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Solar power, bio-plastics and e-commerce show Thai business in transition

Solar power, bio-plastics and e-commerce show Thai business in transition

The business landscape across the world is changing rapidly and many executives in Thai companies are not slow to embrace the new paradigms. While Thailand itself may not have the technological know how and capacity to run with new technologies on its own, local businesses are prepared to join hands with foreign firms which do have the knowhow and are looking to expand their operations into the Thai marketplace.

In mid-July, for example, the Thai Appliance Industry Co (THAICO) signed a Memorandum of Understanding (MoU) with Pacific Star Group, one of Asia’s largest and most successful real estate investment companies and Asiatic Group, a Singapore-based energy and power company to build 10 solar power plants in Thailand. The expected investment will be around three billion baht.

Pacific Star Group has its headquarters in Singapore and has offices in Kuala Lumpur, Bangkok, Seoul, Shanghai and New York.[1]

The investment will take place under the umbrella of a joint venture company to be called Thaico Energy Co Ltd. THAICO will hold 60 percent of the shareholding while Pacific Star and Asiatic Group will have the remaining 40 percent.

Each of the solar power plants will have an electricity generating capacity of five megawatts and are expected to require an investment of up to 300 million baht each. The plants will be erected in a variety of provinces from Nakhon Sawan to Lampang and Kanchanaburi to Prachuap Khiri Khan.

solar power plant panel e1436429753536 - Solar power, bio-plastics and e-commerce show Thai business in transition

Polsak Lertputtipinyo, the managing director of THAICO, was quoted as saying that local agricultural co-operatives will be invited to co-invest in the various projects. They will be placed in control of the cost of land and property maintenance for a 25 year period, while the companies will be responsible for technology investment.[2]

The electricity generated by the solar plants will be sold to the Provincial ElectricityAuthority (PEA) and 70 percent of the profits will be returned to the co-operatives. Based on expected costs and returns, the entire project is expected to reach its break-even point within seven years. Construction will begin once the projects are approved by the Energy Regulatory Commission.

Bio Plastics

PTT, one of Thailand’s leading SET-listed companies, is about to move into the field of bio-plastics by way of its subsidiary PTT Global Chemical (PTTGC).

Thailand’s leading petrochemical company announced it would establish a 50:50 joint venture with one of the country’s leading sugar makers to set up what would be the first bio-plastic industrial estate. The venture is expected to cost around five billion baht.

PTT announced it has a plan to turn Thailand into the bio-plastic hub of the Asean region, recognizing the rising demand for bio-plastics across Southeast Asia and Asia in general.

The PTTG president and chief executive Supatanapong Punmeechaow was quoted as saying, “We are planning to locate the industrial estate in the central region, where farmers grow plenty of sugarcane. Then, we plan to make it a one-stop place from growing sugarcane, producing sugar, making ethanol, generating electricity from biomass-based power plants and setting up a bio-plastic manufacturing plant.”

The joint venture deal should be finalized before the end of this year and the period from planning to final construction of the plant and installation of equipment is expected to take around two and a half years. Given the expected time frame and allowing for delays, the project should be up and running by the middle of 2018.

PTTGC management believe if the bio-plastics plant can be successfully established this will encourage the world’s largest biopolymer producer, NatureWorks, to set up a polylactic-acid manufacturing plant in Thailand, which would be worth around 6.8 billion baht.

pttgc green chemical e1438946323262 - Solar power, bio-plastics and e-commerce show Thai business in transition
Image of green chemical from PTT Global Chemical website

PTTGC has allocated three per cent of its annual net profit for research and development on high-value products. It is planning to set revenue targets from high-value products that will reach 20 percent of its petrochemical revenue within the next decade. Presently, revenue from high-value products accounts for just four percent.[3]

E-commerce set for further growth in Thailand

China’s premier e-commerce company AliBaba Group, via its subsidiary YTO Express, recently signed a memorandum of understanding with Thailand’s home entertainment manufacturer Crown Tech Advance PCL (AJD) to work towards doing a joint logistics and e-commerce business in Thailand.

Although Thailand is the immediate focus, the cooperation hopes to expand the logistics and e-commerce business across the world over time, according to the report tendered by AJD to the Stock Exchange of Thailand.

According to AJD management, YTO Express is looking at Thailand as its central point for the Southeast Asian region, partly because of the cheaper setup costs when compared with Singapore, for example, and partly due to Thailand’s geographic position. Thailand’s geographic position vis-à-vis its near neighbours Laos, Myanmar, Cambodia and Vietnam, and even Malaysia, has always given it a competitive advantage, although that has been somewhat eroded in recent years by the ability of companies to deal via the internet.

YTO Express has noted the strong network of alliances and the nationwide customer base enjoyed by AJD, and the synergy between the Thai company and a foreign company expert in logistics and e-commerce should prove successful over the longer term.

The deal between AJD and YTO Express is expected to be finalised by the end of this year. AJD executives have declined to issue details regarding their cooperation and co-investment agreement, but did say they had debated two key options.

The first was that AJD would issue additional shares and specifically sell to YTO Express or Alibaba. The second option would be to form a new joint venture firm. Whatever option is eventually settled upon, the Chinese company will hold the majority stake.

YTO Express is already a huge player with currently 12,500 warehouses, 73 main distribution centres and 2,300 distribution points. Last year the company claimed to have transferred more than 2.1 billion items across the world. It presently has upwards of 200,000 employees and operates seven charter planes transporting its products to 118 airports worldwide.[4]

 

 

[1] http://www.pacificstargrp.com/ ,accessed 10/8/15

[2] http://www.dealstreetasia.com/stories/thaico-singapore-investors-form-jv-to-build-solar-plants-in-thailand ,accessed 10/8/15

[3] http://www.dealstreetasia.com/stories/thailands-pttgc-to-set-up-143m-jv-for-bio-plastic-industrial-estate ,accessed 10/8/15

[4] http://www.dealstreetasia.com/stories/thailands-ajd-joins-hand-with-alibabas-subsidiary-for-logistic-e-commerce-biz-in-sea ,accessed 10/8/15

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