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Energy Absolute

Nakorn Sawan solar farm up and running BUY

Energy Absolute Plc

Nakorn Sawan solar farm operating commercially as of Dec 23, 2013

Lampang facility to start up in December this year and Phitsanulok in

December next year

Buy with unchanged TP of Bt9

Phase I of 90MW solar farm now on line. EA reports its solar farm in Nakorn

Sawan, with capacity of 90MW, is now feeding into the country's grid, with commercial

operating date (COD) of 23 December 2013, as we had projected, though 23 days later

than the company's own goal. This project attracts an adder of Bt6.50/Kwh. It can now

book revenues from the project; contribution from the 90MW is estimated at EBITDA

of ~Bt1.9bn with net profit of ~Bt1.37bn.

Earnings to jump in 2014 and 2015. The combination of 98MW in solar power plants

plus its fuel oil business (biofuel, high-speed diesel, LPG and glycerin) are forecast to

supply revenue of Bt7bn,+45%YoY in 2014, and Bt9bn,+31%YoY in 2015, with net profit

of Bt1.6bn in 2014, +542%YoY. EA's net profit should jump again to Bt3bn in 2015,

+85%YoY, after the entire 188MW in solar power plants is on line.

Capacity of solar farms could increase exponentially YoY. EA has been granted

three PPAs from EGAT for three 90MW solar farms in Nakorn Sawan, Lampang and

Phitsanulok. Target COD for the 90MW in each of Lampang and Pisanulok is December

2014 and December 2015 respectively. The adder for these facilities has been reduced

from Bt8.0/KWh in the early stage of providing licenses to Bt6.5/KWh, as setup cost is a

lower Bt75.6mn/MW compared to ~100mn/MW on a steady drop in cost of solar

panels. There are ~4 peak sun hours per day (10am to 2pm). To extend the operating

hours to achieve 90MW as agreed in the PPA with EGAT, EA is building installed

capacity of 126MW. By the end of 2015, based on the latest announcements by each

operator, EA will be Thailand's largest solar power operator with total capacity of

278MW. EA also plans to expand its renewable energy to wind power in three

provinces, Nakorn Sri Thammarat, Songkhla and Chaiyaphum, with a combined

capacity of 386MW.

Buy at target price of Bt9. We value the stock using sum-of-the-parts given the

differing nature of its two core businesses, biodiesel and renewable power. This

comprises a DCF-based value of the solar power business at Bt8.4/share and PBV-based

value of the biodiesel business at Bt0.6/share. We leave the possibility of expansion

into wind power as an upside to our valuation. We maintain BUY with the target price

of Bt9.

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