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Energy: Power Plant

Dec 18. 2014
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By Asia Plus Securities

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Gulf contract to be voided, bringing hope to power companies Neutral

Energy: Power Plant

- Gulf found guilty in bidding. Contract to be canceled by Energy Ministry
Permanent Secretary to the Ministry of Energy received a report from the
panel installed by the NCPO to monitor the state budget, notifying that Gulf
Energy Development Company Limited (Gulf JP group) was found guilty as
the sold winner in the bidding of two contracts of a natural gas fired power
plant or the third IPP project (IPP3) with total capacity of 5,000 MW, for the
bidding process had not been transparent and was unfair to other private
bidders. In this regard, the panel requested that the Energy Ministry cancels
the power purchase contract between the Electricity Generating Authority of
Thailand (EGAT) and Gulf JP Group.
- Gulf contract to be voided, bringing hope to power companies
Two scenarios that will happen if the Energy Ministry cancels the power
purchase contract made with Gulf are 1) other bidders in the short list will
be considered for IPP3 project instead, which are EGCO and GLOW or 2) the
natural gas fired power purchase plan will be included in PDP 2015 and the
bidding will be started again. In our view, the second scenario is more
likely, which will benefit all power companies, i.e. RATCH, EGCO, and
GLOW, as they will have an opportunity to join the bidding. However, the
contract cancellation will not affect the security of domestic power use
because initially the Gulf project would not start supplying power into the
system until 2021, which means there is still time for the new bidding.
- EGCO: Top pick
We still select EGCO(Buy:FV@B188) as a top pick. EGCO's earnings are
expected to rebound most remarkably in the next three to five years
because the company is currently working on many power plant projects. It
is also a potential winner of the IPP bid since it already has land and
transmission line system available in Rayong

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