of having a sizeable operation, says that with the limited opportunities available in Thailand, his company has little option but to move abroad and has already found the right partner to do that.
"What is most important in our business is that we have to have the right partner, and in our case it is a partner who has the fields in various countries that can extract natural gas and we then can use our expertise in generating electricity," he said.
"What is most important in our business is that we have to have the right partner," says managing director Narong Sitasuwan.
In the current case, the partner is US-based Chevron which has gas field rights in dozens of countries.
He said that because natural gas prices accounted for 65% of electricity-generation costs, Ratchaburi had hooked up with Chevron for its investment in Vietnam and in Bangladesh.
"The operation in Vietnam could [begin] very soon and it would be for at least 700 MW but discussions are still being undertaken with the government and other parties including some local partners such as Rojana Industrial Estate," he said, while declining to give the details of the possible investment size in Vietnam.
Ratchaburi, he said, had done an extensive study on the possibilities of a plant in Vietnam but had so far not been able to make a conclusion. The stumbling block is that, unlike Thailand or other countries in the region, Vietnam does not offer long-term power purchase agreements (PPAs).
Vietnam, one of the region's fastest-growing economies, is running short of power supply. With the lack of a long-term PPA, the situation looks difficult. But if the returns justify the risks, then Ratchaburi is willing to take that risk.
"Yes, there is demand there but for how long is the key question. Therefore, we would want to go there in a smaller way first with another partner and possibly secure a fixed client base such as that of industrial parks and then take a bigger step once we have tested the market," Mr Narong said.
The risky investment decisions Ratchaburi was undertaking were not out of choice but out of compulsion, he added.
"Our first priority is to expand operations in Thailand but it seems to be difficult, as the competition is very intense and there are new restrictions," he says.
Ratchaburi in November filed a lawsuit against the Energy Ministry for rejecting its bid for the 800-MW power-generation quota allocated to independent power producers (IPPs) on grounds that the company was more than 50% owned by the state. This was the first lot of the 3,200 MW up for bid in Thailand.
Ratchaburi is currently 45% owned by the Electricity Generating Authority of Thailand. Other shareholders include Banpu Plc (15%), the Government Savings Bank (2.6%) and the Social Security Office (4.89%).
"Our aim is to first meet the needs of the country and supply energy here but if our hands are tied then we'll have to look at ways to expand the operations outside," he said.
Ratchaburi has taken a lead in becoming a regional power source, with its 40% stake in the Laos-based Hongsa lignite power project, an 1,800-MW power plant; 25% in Nam Theun 2, and a possible stake in the upcoming project in Burma, the Tasang Dam.
"Now with an elected government in place, we can be assured that there will be some progress in some of the talks that we have been holding with our neighbouring countries," Mr Narong said, adding that some of the projects were put on hold due to the political uncertainties in Thailand.
Ratchaburi, Mr Narong says, is not just looking for power plants, although electricity is still the single largest contributor to the company's top line.
"We are open to anything. We are looking at coal mines in Indonesia and even look at opportunities in alternative power generation," he said, once again declining to give details of when and how this would be achieved.
With coal prices at historic highs, Mr Narong says that this is not an option right away but is something that Ratchaburi is looking for in the future. Companies such as SET-listed Banpu have successfully shown that international coal operations can be successful.
"We have enough cash flow to fund all our projects and our capital expenditure of about three billion baht a year is sufficient for our plans at the moment," Mr Narong said.
With the gradual depletion of power sources, resources would become key drivers in the future and Ratchaburi wants to have its fair share when that day arrives.
As part of the plan, Ratchaburi is also willing to look at funding generators for alternative power, and if in the future there is greater demand, it may even diversify into that area.
But despite all the ambitious plans, Mr Narong says one of the key issues remains preparation for a move outside the country. Human-resources training is the key to any successful venture and the company has already initiated a project to train people to work outside Thailand, even though most of its projects are years away from being operational.
.jpg)
