Mitsui to invest $140m in 2,500MW Thai gas power plant

The $1.6bn project is being jointly developed with Thailand´s Gulf Energy Development, and has been backed by a consortium of 16 lenders.

Japan’s trading house Mitsui will invest approximately $140 million in the construction of a 2,500MW gas-fired power plant in Thailand, jointly owned with Thai power company Gulf Energy, the latter told Infrastructure Investor.

The 50 billion Thai baht ($1.6 billion; €1.5 billion) project, which reached financial close this week, will be backed by a 41 billion baht financing agreement. The project finance includes long-term loans from a consortium of 16 local and international lenders and five billion bahts of working capital contributed by the owners of the asset, Gulf Energy said.

“Hence, [Mitsui and Gulf Energy] will need to invest [14 billion baht] in proportion to their shareholding,” the power company said.

The project, located in Thailand’s Rayong province, will be operated by Gulf PD, which is owned by Independent Power Development, a subsidiary in which Gulf Energy and Mitsui hold 70 and 30 percent stakes, respectively.

The financing consortium for the project includes Japan’s SMBC, Mizuho Bank, Sumitomo Mitsui Trust Bank, Germany’s DZ Bank and the Asian Development Bank, Mitsui and Gulf Energy said in two separate statements.

The loan, with a 23-year tenure, is 50 percent denominated in Thai bahts and 50 percent denominated in US dollars, Gulf Energy said.

According to Gulf Energy, the project finance has “a considerably lower interest cost than projected”, due to an interest rate swap to convert floating interest rate to fixed interest rate, and the low interest rate environment. The loan’s interest rate for the project is 3.3 percent, Gulf Energy told Infrastructure Investor.

The Japan Bank for International Cooperation will provide financing for approximately $208 million, Mitsui said.

In a separate press release, ADB said it will contribute $50 million through a regular loan and will mobilise an additional $45 million through its Leading Asia’s Private Infrastructure Fund.

ADB has also arranged a Term B loan of up to $85 million, which will be funded by Singapore’s Overseas-Chinese Banking Corporation and Germany’s DZ Bank, confirmed Shuji Hashizume, a senior investment specialist in ADB’s private sector operations department.

Construction of the plant will start in July 2020, and it is expected to start operating in 2023, Mitsui said, adding that a 25-year PPA has already been signed with the Electricity Generating Authority of Thailand.

A spokesman for Mitsui said the project would support the Eastern Economic Corridor (EEC) Development, a plan to develop the eastern part of the country into a major technological manufacturing hub.

“The economic growth in the EEC region with aggressive investments by foreign countries like Japan and China would be the major [driver] for energy consumption in Thailand,” the spokesman said.

According to Reiji Fujita, president of Mitsui (Thailand), the project will also support Thailand’s energy transition. “It is […] in line with our strategy to grow natural gas business as the greener fossil fuel and bridge to renewable energy,” he said.

This will be the fourth project Mitsui has developed with Gulf Energy in Thailand. Other assets include a 2,5000MW gas-fired plant in the Chonburi Province, also part of the EEC, and a small-scale power plant, with a combined capacity of 6,470MW, Mitsui said.

Both companies have also partnered on a natural gas distribution network to industrial estates in the country.