No fears of overheating despite high demand for energy
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Banks are not worried that demand for loans to support the energy infrastructure sector will overheat because there are few players in the industry, and energy operators are required to acquire power-purchasing agreements before applying for loans.
So far this year, the volume of lending to the power sector is higher than last year because of higher electricity consumption and the gradual shift away from gas to renewable energy.
It was reported recently that banks were more cautious about dealing with the auto sector for fear of over-lending. But there are no similar worries regarding the power sector. The auto-parts sector has been expanding capacity temporarily to serve demand fuelled by the government’s first-car tax-break scheme. Therefore, some companies need working capital.
Kasikornbank executive vice president Vasin Vanichvoranun said power was the backbone of the country, and operators must meet government regulations as well as have experience in the business. Power projects are developed to serve real demand, so even though there is large demand for loans, this sector will not overheat, he added.
Vorakarn Dhepchalerm, head of corporate banking at CIMB Thai Bank, agreed with this view, noting that the power sector was responding to actual demand.
“We should be concerned about the supply of biomass power because we are not sure this will be sufficient for producing” the country’s electricity needs, he said.
Vasin said KBank was not worried about lending to power producers because investors in this field are larger companies, which can raise funds in many ways besides loans.
According to KBank, power plants are expected to increase overall capacity to 48,000 megawatts in the next 10 years from 40,000MW now, so the Electricity Generating Authority of Thailand (Egat) and private power producers will have to invest large amounts to construct both conventional and renewable-energy generation facilities.KBank, which is the major lender in the power sector, has noted that many banks are focusing more on financing energy infrastructure projects in compliance with the government’s 15-year power-development plan.
Vasin said there were three kinds of investment in electrical-power projects: for own use, for sales, or a combination of the two.
Investors in solar farms must have power-purchase agreements with Egat and have experience in the business. Lenders will consider both elements before providing funds.
KBank targets securing Bt25.6 billion worth of loans for renewable-energy projects, including wind, solar and hydropower, over the next five years.
Smaller lenders such as Thanachart Bank, CIMB Thai Bank and Land and Houses Bank also want to be involved with syndicated loans for conventional power and renewable energy.
