Thailand sets target for EGAT float

Thailand's government says it is aiming to raise up to Bt 34.86 bn ($ 855 mm) through its flotation of the state power producer Electricity Generating Authority of Thailand (EGAT) later this month.
Demand is expected to be strong for what will be Thailand's biggest IPO with the government intending to sell 1.245 bn shares, equivalent to a 16 % stake, in EGAT at a price range of Bt 25 to Bt 28 a share. The sale had been planned for last year but was cancelled in the face of large-scale protests from unions representing the company's 30,000 employees.

There remains some opposition to the sell-off from consumer groups, and some energy analysts who have expressed strong concerns that the share sale will simply convert what is now a public monopoly into a private monopoly, removing any incentive to operate efficiently and limited price increases. The revised IPO includes favourable terms for employees wishing to buy shares and will leave employees owning around 7 % of the company. Fund managers and analysts say the offering is well structured in terms of pricing, with the listing set to help the development of the Thai equities market.
"Although at 10 times PE (price-to-earnings ratio), the share may look expensive, but if you take the distribution network into account, then it is worth looking at," said a local fund manager.

Meanwhile EGAT has said that it will invest more than 100 bn baht over the next three years to build new power plants and transmission lines as part of its effort to meet Thailand's growing demand for electricity.
"We have also received approval from the cabinet to boost our production capacity by more than 50 %," said Kraisri Kanasutra, EGAT's chief executive officer. Kraisri said that the cabinet had approved the company's plans to build up to four new power plants between 2005 and 2010. The first plant, a co-generation plant to be located in Songkhla, is expected to be completed in 2007. The other three plants are to be located in Nonthaburi, Samut Prakan and Chachoengsao, with completion set for 2008 and 2009.

GAT currently has a total electric production capacity of 16,000 MW, with 60 % generated using domestic fuel, primarily natural gas.
Kraisri said of the total investment of 100 bn baht, 65.5 bn baht would be allocated to building power plants and the remaining would be invested in building transmission lines. He also said that EGAT would pay as much as 40 % of its net profits as annual dividends and would likely pay 0.75 baht a share during the second quarter of 2006. EGAT's profitability may decline due to the new way of calculating the fuel tariff.