Message of Chief Executive Officer
This year will be the 11th anniversary of Sakol Energy Public Company Limited or SKE. During the past decade, SKE has continuously grown, starting with provision of natural gas compression service for NGV trailer trucks of PTT Public Company Limited to deliver NGV to NGV stations which are not along natural gas pipelines. After operating natural gas compression service for over 8 years, SKE was listed on the Stock Exchange of Thailand in the year 2017 and utilized the proceeds obtained from the listing for business expansion by investing in renewable energy business or biomass power plant. The construction period of the power plant was an approximate of 18 months and the power plant started its commercial operation date (COD) on 8 August 2019. During the past year, the biomass power plant business generated over Baht 100 million in revenues to SKE. In addition, SKE invested in production and distribution of compressed biomethane gas (CBG) business through acquisition of shares in RE Biofuels Co., Ltd. in the year 2019. RE Biofuels Co., Ltd. has personnel with experience and expertise in the production of compressed biomethane gas. Wastewater from cassava starch factory is used in the production process of compressed biomethane gas. The company sells compressed biomethane gas to industrial factories and as substitute fuel of NGV. The revenues generated during the past year was an approximate of Baht 23 million
It can be derived from Thai economic conditions in the 4th quarter of 2019 that the country’s gross domestic product (GDP) grew 1.6%, a decrease from the growth rate of 2.6% in the previous quarter. In the year 2019, Thai economy grew by 2.4%. The slowdown in GDP growth in the 4th quarter or October to December 2019 is considered the slowest growth in the 21-quarter period from the 4th quarter of 2014 on account of 3 main factors: 1) global economic slowdown, uncertainties on trade barriers, and strengthening of Thai Baht which has resulted in negative growth of the value of Thai exports at -4.9%; 2) delay in Thailand’s 2020 annual budget; and 3) impact from drought. These factors have an impact on NGV and CGB businesses. This can be seen from decrease in the quantity of NGV compression by 11% compared to the year 2018. The average quantity of NGV compression was 499 tons per day. SKE received compensation for an average of 20 tons per day according to the minimum quantity under the contract of 520 tons per day. SKE’s quantity of NGV compression was in line with usage of NGV in the industry which has reduced by an approximate of 12% YoY or from 5,800 tons per day to 5,100 tons per day. Another relevant factor was NGV price, which has increased from Baht 13.10 per kilogram to Baht 14.50 per kilogram or 11% increase.
If the overall economic conditions improve, SKE expects to maintain the quantity of NGV compression at the minimum quantity of 520 tons per day in the year 2020. CBG business was also affected by the current environment and the sale quantity did not reach the target of 7 tons per day. Therefore, SKE focused on selling it as fuel for industrial factories in stead of as NGV fuel. At present, SKE has been selling CBG to industrial factory customers and it is expected that the business can achieve the target performance in the year 2020. The biomass power plant has installed capacity of 9.9 megawatts and a power purchase agreement with the Provincial Electricity Authority for 8 . 0 megawatts. It started commercial operation on 8 August 2019. The capacity factor of the power plant is 84.64%, generating an approximate of Baht 108 million in revenues. Since there is a power purchase agreement with the Provincial Electricity Authority, the biomass power plant business is not much affected by the current economic conditions. Nevertheless, SKE has a plan to increase the capacity factor of its power plant to over90% in the year 2020. It will also have an effective raw material procurement plan in order to control and maintain cost of power generation at a good level.
In the year 2020, SKE will follow its business plan which includes additional investment in alternative and renewable energy business in order to achieve its goals to generate Baht 1,000 million in revenues per year or to achieve the total power generation and distribution capacity of 30 megawatts within the year 2022. At present, SKE’s debt to equity ratio is 0.88 times. Therefore, SKE is confident in securing sources of financing for the business expansion.
On behalf of the management, I would like to express our gratitude to our customers, shareholders, business partners and supporters who have always given confidence, support and trust to Sakol Energy Public Company Limited. The management and I promise to operate SKE at the best of our abilities and uphold good corporate governance principles for the benefits of all stakeholders. I would also like to express my gratitude for all of the hard work by the Board of Directors who has always performed their duties and responsibilities while considering utmost benefits to shareholders and the organization. Most importantly, I would like to extend my appreciation to all staffs and employees of SKE for their professionalism and devotion in performing work at their best capabilities during the year 2019. Thank you.
Mr. Chutchai Sumethchotimetha
Chief Executive Officer