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Published on August 4, 2007

"If we fix the price at Bt33 to the dollar, but the baht strengthens further to Bt25, it could ignite misunderstanding and criticism," Gulf Electric president Sarath Ratanavadi said yesterday.

All seven IPPs at Thursday's meeting with the Electricity Generating Authority of Thailand agreed to go along with the government's request to quote rates in greenbacks, but if baht volatility remains and the fixed baht price proves too expensive, IPPs could face public criticism, he said.

As part of the authorities' move to relieve upward pressure on the baht, Egat also asked the IPPs to convert their foreign loans into baht.

Sarath said Gulf Electric is considering how to manage its US$300-million (Bt10.14-billion) debts to be more in line with sales in baht.

Visit Akaravinak, president of Electricity Generating , half-owner of both BLCP Power and Gulf Power Generation , said the companies would follow the state's wishes but that further discussion was needed on who would shoulder the burden from early foreign-loan repayments if IPPs were to retire their loans.

"As revenues will be in baht, all loans would be in baht," he said, adding that swap contracts could be more practical than refinancing, which could encounter problems in exchange rates and inconsistency in borrowing terms.

Prepayment of loans could incur some costs, as financial institutions would charge fees for early redemption. Asian Development Bank credits in particular contain several conditions on prepayment, and the paperwork needs three months to complete, he said.

The dollar/baht rate that would be used in the new power-sale contracts should be accepted by all parties, he said, adding that the reference baht rate could be increased or decreased within a certain bracket in case the baht appreciated or depreciated against the dollar.