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.