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PTT expands power generation with $3bn acquisition

Thai's state-owned conglomerate to strengthen non-oil business

A PTT petrol station in Bangkok   © Reuters

BANGKOK -- Thailand’s state-owned oil and gas conglomerate, PTT, has approved a plan to spend up to 100 billion baht ($3 billion) to acquire a 69.11% stake in Glow Energy, a listed power generating company.

The deal will expand PTT’s portfolio of power generating and utilities businesses, which now only contribute around 1% to total revenue. It is part of PTT’s policy to diversify into other businesses to offset risks it faces from volatile oil prices and that could lend support to the company in the long run, analysts say.

PTT’s power and utilities arm, Global Power Synergy, will make the purchase. The 100 billion baht purchase value is a significant chunk of PTT's total revenue in the first quarter of this year at 532.9 billion baht.

Officials from both PTT and Glow Energy declined to give further details to avoid share price speculation and breaching regulations.

Analysts said the plan to invest more in power businesses should bode well for PTT in the long term as it helps diversify risks at a time of global oil price fluctuations. But it is not clear how the company plans to fund the buy.

Nalinrat Kittikumpolrat of Asia Plus Securities said that Global Power Synergy has cash on hand of only around 5 billion baht, which suggests it needs to raise funds. "We need to wait and see whether the way to raise fund could incur rising costs,” said Nalinrat.

As part of its diversification plans, PTT last year began a process to spin off its oil business by setting up a new subsidiary, PTT Oil and Retail, in which it will transfer some assets related to oil retailing with the aim of subsequently listing it on the local stock exchange by the third quarter of this year.

The shareholders have agreed earlier this year to allow the asset transfer that would let the new company run its business with more flexibility.

Under its business diversification plan, PTT currently gains 49% of its revenue from oil and oil-trading business, 32% from oil refinery and petrochemicals, 14% from gas, 4% from oil exploration and another 1% from other businesses.

Glow Energy is Thailand’s largest private electricity generator with total capacity of 3,207 megawatts of electricity and 1,206 tons per hour of steam, supplying power for industrial estates in Thailand and neighboring countries.

It posted a net profit of 3.38 billion baht in the first quarter of 2018, up 32% on the year.

PTT's acquisition of Glow Energy shares is in line with the country’s power development plan aimed at increasing the proportion of renewable power to 30% within 15 years.

PTT shares closed down 2% on Monday while Glow Energy shares slipped 2.99%.

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