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ADB Backing $1.37 Billion Power Project in Thailand to Meet Power Shortfall

MANILA, PHILIPPINES (5 February 2004) - The Asian Development Bank ADB is supporting a $1.37 billion power project in Rayong Province, Thailand, to help meet the country's long-term need for reliable energy and diversification of energy sources, through a financial commitment finalized yesterday.

The commitment includes loans amounting up to US$140 million, and a political risk guarantee of up to $70 million for offshore cofinancing.

It is ADB's first private power generation project in Thailand and for which it is providing both a loan and political risk guarantee.

It is also the first independent power producer in Thailand to be financed by both local currency and foreign exchange loans of this magnitude, to mitigate volatile exchange rate fluctuations, such as happened in the wake of the 1997 Asian financial crisis.

The project entails the construction of a 1,434-megawatt coal-fired power station in Map Ta Phut on the coast 60 kilometers southeast of Bangkok. It will be developed under a 25-year power purchase agreement between the Electricity Generation Authority of Thailand (EGAT) and BLCP Power Limited, a private limited liability company incorporated in Thailand.

EGAT will purchase the plant's output during the term of the power purchase agreement. High-quality coal will be shipped to the plant from Australian Coal Holdings Pty Ltd. under a 25-year supply agreement.

The plant, expected to begin commercial operation in February 2007, will help meet projected demand for electricity. About 11,000 MW of additional capacity will be needed by 2013, to be met by new generation facilities to be constructed between 2004 and 2013 as well as hydropower from Lao People's Democratic Republic. The plant will also promote fuel diversification in the power sector in Thailand.

Unless these projects are undertaken, Thailand, which now has installed generation capacity of 25,377 MW, could experience a power shortfall by 2008.

"Located in an industrial zone, the project will increase the supply of reliable and low-cost electricity while promoting fuel diversification in the power sector in Thailand," says Joe Yamagata, an ADB Principal Structured Finance Specialist.

"It will enhance investment and job opportunities and support the budget in the form of tax revenue and foreign direct investments."

Construction is expected to create 1,800 temporary jobs for local unskilled and skilled workers and provide additional indirect jobs for local service and downstream industries. About 280 long-term operational jobs will be created at the plant itself.

The Map Ta Phut Industrial Estate, where the project is located, has been classified as suitable for the development of heavy industries. The project uses modern and proven technology suitable for coal-fired plants of this size and location. Residual environmental impacts will be systematically monitored during construction and operation.

"With the required foreign exchange loans unavailable and limited capacity available for private political risk insurance for projects in the region, ADB's assistance is crucial in supplementing private political risk insurance and catalyzing offshore commercial loans," says Mr. Yamagata.

Accordingly, the project will be financed on a limited recourse basis with debt of $1.043 billion and equity of about $324 million. ADB will provide a direct loan of $40 million, a complementary financing scheme loan of up to $100 million, and offshore cofinancing of $70 million under the ADB political risk guarantee.

BLCP's debt package will also include an offshore commercial loan of $144 million under private political risk insurance, an onshore commercial loan of $40 million in foreign exchange, and an onshore commercial loan of $620 million in local currency. The onshore tranches are fully underwritten by 12 local banks.

Equal shareholders in BLCP are subsidiaries of Banpu Public Company Ltd. of Thailand and CLP Power Asia Limited based in Hong Kong.

More at adb.org/media

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