BANGKOK�Electricity Generating PLC(EGCO), Thailand's first independent power producer, has acquired an additional 5% stake in Laos' largest hydroelectric project from Transfield Pty Ltd. of Australia.
The $4.9 million (US) deal marked the complete pull out of Transfield from the $1.1 billion Nam Thuen 2 power project, following its sale earlier of a 5% interest in the venture to Electricite de France (EDF).
As a result of the accord, which is pending formal approval from the Laotian government, EGCO boosts its stake in the Nam Thuen 2 Electricity Consortium (NTEC), the sponsor of the 1,060 Mw project, to 25% from 20% which it has held since earlier this year.
EGCO bought the 20% interest in NTEC dropped by the Thai telecom concern Jasmine International PLC and Bangkok-based Merrill Lynch Phatra Securities (each held 10%), for $13.5 million as the two moved to concentrate on their core businesses. EDF increased its holdings to 35% from 30%.
The Laotian government and Italian Thai Development PLC, a Bangkok-based infrastructure development group, continue to hold their stakes in NTEC at 25% and 15%, respectively.
Sitthiporn Ratanopas, EGCO managing director, conceded the price EGCO paid for Transfield's 5% share is considerably higher than what it offered to Jasmine and Merrill Lynch Phatra. He insisted the company made a good investment decision, given that the progress so far in reducing the project's major risks.
He was referring to a memorandum of understanding NTEC signed Aug. 8 with the Electricity Generating Authority of Thailand governing Nam Thuen 2 power sales to Thailand.
Power purchase agreement
Furthermore, the Thai power utility and NTEC are due to clinch a 25-year power purchase agreement for 920 Mw in December. The consortium agreed to sell 5,354 gw-hr of power over 25 years beginning in 2006 to the Thai power utility at an average tariff of 4.219�/kw-hr.
Also set for signing in December is an accord for NTEC to sell 35 Mw of power to Electricite du Lao (EDL) for the first 15 years of a supply contract period before stepping up to 75 Mw in the following 10 years under the 25-year build-own-operate and transfer concession agreement established with Laos.
Delivery of the power from Nam Thuen 2 to EDL is also due to start in December 2006.
Sitthiporn said in spite of the top dollar EGCO paid Transfield, the rate of return on investment expected from the project is still within EGCO's investment guidelines.
The additional interest in Nam Thuen 2 also underlines EGCO's strategy to build up its power portfolio, especially overseas, since new power opportunities in Thailand are limited in the near to medium term due to excess electricity supply.
The Thai independent power producer earlier bought a 40% stake in Conal Holdings Corp., an affiliate set up by Alsons Consolidated Resources Inc. of the Philippines, to acquire, invest in, and develop power businesses in the Philippines and abroad.
EGCO is set to double its electricity generating portfolio over the next 3 years to 5,000 Mw from 2,105 Mw. The company also plans to buy more power production businesses, both overseas and at home, to increase its electricity production capacity, providing each project can produce a 15% return on investment.
Negotiations are under way with project sponsors in many countries, including Singapore, Malaysia, Laos, Cambodia, and the Philippines.