ADB supports Thai drive to renewable energy
The switch to renewable energy should be well-planned and managed carefully
WHEN leading Thai power producer B.Grimm Power Public Co launched its initial public offering (IPO) last year, one of the three cornerstone investors was the Asian Development Bank (ADB). The multilateral agency subscribed for 123 million shares amounting to 1.968 billion baht (US$63 million), or about 19% of the offering size of up to 651.8 million shares.
Its decision to invest followed a stringent due diligence process that included environmental and internal audit, with ADB visiting every site and all the power facilities of the company.
“ADB has been a great partner for us,” B.Grimm Power president Preeyanart Soontornwata tells The Asset. “Not only did they support us in our IPO, they also provided us with the loan facility to help us fund our growth plans. We share something in common, which is (the desire) to do something good for the environment and the population.”
The ADB has been providing assistance to its developing member countries in the energy sector for more than 40 years. Its 2009 Energy Policy aims to help developing member countries provide reliable, adequate, and affordable energy for economic growth in a socially, economically, and environmentally sustainable way.
In line with this, ADB has been collaborating with the private sector to carry out its energy goal. To illustrate, the agency invested in Gulf Energy Development Public Co’s 24-billion-baht IPO in December after subscribing to shares in B.Grimm earlier last year.
In February 2018, ADB granted B.Grimm Power a US$235 million loan which will fund the company’s renewable energy projects in Southeast Asia. B.Grimm’s distributed power project will expand renewable and distributed power generation into markets in Asean (Association of Southeast Asian Nations) that include Cambodia, Indonesia, Lao People’s Democratic Republic, Myanmar, the Philippines and Vietnam.
B.Grimm is building distributed and utility scale solar, wind, biomass, waste-to-energy and gas-fired power projects. It will also invest in energy storage and other renewable energy infrastructure in Asean.
Under the Clean Energy Financing Partnership Facility, ADB was able to administer another US$20 million loan for the project from the Canadian Climate Fund for the Private Sector in Asia. The facility carries a competitive interest rate of 1.20% per annum. The facility is intended for investment in underdeveloped markets, according to Preeyanart.
For now, 90% of B.Grimm’s power generation portfolio comes from conventional energy. With renewable power projects in the pipeline, B.Grimm expects to raise the share of clean power in its energy mix to 30% over the next five years from just 10% now. B.Grimm operates power plants with a total installed capacity of 1,779MW that include 13 gas-fired power projects, with four more under development or construction. It also operates 15 solar power plants and two hydro power plants.
The company sells electricity to the state-owned Electricity Generating Authority of Thailand (EGAT), the Provincial Electricity Authority (PEA) and industrial users. Electricity generated by its gas-fired co-generation plants is sold to EGAT under the small power producer (SPP) programme. It sells electricity generated by its solar power plants to PEA under the very small power producer (VSPP) programme.
Expansion to renewable energy
B.Grimm has entered into long-term contracts to sell electricity to heavy commercial users that are mostly blue chip industrial consumers conducting sophisticated manufacturing operations in various industries such as automotive, electronics and industrial metals.
It started expanding its footprint into the renewable energy business in 2015, with the plan to boost the generating capacity of its solar power plants and wind farms to support the Thai government’s environmental conservation efforts and clean energy policies.
It commenced its overseas expansion in 1999 when it began purchasing power directly from subsidiaries of Electricity Vietnam (EVN) and on-selling it to industrial users in the Amata City Bien Hoa Estate through B.Grimms electricity transmission networks. The company then diversified into the hydro power plant business in Laos in 2015.
B.Grimm allocated a portion of its IPO proceeds to the development of Xenamnoy 2 and Xekatam 1 projects, the company’s first hydro power plants in Laos.
The hydro power stations have a total installed capacity of 20MW and has been in commercial operation since August 2017.
In expanding its renewable power generation capacity, B.Grimm plans renewable infrastructure projects in neighbouring countries such as Malaysia, Cambodia, Myanmar, and the Philippines.
“Vietnam is a good destination because of its high GDP growth, and the rules and regulations are more or less stable,” says Preeyanart. “We also want to explore Cambodia, which is an interesting market.”
In line with its collaboration with ADB, B.Grimm Power is expected to take on only the most reputable partners for its projects. “ADB has very high standards when it comes to projects,” Preeyanart points out. “They have to be environmentally-friendly and have to meet the global standards when it comes to safety, cleanliness and good governance.”
But while B.Grimm’s diversification into renewable energy is mostly geared towards solar power, it is also exploring other renewable assets with the emergence of new technology. “Technology is getting better and changing so fast, which in turn, enhances efficiency,” notes Preeyanart.
Preeyanart believes renewable energy is the future of power generation. But, at the same time, she acknowledges that the switch to renewable energy, relying mostly on solar and wind for majority of the energy mix will take a while. In Thailand, the government is aggressively moving toward building the country’s renewable energy capacity. But Preeyanart says the country’s transition to a low-carbon energy supply can only succeed if executed well. “The switch to renewable energy must be done properly. It should be well-planned and managed carefully,” she says.
First equity investment
B.Grimm’s peer Gulf Energy welcomed ADB as an investor to its IPO last year, subscribing 64 million listing shares worth 2.88 billion baht. The investment included funding from one of ADB’s co-financing vehicles Leading Asia’s Private Infrastructure Fund (LEAP), which is dedicated to private sector infrastructure in Asia-Pacific. The funding represented LEAP’s first equity investment. Japan International Cooperation Agency has committed US$1.5 billion in equity to LEAP.
Gulf Energy intends to use part of the IPO proceeds to increase installed power generation capacity in Thailand, as well as seek growth opportunities outside the country.
The company is one of the leading private power producers in Thailand with gross power capacity of 11,125MW under operation and development. It has 17 power projects in operation, including two gas-fired independent power producer projects, 11 gas-fired SPP and four small-scale rooftop solar projects.
Last month, its subsidiary Gulf Chana Green Co achieved a financial close with ADB for a 1.109-billion-baht loan for a biomass power project in the southern part of the country.
The financing will help Gulf Chana Green construct and operate a 25MW biomass power project in Chana, Songkhla province in southern Thailand. The project will convert waste from rubber trees into renewable electricity. It will receive a seven-year tariff incentives of 0.30 baht per kilowatt-hour for utilizing biomass and one baht per kilowatt-hour for investing in southern Thailand.
By converting biomass into a renewable source of electricity, the company can make use of the abundant agricultural waste that is produced from farming and wood industries. Thailand plans to make biomass the second largest renewable power source after solar. The installed generating capacity of biomass in the country is expected to almost double from the current 2,943MW to 5,570MW by 2036, according to ADB.