KBSPIF's solid fundamentals trigger optimism on trading debut

Stocks and Financial Services Press Releases Monday August 24, 2020 14:18
Bangkok--24 Aug--MT Multimedia

Khonburi Sugar Power Plant Infrastructure Fund (KBSPIF) starts trading today on the Stock Exchange of Thailand (SET) with an expected positive market reception. KBSPIF's prospects are driven by its investment in the biomass power generation business of Khonburi Power Plant Co Ltd (KPP) which offers a 62% revenue sharing to the infrastructure fund. KBSPIF's target to provide an 8.95% yield to unit holders in the first year of operation and the projected offering of a 7%* internal rate of return have also contributed to the expected good reception from investors.

"KBSPIF possesses all the good fundamentals for being well accepted by investors on its entry to the Stock Exchange of Thailand (SET) today,'' said Chavinda Hanratanakool, Chief Executive Officer of Krungthai Asset Management Plc which manages the 2.8-billion-baht fund.

The KBSPIF has a policy to pay dividends at least twice a year at a rate of not less than 90% of its adjusted net profit. The fund aims to pay unit holders regularly with a disbursement rate of 8.95% (comprising 6.24% in dividend and 2.71% in capital reduction) for the first year of operation on a projected 7%* internal rate of return.

The funds that will be mobilised from the stock market listing will be invested in the rights for the proseed from KPP's biomass power plant. A total of 25.5 megawatt in the output from the KPP plant will be transmitted to the Electricity Generating Authority of Thailand (EGAT) and Khonburi Sugar Plc (KBS) under a 20-year supply contracts. EGAT pays 2.0577 baht per kilowatt/hour (kWh) for the 22 MW supply from the plant while KBS is charged 2.90 baht/kWh for the 3.5 MW it is taking from KPP. The long-term supply contract on a 'firm' basis with EGAT and the power purchase commitment made by KBS offer stable cash flow and regular revenue for the fund, Mrs Chavinda stated.

KBSPIF's strength lies in the low volatility of the income structure from both EGAT and KBS, according to Rawin Boonyanusasna, Senior Executive Vice President - Head of Global Markets Group, Krung Thai Bank Plc, which serves as a financial advisor and underwriter for the fund.

Furthermore, KBSPIF also does not have to bear power plant operating expenses related to raw materials, repair and maintenance. KBSPIF also has no risks of raw materials shortage because the parent company is committed to supply the needed raw materials. This serves to assure investors that the biomass power plant will have sufficient raw materials to sustain electricity production and generating consistent returns to investors. “That explained why the bank received an overwhelming subscription from investors in early August” he added.

Issara Tawiltermsup, Director of KBS which runs the integrated sugar business, said the group is confident in the potentials of KPP's power plant which KBSPIF has invested in. He assured that the KPP's power plants will generate good returns for unit holders throughout the contract period.

Meanwhile, Mr Issara disclosed that the company has planned to set up a new 18-MW biomass power plant and will mobilise funds for the facility in the future as well.

Note: *The proposed internal rate of return is calculated from the assumption for the fund establishment as of April 1, 2020, with the investment period equal to the period under the benefit transfer agreement. It uses the estimated revenue recognition of a low-profile appraiser (Discovery Management Co Ltd) along the fund's expense assumption made by EY Office Limited that the annual expenses for running the fund does not exceed 1.2% of the fund's total asset value and calculated from the maximum fund raising value of 2,800 million baht. Such an expected internal rate of return is subject to economic, business and other uncertainties which are uncontrollable by the fund and its manager. Therefore, the actual internal rate of return may differ from this estimate.

The fund and the management company do not guarantee the rate of internal return and other figures of projection at all. Investors can study risk information about the investment in the prospectus.

Investors must understand the product characteristics, conditions for the return, and risks before deciding to invest.Investors should study such information from the prospectus, which can be downloaded from www.kbspif.com, www.sec.or.th and www.set.or.th. Or call Krung Thai Bank 02-111-1111 or Krung Thai Asset Management Company 02-686-6100 for more information.Key risks of the fund involve elements like fuel shortage, machine deterioration, prices and liquidity in the secondary market, etc.

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