KGI: Egco core earnings to fall
The core earnings of SET-listed Electricity Generating Plc (Egco) are expected to fall by 8.3-12.6% during 2018-19 after the company divested of assets in the Philippines, says KGI Securities Thailand.
The company yesterday announced the sale of its entire 49% stake, worth US$850 million (26.5 billion baht), in Masinloc Power Partners Co, an operator of coal-fired power plants in the Philippines.
This move was the second sale of a complete Egco stake after the company sold its 18.72% holding in Eastern Water Resources and Management Plc (EASTW), a top-three water management operator in Thailand, to Philippines-based Manila Water Co last month.
KGI stock analyst Voranart Meethavorn said Egco’s revenue will be affected from the absence of contributions from the two companies.
The company will receive net cash of 30.4 billion baht from the divestment of 27.2 billion in Masinloc and 3.2 billion in EASTW.
This sizeable cash on hand could enhance Egco’s investment ability for future projects.
KGI estimates Egco could invest in an additional 1,200-4,000 megawatts in the future and it forecasts the new investment would provide an upside to Egco’s financial performance.
“Although core earnings will decrease, Egco can also decrease its financial cost because part of the cash will be used to refinance high-interest debt,” Ms Voranart said.
Egco president Jakgrich Pibulpairoj said the company sold the stake through its wholly-owned Gen Plus B.V. Masinloc to SMC Global Power Holdings Corporation on Tuesday.
After recognising the proceeds from the divestment, Egco plans to use the cash for its new investment projects in the future.
Last week, Egco announced massive investment plans in another five countries across Asia-Pacific.
Mr Jakgrich said the company is opening up all kinds of power plants, both fossil fuel-based and renewable energy, as well as seeking different business models for new investment and asset acquisition in the new countries.
Egco is exploring business opportunities and expects all business deals to be concluded by 2020.
“We are not only seeking business opportunity in existing operations in five countries — Thailand, the Philippines, Indonesia, Laos and Australia — but also going to Cambodia, India, Myanmar, Taiwan and Vietnam,” he said.
Mr Jakgrich said the first tentative project will be the Quantri coal-fired power plant in Vietnam.
The Vietnam plant will cost $2.5 billion to develop. Egco and its shareholders are talking with the state utility for a power tariff at a capacity of 1,320MW before forming a committed project.
EGCO shares closed yesterday on the SET at 236 baht, unchanged, in trade worth 70.2 million baht.