Move to leverage Singha Estate’s synergies
Entering the power plant business is part of a plan to enhance the SET-listed firm’s core business
SET-listed Singha Estate Plc (S) is moving into the power plant business to leverage synergies with its commercial property, residential property and resorts and hotels businesses amid an increasingly unpredictable local and global business environment.
Thitima Rungkwansiriroj, chief executive officer, said an entrance into the new business is a part of the company’s strategic plan to enhance its core property business.
“The Covid-19 pandemic affects all business sectors and not only in Thailand but also globally,” she said. “This crisis confirms our strategic plan is right. The four businesses will complement each other.”
This year will be a transition year for the company in which it is moving into the next phase of its development by embracing businesses that complement its three core property businesses — commercial property, residential property, and resorts and hotels.
Singha Estate aims to triple revenues to 20 billion baht within three years and generate recurring income, with a growth in profit and a sustainable business, while being resilient in every circumstance.
The company is also interested in related energy businesses, engineering services and other innovative services, she added.
Last week, Singha Estate announced that it has secured exclusive rights to acquire a 30% shareholding in three major co-generation power plants with a total capacity of 400 megawatts, at par value, and with a total investment of 1.39 billion baht.
The first plant is an operational 123MW combined cycle co-generation power plant that is owned and operated by Angthong Power Co. It is located in the World Food Valley industrial estate in Ang Thong province, central Thailand.
The second and third plants, each with a 140MW capacity, are greenfield operations that are currently under construction and will enter into service in 2023. Both are located in the World Food Valley industrial estate. The licences for these power plants are owned by B.Grimm Power (Ratchaburi) 1 Limited and B.Grimm Power (Ratchaburi) 2 Limited.
“Licences for power generation plants of this size are a very rare commodity, so we are especially pleased to have secured rights to a substantial stake in three important power plants. They will give us an immediate and sure-footed presence in this sector,” said Mrs Thitima.
She said the options are made particularly attractive by the fact that 270MW, or close to 70% of the combined output of the three power plants, is already pre-sold at guaranteed prices.
“This assures us sustainable recurring revenues that will enhance the resilience of our business,” she said.
Singha Estate’s commercial property businesses contributed to approximately 15% of its total revenues in 2020.
Angthong Power is the only power plant in Thailand that is profitable even without the need to sell to independent users and 75% of its output is taken up through a 25-year power purchase agreement with the Electricity Generating Authority of Thailand.
She said the use of advanced technology has reduced costs and further improved the margins of the business beyond initial estimates.
The three power plants are expected to generate 7.5 billion in revenues in 2024, she added.
“Apart from the synergy benefits that we foresee from these acquisitions, their returns as stand-alone businesses are also attractive.”
“We have a draw-down facility with banks so that Singha Estate only needs to put up minimal capital, and at the tail end under a ‘back-end equity’ arrangement,” said Mrs Thitima.
Singha Estate has a low net debt-to-equity ratio of 0.96 and access to 25 billion baht in credit facilities.
Currently, its commercial property businesses include 140,000 square metres of office and retail space contributing approximately 15% of its total revenues in 2020.
It has 39 hotels and resorts with 4,600 keys across five countries, contributing approximately 24% of revenues while it has developed 23 residential projects including single detached houses, townhouses and condominiums under the Santiburi, The ESSE, and other brands, contributing 57% to its revenues.