Global Power Synergy Plc (GPSC) will acquire the Energy Recovery Unit (ERU) project from Thai Oil Plc (TOP) for US$757 million (24.1 billion baht).
The ERU is part of TOP's Clean Fuel Project (CFP) in Sri Racha district, Chon Buri province. It is located on 36 rai and aims to use residue and waste from refined oil in the CFP to generate 250 megawatts of power and 175 tonnes of steam per hour.
Both GPSC and TOP are subsidiaries of national oil and gas conglomerate, PTT Plc, and all three companies are listed on the Stock Exchange of Thailand (SET).
TOP, Thailand's largest capacity oil refinery, is a major shareholder of GPSC, PTT's power business.
Chawalit Tippawanich, GPSC's president and chief executive, said the board of directors of both parties approved the ERU investment on Jan 21.
GPSC can invest through either the company or its incorporated subsidiary.
"TOP agreed to the transfer of ownership in the ERU project from the CFP," said Mr Chawalit.
The transaction will be completed after the construction of the ERU project is finished and a provisional acceptance certificate (PAC) is issued under the CFP.
Mr Chawalit said GPSC expects construction of the ERU project will start in April and the PAC will be issued in the third quarter of 2023.
GPSC's budget for the ERU will be financed either by cash on hand, syndicate loans or debenture issuance.
According to two letters from GPSC and TOP submitted to the SET, both companies will enter into other relevant agreements such as the asset sale and purchase agreement, the fuel and utilities supply agreement, the power purchase agreement, the operation and maintenance services agreement, and the land sublease agreement, as well as a novation agreement and any other agreements that are necessary and related to the asset sale for the acceptance of ownership transfer in the ERU project and entry into all relevant agreements with TOP.
The terms of each agreement are 25 years from the closing date and the parties may agree to extend the agreement for another five years.
Mr Chawalit said this transaction is consistent with GPSC's strategic plan that emphasises investment expansion aimed at growth alongside the PTT Group. GPSC hopes to extend power and utility production, making use of other fuels.
The transaction also promotes investment in energy security, he said.
Atikom Terbsiri, TOP's president and chief executive, said the ERU project is meant to reduce investment costs for the CFP, enhance liquidity and support future investment efficiently.
Furthermore, the transaction will boost the return on investment of the CPF while TOP can continue to manage and oversee the implementation of the CPF and ERU during the construction phase and the operation phase while maintaining the safety, reliability and plant optimisation of the projects as originally planned.
"TOP expects the transaction will begin in the second quarter of 2019," said Mr Atikom.
TOP announced earlier it will proceed with investment in the CFP after several years on the drawing board. The project is set for development during 2019-22 at a total cost of $4.73 billion.
The CFP is meant to add to Thai Oil's existing oil refinery and utility units.