Laos utility taps Thai baht bond market
EDL-Generation Public Company (EDL-Gen), the leading electricity producer in Lao People’s Democratic Republic, on July 4 announced the pricing of its upcoming Thai baht bond offering of up to 17.50 billion baht (US$527.60 million) to help fund its expansion plans.
The offering comprised of six tranches with the three-year bond priced with a coupon of 3.90% per annum, five years (4.50%), seven years (4.85%), 10 years (5.50%), 12 years (6%) and 15 years (6.25%).
Praset Deejongkit, senior vice-president and manager for corporate finance at Bangkok Bank, one of the joint lead arrangers for the transaction, describes the 6.25% coupon for the 15-year bond as a good yield from an electricity generation company.
The transaction showcases EDL-Gen’s strong credit positioning as well as the depth, breadth and liquidity of the Thai debt capital markets. The new fund raising will represent a diversification for EDL-Gen in terms of investor base since its previous two offerings in the Thai debt market were sold mostly to institutional investors.
This time around high net worth investors have shown strong interest. “We intend to distribute a significant sum of the debentures to this group of investors for its diversification,” says Adisorn Singhsacha, founder and CEO of Twin Pine Group.
As Laos’ major renewable power generating company specializing in hydropower, EDL-Gen produces electricity both for domestic consumption and for export to neighbouring countries such as Thailand. The company owns 15 hydropower plants and one solar farm giving a combined production capacity of 1,137MW. It is a subsidiary of the state-owned Electricite du Laos (EDL)
EDL-Gen is committed to increasing its generating capacity. It is currently pursuing the acquisition of shares in Xayaburi hydropower project and Donsahong hydropower project from EDL and plans to use the funds raised from this offering to complete the transaction. The acquisition will add a combined 309MW to EDL-Gen’s generation capacity and highlights its goal to become a leading power generation company in the region.
Twin Pine Group Company is the sole adviser for the transaction, while Krungthai Bank, Siam Commercial Bank, Standard Chartered Bank (Thai) and Thanachart Bank are the other joint lead arrangers, apart from Bangkok Bank.
EDL-Gen initially tapped the Thai baht bond market in December 2014 when it issued 6.50 billion baht in multiple tranches, which also marked its first offshore bond and the first corporate bond by a Laotian company in Thailand. It returned to the Thai debt market in 2016 when it raised in early September its maiden US dollar bond amounting to US$312 million to finance its expansion plan.
The Thai baht bond market has become the favoured fund raising avenue for Lao issuers ever since the Ministry of Finance of the Lao People’s Democratic Republic (MOFL) tapped it for its maiden offshore offering in May 2013 amounting to 1.5 billion baht. This was the first foreign sovereign and non-rated issuer raised funds from the Thai baht bond market.
The transaction was well-received by investors with an order book of over 4 billion baht, or more than 2.7x of the intended issue size. The investor base was highly diversified across the spectrum, including Thai institutional investors, Thai corporates, high net worth investors and Thai government-related agencies.
According to Twin Pine, MOFL would like to maintain Thailand as its key fund raising market given its depth and breadth, strong liquidity and the familiarity of the local investors with the MOFL’s credit. MOFL also plans to broaden its investor base to include new institutional investors and high-net-worth investors.