After expanding aggressively in Southeast Asia, mostly in the capital-intensive power business, Bangkok-based B.Grimm Group is preparing to take the next steps to transform itself into "a real international company".
B.Grimm Power Plc now has power plants with 2,000 megawatts of generating capacity from combined-cycle, hydro and solar in Thailand, Laos and Vietnam, with licences for another 1,400 MW. Photos: B.Grimm Power
Established 140 years ago in Bangkok as a pharmacy, B.Grimm has grown into a diversified conglomerate with interests in power, healthcare, transport, real estate, air-conditioning and cooling systems and more, with group revenue approaching 50 billion baht a year.
Power has been the focus of the heaviest investment in recent years, while the healthcare, air-conditioning and shipping businesses are all well established, with expansion being pursued in Thailand and abroad as opportunities arise.
"Now we would like to make B.Grimm become a real international company: international in many meanings. One meaning is that we are active in a number of different countries and that we conduct ourselves in the international way," group chairman Harald Link said during a recent interview with Asia Focus.
"[The other meaning is] that we are open to all nationalities, all religions, all genders, depending on their capabilities whether they are willing to do business with compassion and share our philosophy. Our advisory board comprises both Thai and international high-calibre personalities."
The grandson of the company's first manager, Mr Link today presides over what is still a closely held family business. But the group took a major step last year when it listed its power business on the Stock Exchange of Thailand (SET), giving it more options to raise the large sums needed to fund its growth.
B.Grimm Power Plc now has 2,000 megawatts of power plants in operation together with licences for another 1,400 MW, bringing the total to 3,400 MW. Another 700 megawatts are expected to be added next year.
"A few years ago we made a 10-year plan and a five-year plan for concessions of 5,000 MW and I think we will get there," Mr Link said. He declined to elaborate on how much money would required, but said he did not foresee any problem raising funds.
"There are many ways to mobilise the money and our profitability is good. So I think our investors are very positive if we just try to do it without increasing capital."
B.Grimm Power raised more than 10 billion baht through its initial public offering in July last year. Its shares were trading last week on the SET at 29 baht, an increase of 81% from the IPO price. The company reported a net profit of 937.9 million baht in the first half of 2018, down slightly from 1.1 billion in the same period a year earlier.
B.Grimm builds and operates power plants in Thailand, Laos and Vietnam, providing electricity and steam for national power grids as well as nearly 200 large manufacturers. In Laos, the 20.1-MW XXHP hydroelectric plant became operational in August 2017.
In Cambodia, a transmission line is under construction at an industrial park in the western city of Poipet under a memorandum of understanding signed with Poipet PP SEZ Co, one of the largest industrial-estate operators in Cambodia, in March last year.
SOLAR SURGE
In Vietnam, the company is building the largest solar plant of its kind in Southeast Asia with a capacity of 420 MW. Co-invested with Vietnam's Xuan Cau Group, the solar farm is taking shape on a lake in Tay Ninh province in the southwestern part of the country.
Chairman Harald Link has begun to delegate more responsibility to his daughter Caroline, the fourth generation of the family that runs one of the most storied businesses in Thailand.
A second solar project is under way in the south-central coastal province of Phu Yen. B.Grimm Power, through subsidiary B.Grimm Renewable Power 2, last year spent US$32.5 million to acquire an 80% interest in Phu Yen TTP JSC, which has invested in the 257-MW plant. Truong Thanh Viet Nam Group (TTVN) holds the remaining 20%.
Expected to begin commercial operations from June 30 next year, the solar power project has a 20-year power purchase agreement with Electricity of Vietnam (EVN).
Through a joint venture with The Thai industrial estate developer Amata Corp, B.Grimm Power also operates a diesel power plant in Amata City Bien Hoa, Vietnam.
"The area needs a lot of electricity," said Mr Link of the fast-growing economies of Indochina. "In those countries we are looking at renewable energy projects whether it's wind or solar.
"In Cambodia, we are looking at wind, solar and combined-cycle power plants. We haven't done anything yet but this will come."
The group is also looking at investment opportunities in Malaysia where the government has always been business-friendly, including the current administration of Mahathir Mohamad. "There are good opportunities in Malaysia after the election and we have many friends there," he said.
"In Malaysia in the past, they had pretty much combined-cycle (power plants) because the country has so much gas. We think we have lots of knowledge in that area as well as the renewable power plant/energy area. We are very keen to do something in Malaysia.
"I think the new government has not yet established its policies. When we understand that policy and some of the opportunities then we will [look at investments].
"At the moment, we are looking at one Malaysian company that wants to have a partner. They happen to be friends of ours. They are a power producer with a combined-cycle power plant."
When it expands to foreign countries, B.Grimm normally develops projects with local partners, he noted. In Vietnam, for example, it has two very good local partners. As well, the group is looking to work with some big Thai companies, including Amata, for projects in Vietnam, Cambodia and Laos.
"Our first project in Vietnam was with Amata. That went very well with 160 [industrial] customers and we have transmission networks there for small plants. Our partnership with Amata has been excellent since very beginning," said Mr Link.
Besides the Vietnamese plant, B.Grimm has five power plants each with Amata at the latter's industrial estates in Chon Buri and Rayong provinces on Thailand's Eastern Seaboard.
The relationship with Amata might deepen as the industrial estate firm enters a new market, Mr Link said.
"Amata is going to Myanmar and so we are talking with them about Myanmar," he said. "It really depends on them. B.Grimm Power has no projects in Myanmar but maybe we can join them."
Myanmar would be a long-term investment, and Mr Link has no illusions about the time needed to see results given the country's rudimentary infrastructure.
"Similar to Vietnam, it might take 20 years to develop bigger industries in Myanmar. It's quite difficult for a country to change from one system to another with acceptable laws and all the infrastructure that needs to be built. To bring all that in, it's difficult."
But he expresses optimism that things will work out for Myanmar, thanks to very smart and capable local people. B.Grimm is hopeful that conditions there will improve soon despite the current controversy surrounding the ruthless crackdown in Rakhine state and the civilian government's failure to stop abuses by the military.
"We just haven't found the right project yet," said Mr Link, noting that the company entered a bid earlier for a 200-MW gas-fired power plant in Mandalay but Sembcorp from Singapore won the deal.
"I'm sure Myanmar will find the way to solve the issue. We will be ready when it's ready, when there is the opportunity, whether with Amata or not," he said.
B.Grimm's interest in the power business extends beyond Asean. Earlier this year, the company signed a memorandum of understanding (MoU) with Korea Electric Power Corp to develop an offshore wind farm with a capacity of 100 MW in South Korea.
"We are evaluating and doing due diligence with the partner," Mr Link said. "Korea has lots of industries. It is an industry-intensive country and has the most widespread internet connections. Its electricity consumption will continue to grow.
"People are now getting away from coal and nuclear. We have a renewable energy project there. There is lots of room to move because of the country's growing consumption and a desire to go into renewable energy."
HEALTHCARE EXPANDING
While power has occupied much of the group's attention, B.Grimm is now looking to expand in healthcare, which was its original business dating back to the Siam Dispensary established by Bernhard Grimm and Erwin Mueller in 1878. The Link family connection began in 1903 when the partners hired Adolf Link, Harald's grandfather, as a manager to help expand the growing business.
B.Grimm also operates a bulk-carrier shipping business via a Greece-based joint venture called Sealink Navigation.
B.Grimm for decades has been a distributor of healthcare products and medical equipment for major global names including Siemens, Merck and Carl Zeiss.
"We have to have the right concept and we are working on the healthcare concept now about how to expand that business to other countries, what kinds of products, and what areas to invest in," said Mr Link. "This is an area we have expertise in and definitely the industry is growing. A number of companies want to work with us.
"We are in the planning stage. We don't have anything outside Thailand yet. We are evaluating that and there are so many opportunities.
"We'd like to do something that we can do well in Thailand and something that we can replicate in other countries … whether it's service-oriented or manufacturing-oriented that we can export to many countries.
"It should be something that uses Thai materials or something service-oriented. They could be services from medical equipment which we can do in Thailand and also in other countries."
Mr Link likes to look at each market and think about what kind of activity the company could undertake as a "trailblazer" in its segment.
"In Malaysia, the trailblazer was our air-conditioner business. We were the first there. For Vietnam, the power business is the trailblazer. In Myanmar, the trailblazer could be power or maybe healthcare."
He adds as an aside that in Thailand he was a trailblazer in polo, as the founder of the Thai Polo & Equestrian Club. An enthusiastic player, Mr Link is the driving force behind polo tournaments that also help to raise funds for the philanthropic activities the family pursues.
COOLER CUSTOMERS
B.Grimm distributes air-conditioners through a joint venture and licensing arrangements with US-based Carrier Corporation. It also provides parts for air-conditioning and refrigeration units through a joint venture with Beijer of Sweden. Its air-conditioning factory manufactures Carrier commercial and light-commercial air-conditioning systems.
B.Grimm has healthcare joint ventures with the local units of major global names including Merck, Siemens, Carl Zeiss and Sweden-based Getinge, the developer of hybrid operating rooms (above).
Two years ago, Mr Link transferred the responsibility for the air-conditioning business to his 36-year-old daughter, Caroline, who has come up with some modern concepts including raising the company's presence in social media. Thanks partly to that, he said, the business has improved its market share by 2.5 times.
"Now we are active in Thailand and Malaysia and we want to go to all Southeast Asian countries for air-conditioning and refrigeration parts. That's the idea," he said. "We are looking mainly at buying existing companies and then bringing in some of our products. The next markets may be the Philippines, Indonesia or Vietnam, or Myanmar."
Under the 10-year plan, B.Grimm wants to double the sales of the air-conditioning business from 5 billion baht currently. Growth can come from sales within Thailand as well as exports to Asean markets such as Vietnam, Indonesia and Myanmar.
OPPORTUNITY AT SEA
Not many people know that B.Grimm also operates a shipping business via a joint venture called Sealink Navigation Ltd. Based in Athens, the seven-year-old company now has seven Japanese-built ships for dry-bulk cargoes including wood, iron ore, steel, wheat, and rice.
"Ships go all over the world and we have professional management so the business is now becoming quite international itself," Mr Link said of the company where his Greek friend Nicholas Kosmatos is the managing partner.
"I grew up in Hamburg, the port city (in Germany) so I feel very close to the sea and ports, so we like ports a lot. We would like to invest in the future in ports as well," he said.
"Places like Athens, London, Singapore and New York are good places for shipping offices. Bangkok is also good but Bangkok is not in the centre. In our case, since our partner is Greek and Athens is a good place for shipping, it's good to have the office there."
Shipping is, of course, a highly cyclical business in which operators have to carefully time their capital expenditures. The industry just began to emerge from its most recent slump in the middle of last year, but prior to that, prices of ships had become very attractive.
To a business veteran like Mr Link, shipping is quite an interesting business but it's not easy to run. "I think it's wrong to go into the market when the market is high," he said.
"If we'd bought in the beginning of 2008, the same ship would have cost two and a half times as much [as what the firm eventually paid].
"People jump into it because they think it's cool. You have to be careful. You have to have people who know what they are doing. You have to have consultative finance and don't buy too many ships.
"Our shipping business has just started and we want to grow steadily. We will continue to expand Sealink but slowly. No rush."
INTERNATIONAL OUTLOOK
To expand successfully abroad, Mr Link recommends that companies "become local".
"I think it's completely necessary. To be an international company, in my mind, is to be somebody who wants to be local where it's good to be local," he elaborates.
"If you are a Malaysian company, you have to have good Malays working with you. Why send Chinese people to work in Malaysia? Then we have to respect the Islamic religion. And you have to have ways that you can contribute to the Islamic way of life."
He stresses the need "to be part of the society and understand their needs" and to be a fully integrated company.
"We like B.Grimm to be fully integrated in the society we work in. I think that is very important. We don't want to be a foreigner, fly in by night, reap the benefits and then leave. We want to be an integral part of the society."
When choosing the right business partners, apart from references and reputation, he looks for companies that share the same values as B.Grimm.
"You have to find someone who has similar values as you, so you can work together. For us, we want someone who is professional, who wants to be kind to the environment and the people, and wants to create value for society," said Mr Link.
"It's good to talk upfront about what is important to you. It's like when you make friends, they are somehow similar but you also like some of their differences for the sake of diversity, but at least their values should be the same."
Looking forward, Mr Link believes Asean will continue to pursue even more free trade even though nationalism and protectionism appear to be gaining ground in many parts of the world.
"I think the total mindset of Asean is free trade and we are on the way to have more of it. People in Asean are at the beginning of closer cooperation and everybody can see the benefits," he said.
"Peace is best for the whole world. In all of Southeast Asia, now we want to support each other and we want to trade with each other."