SET-listed Siam Gas and Petrochemical Plc (SGP), Thailand's top liquefied petroleum gas (LPG) trader, has acquired a stake in a power generating business in Myanmar.
Deputy managing director Jintana Kingkaew said SGP has acquired a 30% stake in Myanmar Lighting, a 230-megawatt gas-fired power plant in Mawlamyine, Mon State.
She said the deal, worth US$48 million (1.63 billion baht), was done via SGP's wholly-owned subsidiary, Siamgas Global Investment Ltd.
"This investment is an opportunity to expand into other energy businesses that should bring in rising income and good returns," said Mrs Jintana.
She added SGP is also negotiating another deal to acquire a second power plant in Myanmar.
The Mawlamyine power plant was built by Singapore-based Asiatech Energy. The plant was initially designed to produce and supply power for the Myanmar Electrical Power Enterprise. The project cost $170 million and began commercial operations late last year.
SGP's expansion into Myanmar comes as energy demand there is expected to grow in line with the economy.
The company is also eyeing opportunities in the fuel segment.
Mrs Jintana said a drop in LPG prices at a time when the government is cutting subsidies for it has intensified competition in the domestic gas market, prompting SGP to diversify into other LPG-related segments and the energy business.
SGP operates an LPG distribution business for automobiles, controlling up to 50% of the total domestic market. But a drop in oil prices has prompted motorists to switch to petrol, cutting into LPG sales.
The profit margin in the automobile segment of the LPG retail business dropped by half to lower than 2 baht per kilogramme, down from the 4-5 baht seen when oil prices were surging, boosting demand for the gas.
Also pushing SGP's desire to diversify was the entrance of several new players into the LPG market.
This year, SGP switched to focusing on selling LPG to industrial and large-scale consumers, including food and beverage producers and department stores. The company expects rising sales in that segment to help offset a drop in LPG retailing for the automobile segment, said Mrs Jintana.
With stronger competition, she said the company's revenue in the second quarter would be lower than the 14.3 billion baht generated in the first due to falling global propane prices, which dropped to $466 a tonne from $520.
But total revenue for the whole year is expected to grow by 25% to 60 billion baht, from 48.2 billion last year.
Total demand for LPG in the Thai market this year is expected to grow 5% to 3.2 million tonnes, she said.
Last year, 63% of SGP's sales channel were for the export market, said Mrs Jintana.
SGP shares closed yesterday on the Stock Exchange of Thailand at 14.70 baht, down 10 satang, in trade worth 51.8 million baht.