What happened?

When it comes to the energy sector in Thailand, one name stands out prominently: Gulf Energy. 

Gulf Energy is a powerhouse in the energy industry in Thailand as the largest private power producer. 

The company has also diversifying into the infrastructure and digital businesses in recent years. 

Gulf Energy is also the largest shareholder of Intouch, which owns Thailand’s largest mobile company, AIS. Singtel also has a stake in AIS. 

Let’s find out more about Gulf Energy and understand the growth prospects of the company. 

What you need to know about Gulf Energy

#1 – Largest private power producer in Thailand 

Gulf Energy is Thailand’s largest private power producer, with an equity installed capacity of 7.6GW as of the end of April 2024. 

Its portfolio includes mostly conventional gas-fired power plants (89% of revenue) and renewable power plants. 

Power is sold to both public (i.e. sold to the Electricity Generating Authority of Thailand (EGAT)’s national grid) and private clients (located in industrial users). 

Gulf Energy also owns stakes in power plants overseas, though these are much smaller in size compared to its domestic exposures in Thailand. Satellite 

Gulf Energy was founded in 2007 by Mr Sarath Ratanavadi, the company’s CEO. 

The company was listed on the Thai stock exchange in December 2017. His family currently owns 73.84% of GULF through various holding entities.

#2 – Solid and Low-Risk Power Purchase Agreements

Gulf Energy’s biggest revenue generators are its 6 gas-fired IPPs (Independent Power Producers). These plants carry low operating and financial risks. 

Thailand’s IPP scheme is backed by solid Power Purchase Agreements (PPA) with the Thai government. Gulf Energy has been awarded the contracts mostly through a competitive bidding process. 

Return on investments in IPPs is almost fully locked in as long as the plants are ready to dispatch (i.e. no exposure to power demand), while energy prices are fully passed through to the government and then to the public. 

Financing is done under project financing with fixed interest rates.

#3 – Thailand’s Power Demand Growth Resumes with Future Growth from Data Centres

Thailand’s power consumption and peak power demand grew at average rates of 3.3% and 6.4% in 2022-23, compared to 2.4% and 2.9% between 2011-19. 

Adoption of electric vehicles and the addition of data centres are expected to be two sources of future demand growth. Globally, demand from data centres has shown significant growth for power consumption. 

In 2023, data centres across the globe consumed 7.4 GW of power, a 55% increase from the 4.9 Gigawatts in 2022, according to Cushman & Wakefield, a global commercial real estate services firm.

Demand for data centres is evident in Thailand in recent years. Major players have started to make significant investments in Thailand to support demand, which has shifted from traditional on-premises data storage to cloud-based services and an increase in technology adoption. 

Gulf Energy’s power business is set to benefit by leveraging its ties with Singtel and its ownership of AIS.

#4 – Significant Growth Opportunities in Renewable Power

In the latest bidding round of renewable capacity in 2023 of 5GW, Gulf Energy won more than half, with the startup scheduled between 2025-30. By the year 2033, Gulf Energy will have a total installed capacity of 8GW under its renewable energy business (vs. 1GW currently). 

This target comprises mainly 2.7GW of solar power, 2.3GW of wind power, and 3GW of hydroelectric power. The Thai government has mandated that at least 50% of power generation in the country comes from renewable energy sources by 2037, a significant increase from the current 16.6% share as of March 2024. 

Gulf Energy has set a total spending budget of Bt90bn for investment between 2024-28, of which 79% is expected to be spent on renewable projects.

#5 – Diversification into infrastructure and digital businesses 

In recent years, Gulf Energy has diversified into the infrastructure and digital businesses. 

Gulf Energy spent over Bt90bn to acquire a 47% stake in Intouch, a 40% shareholder of Advance Info Services (AIS), a leading provider of mobile and high-speed internet broadband, and digital businesses for enterprise customers. 

As the biggest shareholder of Intouch, Gulf Energy has effective control of AIS. 

On 16 July 2024, Gulf Energy and Intouch announced their decision to merge by means of a share swap.

This will create a NewCo in which the major shareholder of Gulf Energy will own a 59.72% stake.

What are the risks of Gulf Energy?

Regulatory Risks

Thailand’s power and gas industries are going through liberalisation. Gulf Energy is expected to benefit from this. However, if regulatory decisions are delayed or reversed, Gulf Energy may be negatively affected, especially in terms of its future growth prospects.

Development Risks

Delay and cost overrun. Many of Gulf Energy’s plants are still under construction. The development and construction could be affected by the timing of permit issuance by the government, delivery of key equipment, etc. These factors could lead to cost overruns or startup delays.

Competition in Telco Industry

In the telco business, TRUE has been an aggressive player in terms of pricing in the past. There is a risk that TRUE may introduce a new round of price competition. 

However, we believe that the new merged entity would be more rational, especially with Telenor owning a stake in the merged entity and continuing to have an active involvement in day-to-day operations. 

In the power business, Gulf Energy has seen a significant competitive advantage from economies of scale compared to its competitors, who are much smaller in size.

What would Beansprout do? 

Gulf Energy has announced that it is planning to be delisted should the proposed merger with Intouch be approved and the NewCo is formed. 

Investors in the Gulf Energy SDR (SGX: TGED) can look out for any further updates on the corporate action on the SDR issuer’s website. 

Apart from Gulf Energy, the other recently-launched SDRs which offer more options for investors looking to invest in Thai blue-chip companies include AIS, Delta Electronics, Kbank, as well as Siam Cement.

Here’s a quick summary of why these companies might be worth a closer look:

• AIS: Thailand’s largest telecommunications conglomerate partially owned by Singtel. Read more about AIS here.
• Kbank: Thailand’s best domestic bank 2023. Read more about Kbank here.
• Delta Electronics: Largest electronics manufacturer in Thailand
• Siam Cement: ASEAN’s largest industrial material conglomerate 

SDRs trade on the Singapore Exchange in Singapore Dollars (SGD). The same trading hours for the Singapore Exchange apply to the trading of SDRs, which is 9 am to 5.16 pm SGT currently. 

SDRs are tradable by all investor types, as they are classified as Excluded Investment Products (EIP). While this product is available to anyone with a basic understanding of financial instruments, do make sure that you are aware of the product characteristics and risks before you invest in it. 

You will be able to buy Singapore Depository Receipts directly through a stock trading platform which offers trading on the Singapore Exchange.

Click here to read our earlier article explaining what are Singapore Depository Receipts. 

You can also find more resources at the SGX product page.

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