Energy: Power Plant
Waiting for boost from IPP3 and IPP4 Neutral
Energy: Power Plant
- IPP3 requested to cancel
Electricity Generating Authority of Thailand's labor union secretary general
Sirichai Mai-ngam is filing a petition requesting the energy minister
Narongchai Akaraserani and new regulators to consider canceling the third
IPP project (IPP3) of Independent Power Development, which is a joint
venture between Gulf Energy Development Company Limited (Gulf JP
group) and Mitsui and CO., (Thailand) Limited, the only winner of two
contracts for total power generating capacity of 5,000 megawatts,
questioning the project’s transparency.
- Benefiting IPP3, IPP4 potential winners: EGCO, GLOW
The state will need time to carefully consider this issue, but it would not
affect existing power generation plan since the first power plant of Gulf will
not enter the system until 2022. If the contract is cancelled and the bidding
is reviewed, EGCO and GLOW are very likely to win the new bidding since
both of them have met technical requirement, especially EGCO that has
offered the lowest price. Moreover, EGCO, GLOW, and RATCH are preparing
to join the fourth IPP bidding (IPP4) according to the new PDP, which is a
coal-fired project. GLOW and HEMRAJ (using GHECO-One location) and
ECGO and BANPU (using BLCP location) have high potential to win the
bidding for this coal power plant project.
- Top pick is EGCO
Although share prices of all power plant companies under our coverage,
including EGCO (2014FV@B160, 2015FV@B186), GLOW (2014FV@B82,
2015FV@B95), and RATCH (2014FV@B60, 2015FV@B70), have risen until
reaching 2014 fair value, there are additional positive factors in the near
future that we have still not included in our forecast: 1) new project
overseas, 2) new IPP bidding, and 3) IPP3 review. EGCO is a top pick.
- Examining third IPP bidding. Gulf wins 5,000 megawatts capacity
On June 20, 2013, The Energy Regulatory Commission (ERC) looked for
gas-fired Independent Power Producer (IPP) with up to 5,400 megawatts
energy. Gulf Energy Development (Gulf JP) proposed the lowest electricity
cost (compared to GLOW and EGCO) of B4.2371/unit and won two
contracts with the total capacity of 5,000 megawatts. Gulf proposed to
open two gas-fired IPPs (2,500 megawatts each), one in Rojana Industrial
Park (Pluak Daeng, Rayong) and other in Hemaraj Industrial Park,
Chonburi.
- EGCO, GLOW to win if bidding restarts
EGCO and GLOW have already met the technical requirement for the third
round of IPP bidding. EGCO’s two proposals (1,800 megawatts capacity
each) met the technical requirement. EGCO would have a new IPP
constructed on the land REGCO (expires in 2014) is located, lowering
electricity cost; it is expected to start its commercial run within 2021-
2026. GLOW’ s two proposals (1,100 megawatts capacity each) met the
technical requirement as well. GLOW would construct its new IPP at
Eastern Seaboard Industrial Estate, Rayong. However, according to the
condition (RFP), power plants with similar capacity would be considered.
EGCO's proposals (1,800 megawatts capacity each; using REGCO location)
offered the lowest electricity cost, while GLOW's proposals (1,100
megawatts capacity each) offered high electricity cost. Thus, EGCO and
GLOW's average electricity cost is higher than Gulf's two proposals with
lower average electricity cost, resulting in Gulf winning the bidding. If the
contracts between EGAT and Gulf are terminated and the bidding needs to
be corrected, EGCO and GLOW are likely to win the auction because they
have already met the technical requirement for the IPP bidding; EGCO
would have a higher chance to win as it offered the lowest electricity cost.
If EGCO wins one contract, its fair value would increase by B15-20. If
GLOW wins one contract, its fair value would increase by B7-9.
- IPP4 bidding to focus on coal energy
The new PDP plan would probably emphasize on changes in energy
sources. Proportion of natural gas usage as energy source is expected to
be cut. Due to limited natural gas supply, Thailand might need to import
LNG in the future, and electricity generation cost would rise because global
LNG price is nearly twice as high as domestic LNG price. Meanwhile, usage
of other energy sources (e.g. coal, nuclear power, and power deal with
other countries) is expected to increase. Proportion of coal usage as
energy source is projected to rise from 20% to 30%, and bidding for coalfired
IPP is likely to be held. In case that there is coal-fired IPP bidding,
power plant companies are anticipated to win are GLOW, HEMRAJ (using
GHECO-One location), EGCO, and BANPU (using BLCP location). Although
IRPC does not have coal-fired power plant now, it would be advantageous
for its deep sea port that can be used for coal transportation.
