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EA confident in sealing energy deal

Amorn Sapthaweekul, deputy CEO of Energy Absolute, says the company is going to put 100 billion baht worth into a 50-gigawatt facility.

SET-listed renewable energy firm Energy Absolute (EA) says it can sign partnership deals with 4-5 major local oil companies to help finance its 100-billion-baht, 50-gigawatt-hour energy storage facility in Chachoengsao Industrial Estate by the end of this year.

Amorn Sapthaweekul, deputy chief executive and one of the three founders of EA, said the company is in talks with a few local large-scaled energy firms for the partnership, but the details of the agreement are yet to be settled.

The company will hold a 51% stake in the joint venture with one of them, and is negotiating with 4-5 prospective local large oil firms to hold the rest.

GIGAFACTORY: THAI EDITION

The first phase of the 3,000-rai energy storage facility, a 4-billion-baht investment, will generate 1 gigawatt-hour (GWh), and is scheduled to open in the third quarter of 2019. Mr Amorn said the company will finance this first stage by itself.

The second phase will total US$3 billion (a little less than the company's 123-billion-baht market cap) and will have capacity of 50GWh. The company expects the project to be completed in 2021.

To finance this stage of the project, Mr Amorn said EA plans to establish a joint venture with registered capital of 2 billion baht. The company will raise 50 billion baht in capital to pay for its part of the deal, in which it will hold a 51% stake. EA is negotiating with 4-5 local large-scale energy firms to hold the remaining 49%, saying the project will have at least four partners.

The company will finance half of its part of the deal through bank loans.

At 50GWh, the completed plant will have a larger capacity than Tesla's 35GWh Gigafactory in Nevada, US. The factory is also among the largest planned in the world. Tesla will open a 50GWh facility by 2020, according to company reports, and Chinese electric vehicle (EV) maker BYD recently announced it is working on a 24GWh facility, to be operational in 2019.

The company is also investing 1 billion baht later this year in a smaller energy storage manufacturing plant in Vietnam. The facility will have production capacity of 30MW.

Laos, Indonesia and Myanmar are other stops on the company's expansion road map.

EA is also looking at major regional players in Indochina, Malaysia and the Philippines, with each to hold 15% in the venture.

Just like Tesla across the Pacific, EA wants to roll out an ecosystem to build demand for its storage business. The firm introduced its own electric car, Mine, at this year's Bangkok Motor Show, and plans to launch 5,000 of the battery EV's three models -- a multipurpose vehicle, a city car and a sports car, with the cheapest starting from 600,000 baht.

To go along with its automotive operations, the Bangkok-based firm will also build 1,000 charging stations across the country this year. Some 90% of the stations will operate as stand-alone locations; the rest be located in shopping centres and at Susco petrol stations.

There are less than 10,000 EVs in Thailand, hardly enough to keep even a minimal fraction of stations operating at capacity, said Mr Amorn. By way of comparison, there are close to 26,000 gas stations supplying 37 million registered cars in the country, reported Thai PBS.

"Our strategy is to secure the best locations before the competition comes, which is why we are moving so rapidly. We believe adoption of EVs will happen much more quickly than predicted," he said.

The company's investment in the charging stations is minimal, said Mr Amorn. EA will supply the batteries, while a Chinese company will supply the station machinery. The real estate was mostly secured through revenue-sharing agreements.

"Overall, we've only lost 1 million baht from the project so far," he said.

EA plans to expand its holdings beyond renewable power plants, which now represent close to 60% of its revenue. The company's stock skyrocketed after the publication of its 2017 results, but dropped 50% after the government's announcement it would restrict renewable energy adders. Last year, about 40% of EA's turnover came from subsidies.

Earlier this year, the government announced new renewable power investment will not receive a feed-in tariff rate over the 2.44 baht kilowatt-hour (kWh) paid for fossil fuel-based energy. State utilities purchase energy at 4-7 baht per kWh under existing contracts, as previously reported by the Bangkok Post.

While the company will not lose all of its subsidies, given its long-term contracts with the state, the government's move may signal the rise of a regulatory environment less welcoming to alternative energy sources.

A GREENER FUEL

EA is also expanding its biodiesel portfolio, which now accounts for close to 40% of its revenue. Like biodiesel, "Green Diesel" is also derived from palm, but it offers better performance and is more environmentally friendly. Green diesel is already present in small percentages in premium diesel sold at gas stations around the country.

The company is in talks with the government to subsidise the new product, and once the subsidies kick in it should be around 3.5 baht more expensive than biodiesel per litre. Green diesel is slightly more expensive to produce than biofuel for EA.

EA wants to launch the product in the first quarter of 2019, when it targets production capacity of 40,000 litres per day, about 5% of its 800,000-litre-per-day goal, once the government support issue is clarified, said Mr Amorn.

The company allocated 26 billion baht for investment in 2018-2019. Of the total, 18 billion baht is for construction of the 260MWh Hanuman wind farm; 4 billion for an energy storage plant; 2 billion for green diesel production; 600 million for charging stations; and the rest for phase change materials.

The company expects revenue of 13 billion baht this year, up from 11.7 billion in 2017.

Last year EA recorded net profit of 3.8 billion baht.

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