B Grimm studies funding options for power-generation arm

Corporate June 17, 2014 00:00

By Sucheera Pinijparakarn,

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B Grimm, a diversified power producer and trading group, is evaluating several funding alternatives to finance its massive investments in the power-generating business, its executives say.

The funding options include launching an infrastructure fund, issuing a bond, and launching an initial public offering, said Preeyanart Soontornwata, president of B Grimm Power, the holding company for the group’s power business.
Harald Link, chairman of B Grimm, said the group, which has already secured concessions to build additional co-generation power plants to increase its total generating capacity to more than 2,000 megawatts by 2009, was looking at the possibility of boosting this to 5,000MW within the next several years.
The additional capacity would require capital investment of more than US$3 billion (Bt97 billion), and thus the group will have to consider raising funds from the stock market through listing B Grimm Power within the next two years, he said.
Power business contributes about 70 per cent of the B Grimm group’s revenue. Its businesses also include manufacturing air-conditioners under the Carrier brand, transport, and real estate. The group expects total revenue to grow by 35 per cent to Bt34 billion this year, of which Bt24 billion will be contributed by the power business. 
Link said the group’s profits were normally about 8 per cent of sales, though this year the net sales margin might fall slightly to about 7 per cent.
The group is looking to further its investments in the power business in Thailand and abroad, especially in Myanmar, where it is shortlisted as one of the candidates to invest in a 220MW natural-gas-fired IPP (independent power producer) project in Myingyan, a city near Mandalay. 
Preeyanart said B Grimm and also been invited by Sumitomo, which is developing the Thilawa Industrial Park Development near Yangon, to build a power plant to serve factories in the estate, beginning with a 40MW project.
The B Grimm executives were speaking at a ceremony held to announce its acquisition of two small co-generation power plants, with a combined generating capacity of 163MW, in Laem Chabang Industrial Estate from Sime Darby Group yesterday, as the Malaysian conglomerate completed its exit from the power business. 
Preeyanart said the deal, valued at Bt5.3 billion, was not cheap but B Grimm looked beyond the apparent numbers to make the decision, including synergy in optimising assets and manpower, and opportunity to expand.
The acquired power plants are forecast to generate a total profit of only Bt220 million on revenues of Bt4.2 billion this year. 
Link said B Grimm, which until the yesterday’s deal had only expanded through organic growth, would from now on take on mergers and acquisitions as part of its growth strategy.
CIMB Bank is the financial adviser of the deal. Preeyanart said B Grimm was offered good loan conditions from Thailand’s big four banks but it was considering various funding alternatives and might seek a bridge loan for short-term financing.
The company is also venturing into renewable energy with its first 16MW wind-power project in Mukdahan province, waiting for a concession approval. Preeyanart said it would also apply for an additional 40MW capacity.
Jauhari Hamidi, executive vice president of Sime Darby, said the group would continue to look out for opportunities and would continue to grow its business in Thailand. The divestment of its Thai power plants was part of its strategy to exit non-core businesses and to focus only on those where it is either No 1 or 2 in the market.
Sime Darby remains committed to its other businesses in Thailand, which include its stakes in Morakot Industries, Mecomb Thailand, and Ford, Mazda and BMW automobile dealerships.
Yesterday’s acquisition of Sime Darby’s two small power plants will immediately raise B Grimm Power’s power-plant portfolio to eight gas-fired co-generation plants with a total capacity of 896MW. It is also constructing four new plants with a combined capacity of 480MW and will start constructing another six from this year onwards.

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