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Songkhla Biomass succeeds THB 620 million project financing; A model of power plant development with full community participation

• The loan arrangement will facilitate the project's construction, scheduled to commercially      generate in 2014.  
•  It is the first project finance of the Islamic Bank in energy sector.
• The project is regarded as a model of power plant for community by allowing their participation  and ownership.     
 

Bangkok: Songkhla Biomass Company Limited (Songkhla Biomass), a joint entity of Ratchaburi Electricity Generating Holding Public Company Limited (RATCH), Precise Power Producers Company Limited (Precise Power) and Assiddeek Savings Co-operative Limited (Assiddeek), announces an accomplishment of its project financing valued THB 620 million. The loan agreement was already signed with the Islamic Bank of Thailand (IBANK) on 13 September 2012.

Mr. Noppol Milinthanggoon, RATCH’s Chief Executive Officer, one of the shareholders, said that the company is very proud of Songkhla Biomass project because it is the very first model of community involvement with the key success during its development process. In a preliminary stage, Assiddeek partially owns equity stakes in Songkhla Biomass and will later allocate shares to community members surrounding the power plant.

"Community involvement in the project will lead to their understanding about the power plant. Moreover, they will closely investigate and monitor the plant ensuring its operation efficiency that consequently helps create a sense of ownership among them", said  Mr. Noppol.

To drive consistent progress of the project towards its goal, RATCH has supported capital and extensive experienced manpower specialised in engineering and finance. More importantly, the project responds not only to RATCH's strategy of renewable energy business, but also to the government's policy of renewable and alternative energy promotion with an aim to increase biomass energy capacity to 3,630 megawatts in 2021.

"It is the right decision to join forces with Precise Power in Songkhla Biomass. It is because we aim for the same goal, which is to serve the government’s policy to a reduction of fossil fuel import in order for power generation and a solution to global warming problem. We believe that building an understanding among the community leads to acceptance and trust is a key success factor of the power plant development which will eventually harmonizes the power plant operators and community. We are pleased with community’s support and cooperation for its reflection in understanding the benefits of the nation and community", added Mr. Noppol.

Mr. Pornthep Thanyapongchai, Precise Power Producer’s Board member, as the shareholder revealed that Songkhla Biomass power plant was originated in line with renewable energy promotion policy of the government. Songkhla Biomass decided to select the plant’s location in Chana district, Songkhla province due to abundant supply of parawood slabs and roots, a fuel source of the power plant. More than 85 per cent of parawood are grown in Southern Thailand and the lumber transformation industry also heavily lies in the region. Plenty of raw material supply assures the plant’s stable operation and low risk of fuel shortage.

"The location of Songkhla Biomass project is in government's special promotion zone, and it will consequently receive adder tariff of THB 1.30 per unit or equivalent to 30% increase for 7 years which results to a higher return on project investment", said Mr. Pornthep.

Mr. Korsi Auseng, Manager of Assiddeek Savings Co-operative, said that it is our great pleasure to be a part of the project development process since its beginning. Assiddeek plays a key role by harmonizing the project's developers and the community at large as well as involving in constructively issues solving concerned by the community during project development.

"Allowing community participation in the project in forms of ownership reflects a concept of a power plant for community and expresses sincerity of the project owners. As a result, the project gains trust from the community ensuring its sustainable success”, said Mr. Korsi.

Mr. Narongsak Wichetphan, Managing Director of Songkhla Biomass, stated that the 9.9 MW Songkhla Biomass power project will distribute 9.1 MW to the Provincial Electricity Authority (PEA). We are delighted in seeing the progress of the project development resulting from exceptional collaborations from all parties. In July 2012, the Company entered into the 25-year non-firm Power Purchase Agreement for VSPP with the PEA. Also, it has been granted an adder tariff of THB 1.30 per unit from the Power Department Fund Management of Energy Regulation Commission for 7 years and a 8-year promotion privileges from the Board of Investment. Today, the Company successfully concludes THB 620 million Loan Agreement with IBANK.

"After today's financial close, we will work on a power plant's design, machine and equipment procurement and the plant's construction. The commercial operation is expected in July 2014", concluded Mr. Narongsak.

M.R. Sasiprin Chandratat, Director and Acting President of IBANK, revealed that this project marks the first start for the bank penetrating into the power business ever since the inception in 2002. The project is outstanding due to community's support and sufficiency of fuel supply. With our financial support, this will reaffirm every partners and related parties that Songkhla Biomass project will pursue its development plan and achieve the target by commencing operation in 2014.

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Public Relations Department
Wiwan Phayakvichien, Nuannang Changadveja
Tel: 0 2794 9941, 0 2794 9944
E-mail: wiwanp@ratch.co.th

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