Thai power firm posts big profits before huge IPO

One of Thailand’s biggest independent power producers, Gulf Energy Development, posted a 343 percent increase in profits following its initial public offering (IPO), the largest IPO in Thailand in a decade, and ahead of its plans to expand around the region.

The announcement on profits came a day before Gulf Energy’s shares began public trading on the Stock Exchange of Thailand, where eager local and international institutional investors snapped them up.  Among those investing in the firm was the Asian Development Bank (ADB), which purchased $88 million worth of shares. Gulf raised $733 million with its IPO.

“ADB’s support for the initial public offering demonstrates our confidence in Gulf Energy’s business model and expansion strategy,” said Christopher Thieme, Deputy Director General of ADB’s Private Sector Operations Department, in a press release.

Gulf Energy chief executive Sarath Ratanavadi said funds from the IPO would be used to finance the completion of the company’s gas-fired and biomass power plant construction as well as for its expansion plans. With the completion of the plant, the company will be able to increase total installed production capacity to 11,125 megawatts (MW) by 2024, up from 4,772MW today.

“Gulf Energy will have stronger financial leverage for more expansion following the IPO, as new power plants require a large amount of money. The company is looking at a number of opportunities in Thailand and neighboring countries,” Sarath told Bloomberg news agency.

“We will use our business experience to develop planned power plant projects jointly with our partners, affording regional security among major independent power producers,” Sarath said.

Gulf Energy is currently operating 17 power projects including two gas-fired independent power projects (IPPs) and 11 gas-fired small power project (SPPs), and four rooftop solar projects. In addition, it has 11 power projects under construction and development, including two gas-fired IPPs, eight gas-fired SPPs and one biomass SPP.

Gas accounts for about 60 percent of the energy used in Thailand, and nearly all of Gulf’s projects are in natural gas. This not only aligns with the country’s current energy mix and needs, but also shields it from increasing concerns and public protests over pollution from coal use. Gulf also said it would begin making some investments in renewable energy sources, but did not detail which sources beyond biomass and rooftop solar.

Thailand is the second largest energy consumer in Southeast Asia, and power demand is expected to grow 2.67 percent annually over the next two decades, the ADB said.The country plans to add new capacity of 57,459 MW and retire capacity of 24,736 MW during 2015-2036, according to the latest Thailand Power Development Plan.