Laos power plant to get nod in 30 days, Ch Karnchang says

The Nation 23 April 2011

By Somluck Srimalee

Ch Karnchang believes that the Laotian government will approve construction of the Xayaburi hydropower plant within 30 days because the plant's design takes environmental impact into account, chief executive officer Plew Trivisvavet told a shareholder meeting yesterday.

The project faces opposition from individuals and nongovernmental organisations concerned about possible environmental impacts from the plant's construction and subsequent operation on the mekong River. Because of this, the design includes more than Bt10 billion worth of systems to protect the environment, he said.

"We believe that we will sign three contracts for this project in the next 30 days," he said.

Those three contracts are the one with the Laotian government for construction of the plant, the power purchase agreement with the Electricity Generating Authority of Thailand (Egat), and the agreement for a syndicated loan of Bt80 billion. The four lenders providing the syndicated loan are Kasikornbank, Krung Thai Bank, Bangkok Bank and Siam Commercial Bank.

Plew said the Laotian government had confirmed informally that it will go ahead with the project and would send official confirmation within two weeks.

If the project is approved, Ch Karnchang will get a construction contract worth Bt76 billion over eight years. The company also will receive dividends from Xayaburi Co Ltd when the hydropower plant starts to operate and sell electricity to Egat.

Ch Karnchang holds 30 per cent of Xayaburi Co, which has registered capital of Bt1 billion. The Laotian government holds 20 per cent, while 25 per cent is held by PTT subsidiary Natee Synergy Co, 12.5 per cent by Tokyo Electric Power Co, 7.5 per cent by BECL, and the rest by small shareholders.

Ch Karnchang has projects on hand, for which it has signed construction contracts or is in the construction process, worth Bt30 billion, nearly half of which will be completed this year. Construction projects will generate Bt15 billion of the company's revenue this year, up 78 per cent from last year's construction revenue of Bt8.4 billion.

Plew said 85 per cent of its revenue came from its construction business, and the rest from its investments.

The company also will join bidding for Bangkok's masstransit system and for small power producers worth nearly Bt100 billion this year.

"Although the election will delay bidding plans for mass transit, we believe this will have little impact on our business," he said.

The company expects its gross margin to increase from an average of 5 per cent last year to 10 per cent this year through adjustments in its construction prices to cover its rising costs and through managing its expenses.

To that end, the company has signed longterm contracts of between six months and three years for purchase of construction materials, he said.

He added that the construction business faced a tight labour supply but there was enough to support Ch Karnchang's needs.

However, if the company wins the bid to build the new mass transit extensions, it will need to add about 500 labourers to its current workforce of 5,000. If there is a labour supply shortage, the company may hire foreign workers, he said.