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Energy sector: Power

Reviewing third IPP bidding Neutral

Energy energy sector: Power

The Permanent Secretary of Energy Ministry has been investigating

on the electricity purchase agreement that Gulf won. If the auction

is proven unrightful and thus reviewed, EGCO and GLOW that have

already met the technical requirement would be advantageous.


- Examining third IPP bidding. Won by Gulf

The Permanent Secretary of Energy Ministry has been investigating on the

third round of Independent Power Producer (IPP) bidding due to complaint

on questionable transparency. Gulf Energy Development (Gulf JP) was the

sole winner for the third round of bidding, winning two IPP contracts with

the total capacity of 5,000 megawatts. If the auction is proven unrightful,

IPP electricity purchase agreement might need to be corrected; the

investigation would take time. However, this is not likely to affect overall

power generation; Gulf’s first power plant will start its commercial run in

2022.

- EGCO, GLOW to win if bidding restarts

The result of the third round of IPP bidding on June 20, 2013 was

unexpected. EGCO, GLOW and Gulf were initially projected to have at least

one proposal each that would meet the electricity cost requirement.

However, although EGCO's proposal offered the lowest electricity cost,

EGCO and GLOW failed to meet the electricity cost requirement. If the

agreement between Gulf and EGAT is terminated and the bidding restarts,

EGCO and GLOW might win the auction because they have met the

technical requirement already; EGCO's proposal actually offered the lowest

electricity cost.

- Top picks: EGCO

For power generator sector, top pick is EGCO(BUY:FV@B160). As EGCO

possesses many power plants, its profit is expected to grow most

outstandingly in the next three to five years. Also, the third round of IPP

bidding might be revised and restart. If EGCO wins one contract, its value

will increase by B15-20/share. Meanwhile, if GLOW(HOLD:FV@B75) win one

contract, its value will increase by B7-9/share.


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