Will EGCO survive Thailand’s competitive power sector?
The BLCP coal-fired power plants are the most important sources of power generation in the Thai Kingdom. EGCO one the IPP’s in Thailand has tried to diversify its power generation by investing in plants that were gas powered or that worked on renewables. These plans have been undermined by the main retailer EGAT which still prefers coal power plants.
A long hot summer in Thailand is does not only result to a tumultuous political situation. Electricity demand surged by 7.7 per cent as more Thais fired up their air conditioners and fans. All of this was good news for The Electricity Generating Company (EGCO), one of Thailand’s IPP’s, which was spun off from EGAT in 1994. With a total capacity of 2 GW over two plants the company sells all of its electricity to EGAT. China Light and Power (CLP) also owns a 22 % per cent stake in the company, while EGAT owns a 25 % stake. Net revenue at some of the company’s older plants, such as REGCO and KEGCO, was down. Overall the company did rather well with a net income increase of 31 %, due mainly to a 94 % utilisation rate of its BLCP Plant. BLCP Plant became EGAT’s first choice for electricity since its tarrifs are lower than those at the gas fired plants.
EGCO did not limit its investment to BLCP. It decided to invest in gas resources for power generation by launching Khaeng Koi 2. The latter is a project that was scheduled to begin in March 2007 but was instigated with two months delay causing considerable loss of revenues. The new project prematurely faces two main challenges. First - direct competition from BLCP as EGAT still prefers contracting the coal plant for power production due to the lower costs involved. Second - EGCO did not give sufficient information on Khaeng Khoi 2’s potential earnings, rendering it an uncertain project. Nevertheless, even if revenues are expected to drop by 8% next year, EGCO’s management renounced on selling BLCP and Khaeng Koi 2 to is strategic partner J-Power claiming that these projects remain lucrative. If they had to liquidate any projects, EGCO stated that it would only be willing to give up REGCO and KEGCO.
The company still believes in its original projects. The management is planning to negotiate a 10-year extension of KEGCO’s Power Purchase Agreement (PPA), even if revenues from it are decreasing. It is even planning to increase the capacity of the plant at Khanom by 700MW. And if the negotiations fail, EGCO is still expected to use this site for the next round of IPP bidding rounds in 2009.
EGCO is diversifying to renewable power projects. The company took a stake of 30% in a 35MW wind power project in Southern Thailand which costs US$1.4m. The company also signed an MOU to build a LNG terminal in 2011 with other companies involved.
Despite all its new projects, it seems that EGCO is going to face a lot of problems in the near future. If the Thai government starts to environmentally-friendly sources of electric power, EGCO might lead the energy market in Thailand in this sector. But such prospects seem dim and EGCO has to find a new strategy to remain competitive in the Thai energy market. What do you think of this issue? Can EGCO successfully lobby the energy ministry to encourage the use of renewables and gas?
A long hot summer in Thailand is does not only result to a tumultuous political situation. Electricity demand surged by 7.7 per cent as more Thais fired up their air conditioners and fans. All of this was good news for The Electricity Generating Company (EGCO), one of Thailand’s IPP’s, which was spun off from EGAT in 1994. With a total capacity of 2 GW over two plants the company sells all of its electricity to EGAT. China Light and Power (CLP) also owns a 22 % per cent stake in the company, while EGAT owns a 25 % stake. Net revenue at some of the company’s older plants, such as REGCO and KEGCO, was down. Overall the company did rather well with a net income increase of 31 %, due mainly to a 94 % utilisation rate of its BLCP Plant. BLCP Plant became EGAT’s first choice for electricity since its tarrifs are lower than those at the gas fired plants.
EGCO did not limit its investment to BLCP. It decided to invest in gas resources for power generation by launching Khaeng Koi 2. The latter is a project that was scheduled to begin in March 2007 but was instigated with two months delay causing considerable loss of revenues. The new project prematurely faces two main challenges. First - direct competition from BLCP as EGAT still prefers contracting the coal plant for power production due to the lower costs involved. Second - EGCO did not give sufficient information on Khaeng Khoi 2’s potential earnings, rendering it an uncertain project. Nevertheless, even if revenues are expected to drop by 8% next year, EGCO’s management renounced on selling BLCP and Khaeng Koi 2 to is strategic partner J-Power claiming that these projects remain lucrative. If they had to liquidate any projects, EGCO stated that it would only be willing to give up REGCO and KEGCO.
The company still believes in its original projects. The management is planning to negotiate a 10-year extension of KEGCO’s Power Purchase Agreement (PPA), even if revenues from it are decreasing. It is even planning to increase the capacity of the plant at Khanom by 700MW. And if the negotiations fail, EGCO is still expected to use this site for the next round of IPP bidding rounds in 2009.
EGCO is diversifying to renewable power projects. The company took a stake of 30% in a 35MW wind power project in Southern Thailand which costs US$1.4m. The company also signed an MOU to build a LNG terminal in 2011 with other companies involved.
Despite all its new projects, it seems that EGCO is going to face a lot of problems in the near future. If the Thai government starts to environmentally-friendly sources of electric power, EGCO might lead the energy market in Thailand in this sector. But such prospects seem dim and EGCO has to find a new strategy to remain competitive in the Thai energy market. What do you think of this issue? Can EGCO successfully lobby the energy ministry to encourage the use of renewables and gas?
posted by Charltonmedia.com @ 3:11 AM
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