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Lao power operator to issue Thai bonds

May 29. 2018
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LAOS-BASED EDL-Generation Plc (EDL-Gen) aims to issue a baht-denominated bond worth US$550 million (Bt17.5 billion) under plans to tap the Thai securities market in the third quarter of this year, the company’s deputy managing director (CFO), Dr Bounsalong Southidara, said recently.

He said that the company would use the proceeds from the bond issuance to increase its investment in two hydropower electricity generation plants, the Xayaburi and Donsahong facilities, worth about US$450 million (Bt14.4 billion). A further US$100 million (Bt3.2 billion) would used to pay back an existing bond that will expire in 2019.

The Xayaburi plant will have a production capacity 1,285 megawatts, with an investment budget of US$4 billion. It is due to start operating next year.

The project is being undertaken by a joint venture firm involving six partners. State-owned Electricite Du Laos (EDL), the parent company of EDL-Gen, is one of the major shareholders, with a 20 per cent stake.

 EDL-Gen plans to spend about US$380 million to buy the 20 per cent stake from EDL. EDL-Gen also has plans to spend about US$70 million to buy a 20 per cent stake in the Donsahong hydropower plant that is currently held by EDL.

The Donsahong plant has a total production capacity of 260 megawatts, with an investment budget of US$520 million. 

In total, EDL-Gen has outright or partial ownership in 16 hydropower plants and solar-powered plant in Laos. They have a combined production capacity of 1,137 megawatts. Ten of the 16 plants are held 100 per cent by EDL-Gen. They have a combined production capacity of 619 megawatts. Stakes in the other six plants are held under a joint venture with EDL-Gen’s strategic partners. These plans have a combine production capacity of 309 megawatts. 

EDL-Gen managing director Rattana Prathoumvan said that the company plans to conduct a roadshow for Thai investors in for its proposed Bt17.5 billion bond issue in the third quarter.

Boosting production capacity

The company plans to increase its production capacity from 1,137 megawatts to 1,260 megawatts by the end of this year and to 2,400 megawatts in 2023, she said.

Meanwhile, the company also plans to export its electricity to others countries in Asean. Aside from Thailand, which is one of the company’s main customers, EDL-Gen plans to sell its electricity to Vietnam in the order of 600 megawatts, Myanmar with 30 megawatts, and Malaysia 100 megawatts. 

The company also plans to expand its investment in the development of coal-fired electricity plants, solar plants, and wind plants to manage its business risk. Now, up to 90 per cent of its production capacity is from hydropower plants. 

In line with this plan, the company set up a joint venture firm with Energy Absolute Plc under which it holds a 60 per cent stake.

The joint venture firm has invested in solar farm with a combined production capacity of 32 megawatts, with 10 megawatts of capacity already installed. Negotiations are under way for the sale of the output to EDL. 

EDL-Gen announces a net profit of 471.185 million kip at the end of 2017, a drop of of 14.57 per cent from 551.6 million kip at the end of 2016, according to a statement posted on its website.

Adisorn V. Singhsacha, founder and CEO of financial advisory Twin Pine Group Co Ltd, said that EDL-Gen’s debt to equity ratio was only at 1.1 times, giving it room for capital raising through debenture issuance. 

After studies of capital raising methods, the figure of US$550 million for the debenture issuance was decided upon, and that Thailand was a suitable source of the capital raising.

 EDL-Gen had recently issued debentures in baht and in US dollar on two occasions and the demand surpassed the target for capital raised.

Although the debenture issuance undertaken by EDL-Gen in Thailand has been successful, the securities were bought only by institutional investors. 

The amount of the previous debenture was not sufficient for the high net worth individuals in Thailand. At this time, the financial amount of the capital raising is remarkably higher than the first 2 issuances, opening the opportunity for the high net worth individuals in Thailand to invest. 

The amounts in the previous debenture issuance were not sufficiently high to attract high-net-worth individuals in Thailand. This time, the capital raising target is much higher than on the previous two occasions, and this is seen as making it more attractive for high-net-worth individuals.

The company would determine soon the rate of return, the lead underwriter and the distribution method, said Adisorn, with the offering in the third quarter.


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