To what extent can green energy play a role in Thailand’s Covid- 19 recovery strategy?
BUNDIT SAPIANCHAI: We have learned a lot from Covid-19, particularly in the power sector, as the pandemic has instigated many changes in the industry. First, lockdown measures have demonstrated that if people are not driving to work and there are fewer cars on the roads, then pollution is reduced and air quality improves.
Everybody loves clean air, and most people want this improved air quality to be permanent, not temporary. This period has provided evidence for all to see that fossil fuel-based vehicles are not environmentally friendly.
From a policy perspective, every government should observe this and try to promote green energy more aggressively. Covid-19 has cleared a path for green energy by changing lifestyles.
From an investment perspective, in March 2020 share prices of companies across the energy industry fell by more than 50% from their pre-Covid-19 prices. There is a strong consensus that green energy is the future emerging segment for the industry. Thus, this is an opportunity for green funds and green investors to buy shares at a cheaper price. In the big picture green energy is the future; however, businesses are undervalued at the moment due to the global shocks. After the initial impact of Covid-19 investors will increasingly look to this sector.
How was revenue increased in the first quarter of 2020 when energy demand was down?
SAPIANCHAI: While the overall demand for electricity went down in the first quarter of 2020, it did not seriously impact our business. Our clients are generally not industrial factories; we sell energy to the government through long-term power agreements, and Covid-19 did not negatively impact this demand.
Our growth was driven by two key factors. The primary reason was the organic growth of our portfolio. We acquired two hydropower plants in Laos: one in September 2019 and the other in February 2020. The second reason was the exchange rate: we not only invest in Thailand but also overseas, including Japan, Indonesia, Laos and the Philippines, and the value of the Thai baht against the dollar helped us.
What changes do you anticipate in the financing ecosystem for renewable energy in South-east Asia as a result of the pandemic?
SAPIANCHAI: If, currently, a banker or an investor has the option of a hotel, a retail store or a green energy firm, I think the green energy firm would have the most appeal. We have a sustainable business model and the sector has been impacted by Covid-19 to a lesser extent relative to other segments that may offer investment opportunities. This will probably be exasperated by the crisis, as bankers and investors will likely become more conservative. They have to use their liquidity efficiently. While they will continue investing, they will be very careful about where they place their money. I am convinced that the green energy sector will be a first choice for many, as lenders can feel confident about placing their financing in the segment.
Has the pandemic forced you to reassess capital expenditure plans?
SAPIANCHAI: Before Covid-19 our capital expenditure plan for the 2020-25 period was BT45bn ($1.4bn), and we had planned to invest big in 2020. Since the global economic shocks caused by the pandemic the plan still remains BT45bn ($1.4bn), but we have rearranged the distribution of capital expenditure over those five years. We have placed some projects on hold for now, but after Covid-19 – hopefully by early 2021 – we can resume investment activities at the levels we had planned.
Where may opportunities arise from Covid-19 to accelerate innovation within the energy segment?
SAPIANCHAI: We expect that the producer-consumer model will be adopted to a much wider extent, as people want to rely on themselves. Countries are becoming more self-sufficient because of Covid-19. Globalisation has been diminished to an extent in the short term, with restrictions on international travel, which has added appeal to local production.
This mentality also applies to individuals. People are staying home more and socialising less – but they are working together more. We have a digital energy project ready in our portfolio, which will be positive for us since our project can launch in the market much sooner. Consumer behavior changes will also be positive for us.