Glow Energy Plc. Analyst Briefing:TNP Acquisition. 9 June 2011

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Giles Franklin
6 years ago
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1 Energy Plc. Analyst Briefing:TNP Acquisition 9 June 2011

2 Disclaimer The views expressed here may contain information derived from publicly available sources thatt have not been id independentlyd verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information contained in this presentation has been prepared based on number of assumptions which may be incorrect and/or not properly represent actual situation incurring in the future. The actual information contained in this presentation is for the purpose of illustration and presentation only. Should there be any discrepanciesi with audited/reviewed d/ i d financiali statements, tt t annual report, and other official filings to SEC, the information presented in such documents should be relied upon as official information. This presentation should not be relied upon as a recommendation or forecast by Group. This presentation shall not be construed as either an offer to sell or a solicitation of an offer to buy or sell shares in any jurisdiction. Page 2 2

3 Rationale of the Transaction As a result of merger between GDFSuez international energy business and International Power (IPR) in early 2011, IPR-GDFSuez currently has presence in electricity generation business in Thailand through both Group and Thai National Power (TNP). With this transaction IPR-GDF Suez would consolidate its electricity generating activities in Thailand under one entity ( Energy) and comply with undertaking of GDF Suez not to compete with for electricity generation in Thailand. The IPR s ownership of remains unchanged at 69%. As both IPR and are listed the valuation and transaction is done on arms length basis. Page 3 3

4 Description of the project (1/5) General description: Thai National Power Co., Ltd., (TNP) is a wholly owned subsidiary of International Power group, and owns and operates a power plant located in Siam Eastern Industrial Park (SEIP) in Pluak Daeng, Rayong Province, Thailand. SEIP covers and area of 1,376 rai (2.2 km2) and further 600 rai is being developed. In addition to TNP, 26 businesses have set their industrial operations in SEIP. The businesses are mainly Japanese manufacturing companies supplying parts and components for automotive and motorcycle manufacturers. TNP has an agreement of being the exclusive supplier of cogeneration products (power, chilled water and others) within SEIP. Effectively PEA is the only competitor Project background/history: TNP was created to build, own and operate a 120 MW CCGT plant, operating under the SPP program. The plant reached commercial operation in The capacity of the CCGT plant has been upgraded from original 110 MW by increasing firing temperature of the combustion turbines and installing a fogging system to the air intake. In 2005 an absorbtion chiller was taken in operation, solving the thermal load condition of the SPP PPA. The product of the chiller, chilled water is sold to industrial customers. In 2006 as the industrial customer load had increased, four gas-engines owned by Rayong National Power a fully owned subsidiary of TNP - entered in operation. In 2011, TNP started construction of new 110 MW CCGT plant under SPP program. Activity: Power generation; power sales to EGAT under a SPP PPA (90MW); power sales and distribution to 26 industrial clients (53MW), sale and distribution of chilled water (2,200 RT) A further 90 MW PPA with EGAT has been signed, COD scheduled for December Total investment cost: Approximately 8,000 MTHB, including equity acquisition, debt for existing and new plant, and capital contribution to new plant. Page 4 4

5 Description of the project (2/5) UK Thailand 100% RNP IPR NPT TNP 100% 100% 100% TNP2 Local loans (KBANK&BAY) Gas engine subsidiary Expansion project subsidiary TNP financing structure TNP is a wholly owned subsidiary of IPR. TNP was originally funded by THB1000 million of equity and debt of THB 2,137 million (@31 Dec 2010) from two local banks. TNP owns 100% equity of RNP and TNP2. Additional debt of approximately 4,000 MTHB for construction of TNP2 was raised in Page 5 5

6 Description of the project (3/5) Technical description of existing plant (TNP and RNP): Size: Technology: Distribution Network: installed capacity 120 MW CCGT (COD Oct 2000); 2,200 RT* absorption chiller (COD 2005); 23 MW gas engines (COD 2006) gas-fired CCGT power plant, based on 2 GE Frame 6B CT s with HRSG and common ST, 4 gas engines of 5.75 MW each 6 x 22kV distribution feeders based on overhead lines * RT = Refrigerated Ton (capacity of chilled water) Page 6 6

common ST and a 1200 RT absorption chiller EPC Contractor: Ishikawajima Heavy Industries (IHI) as off-shore supplier and

7 Description of the project (4/5) Technical description of expansion plant (TNP2): Size: p y Technology: installed net capacity 110 MW CCGT RT chilled water gas-fired cogeneration power plant, based on 2 GE LM6000F CTs with HRSGs, common ST and a 1200 RT absorption chiller EPC Contractor: Ishikawajima Heavy Industries (IHI) as off-shore supplier and Thai Owner s Engineer: Jurong Engineering as on-shore contractor, NTP given FEB 2010, scheduled COD Dec 2012 Mott MacDonald Page 7 7

8 Description of the project (5/5) Commercial aspects Customer contracts: Competitors: Customers: Fuel supply: Financing: 2 x 90 MW PPAs with EGAT under the SPP program, 26 power supply contracts and two chilled water supply contracts with industrial customers PEA EGAT and mainly Japanese manufacturing industries Long term gas supply agreements with PTT acquisition to be be financed by raising new debt at level Page 8 8

9 Risk and rewards of the project Risks /Mitigation measures - Industrial offtakers depend on global market and economy / several customers, industrial offtake represents 20% - 30% of the total capacity sold - Limited thermal energy usage could lead to penalty and/or reduced tariff under the SPP PPAs if minimum is not met / is familiar with technology and business model, which helps to secure the chilled water contract with identified customers - TNP2 construction delay and/or cost overrun / is experienced in construction management of cogeneration plants - credit rating downgrade due to increased gearing / TRIS Rating has confirmed maintaining current credit rating of Rewards - Drivers of value creation and upsides: - Profitable expansion of cogeneration business outside Map Ta Phut Industrial Estate - Additional EGAT SPP contracts adding 180 MW to existing 664 MW SPP PPA portfolio Synergies from the combination further enhancing value of TNP business Refinancing of existing TNP Project Finance at Group level Page 9 9

10 Details of Transaction Sellers: International Power PLC ( IPR ) and National Power (Thailand) Co., Ltd. ( NPT ) Buyer: Energy PLC subject to TNP lenders consent to waive pledge of TNP s shares (otherwise Company Limited) Purchase Price: 55 MUSD for 100% stake of TNP (1,000 MTHB in paid-up capital; and equity book value of 1,747 MTHB as of Dec 31, 2010) This transaction is considered as Connected Party Transaction and required approval from 75% of minority shareholders attending the meeting. Conditions Precedent: board and shareholders approval IPR board approval ERC approval Consent from TNP s lenders Expected Closing: by August 2011 and IPR board approval achieved shareholders EGM is scheduled at 8 July 2011 ERC approval and consents from TNP s lenders are in process Page 10 10

11 Group Structure after Acquisition Cogen Business Energy SPP1 SPP2 TNP SPP3 RNP TNP2 Co HHTC IPP2 IPP3 IPP HHPC Gheco-One IPP Business Page 11 11

12 Key Financial Stats of TNP (in MTHB) Profit & Loss Statement Revenue from Sale 2,446 2,449 2,610 Gross Profit EBITDA EBIT Net Profit NNP Balance Sheet PP&E 2,216 2,102 1,972 Total Assets 3,829 3,712 4,115 Long-term loans 2,028 1,799 1,801 Total Liabilities 2,539 2,257 2,367 Paid-up capital 1,000 1,000 1,000 Total Equities 1,290 1,455 1,747 Page 12 12

13 Investment Return Evaluation Financial model used for valuation is based on information obtained during due diligence and s internal assumptions for Cogeneration Business, and reflected: Industrial customers profile (demand and load profile) Industrial customers electricity and chilled water tariff structure (PEA 22 kv TOU/TOD rate) Existing 90 MW standard SPP contract (on TNP1) and new 90 MW standard SPP contract (on TNP2; SCOD in Dec 2012) Capex and construction plan of TNP2, and additional capital injection into project of around 450 MTHB, on top of existing Project Finance Facilities Existing dispatch plan and current projected maintenance cost, in-line with Group Existing Project Finance facilities and hedging (interest and FX on capex) uses its own key assumptions, in order to be in-line with valuation methodology for its Cogeneration Business, including key macro economic data, gas price and industrial customers electricity tariff (PEA tariff). Page 13 13

14 Synergies are assumed as upside also assessed during due diligence number of potential synergies by combining TNP into Group. Potential synergies include: Operational synergies, i.e. spare parts cost saving, operation staff synergies, sharing of expertise Administration synergies, i.e. admin cost reduction, admin function synergies Re-arranging of TNP s financing TNP s existing funding is through Project Finance, with comparatively higher cost of borrowing All existing and future TNP debt will be consolidated into Energy, regardless of how it s funded. We believe there is value enhancement possibility by utilizing strength of Energy financial status for funding of TNP Page 14 14

15 Funding Plan for TNP acquisition We have secured 2,000 MTHB loan, due in 2014, for TNP acquisition. We plan to refinance existing debt of TNP amount to 3,000 MTHB with Energy s Corporate Finance due in In 2012, we will further issue 3,000 MTHB Corporate Financing for TNP2 construction. 6,000 5,000 4,000 3,000 2,000 1, ,000 6,000 5,500 4,000 4,000 4,600 2,965 3,000 3,400 2,500 3,000 3, Current funding TNP acquisition TNP Refinancing Page 15 15

16 Key Ratio is not substantially affected Cogen DSCR is still within policy level of 1.6x after acquisition. Consolidated D/E would be peak at slightly higher level, and take slightly longer to return to 1.0x. Credit rating agency (TRIS) has confirmed our rating at A with Stable Outlook, with anticipation of this transaction without TNP No TNP 2.5x 2.0x x refin with CF TNP with associated financing 1.0x 0.5x 0.0x TNP with associated financing refin with CF without TNP No TNP Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- -18 Dec-1 10 Jun-1 11 Dec-1 11 Jun-1 12 Dec-1 12 Jun-1 13 Dec-1 13 Jun-1 14 Dec-1 14 Jun-1 15 Dec-1 15 Jun-1 16 Dec-1 16 Jun-1 17 Dec-1 17 Jun-1 18 Dec-1 18 Page 16 16

17 Summary of Our Views on This Transaction TNP business is also Cogen Business, but it has different risk/return profile compared to s existing Cogen Business in MTP. In consideration of: 1. s conservative assumptions for valuation 2. Synergies and potential upsides 3. Cogen business outside MTP 4. Immediate positive impact to P&L from 2011 Acquisition price of 55 MUSD, which is approximately equal to equity book value at year end 2010, for this transaction is justified. Our plan is to acquire this asset without increase of capital or material adverse effect to debt service capability, with no dividend reduction, and while maintaining credit rating. Therefore, the return on this investment will be additional return on equity of our shareholders. Page 17 17

18 Thank you Page 18 18

Glow Energy Plc. Results of H August 2012 August Glow

Glow Energy Plc. Results of H1-2012 16 August 2012 Glow 1 Disclaimer The views expressed here may contain information derived from publicly available sources thatt have not been independently d verified.