B.Grimm Power hoping for more Thai IPO electricity

The country's oldest power producer hopes to replicate other recent Thai utility successes, despite a relatively weak broader market backdrop and mildly rich pricing.
B.Grimm Power's largest power plant at Amata Nakorn Industrial Estate
B.Grimm Power's largest power plant at Amata Nakorn Industrial Estate

B.Grimm Power, Thailand’s oldest electricity company, launched the country’s third internationally marketed initial public offering this year on Tuesday, looking to extend the recent strong track record in Thai utility deals in spite of relatively rich pricing.

Indicative terms show that the Bangkok-headquartered power producer is targeting Bt9.8 billion to Bt10.8 billion ($288 million to $316 million) from the sale of 651.8 million new shares on a pre-greenshoe basis. The maximum proceeds could reach $348 million if the 10% greenshoe option is fully exercised.

The floatation comes after TPI Polene Power and WHA Utilities and Power both rewarded investors with their respective IPOs earlier this year. WHA Utilities, in particular, saw its share price close at Bt30.5 on Tuesday against the Bt26.25 price it listed at in late March, implying a 16% return in less than three months.

In October last year, power producer Banpu Power also successfully completed an IPO that has since delivered a 28.5% return for investors and handsomely outperformed Thailand's benchmark SET index, which put on just 6.1% over the same period.

It is worth noting that all these IPOs were priced at the top of their guidance during the listing process, indicating that they drew significant investor demand both during the IPO period and in the aftermarket.

B.Grimm Power will now be hoping for more of the same and that investors focus on the positive backdrop for utility IPOs rather than on the Thai market's broader performance when deciding whether to take up the new shares. Year-to-date Thailand is the worst-performing regional stock market with only a 3% gain, while most of the other Southeast Asian markets are up over 9%.

Relatively pricey 

B.Grimm Power is pitching its deal at Bt15 to Bt16.5 per share, giving the company an estimated market capitalisation of $1.2 billion to $1.3 billion. The projected valuation suggests B.Grimm Power will be about half the size of Banpu Power, one of its closest comparables and currently valued at $2.45 billion.

One banker familiar with the situation told FinanceAsia that B.Grimm Power is being pitched at around 14.7 times to 16.2 times estimated 2018 earnings. This represents a premium of almost 50% to Banpu Power’s valuation guidance of 10 times to 11.6 times earnings when it pitched its IPO eight months ago.

But Banpu Power's share price has soared since then and currently trades at 13.6 times its estimated earnings next year. Banpu Power's shares are nonetheless still at least 7.5% cheaper than B.Grimm Power’s projected valuation at the lowest end of its price guidance.

Still, B.Grimm Power’s optimism on valuation is not without grounds. For one, the company is actively increasing its installed capacity by entering new markets such as Indonesia, Myanmar, and the Philippines, in addition to its existing operations in Thailand, Vietnam, and Laos.

Currently, the company has 15 new projects under development. It aims to increase its total installed capacity to 2.35GW by 2021 from 1.6GW at the moment.

B.Grimm Power’s commitment to renewable energy is perhaps its biggest selling point over its peers. In addition to its mainly gas-powered plants, the company operates three solar farms in Thailand and plans to venture into hydropower and wind power in the next three years, targeting a total of 118MW of power generation from these new projects.

The company's commitment to green energy has already yielded some fruit, attracting Asian Development Bank as one of its three cornerstone investors. Together with Thai Life Insurance and Muang Thai Life Insurance, ADB will subscribe to 201 million shares or roughly 31% of all the shares on offer.


B.Grimm Power is a subsidiary of B.Grimm Group; founded in 1878 it is Thailand’s oldest industrial conglomerate. The group counts energy as its biggest business but also engages in property development, industrial system manufacturing, and finance. It is part of the consortium that built Bangkok’s Airport Rail Link in 2005.

The company mainly supplies electricity to five industrial estates in Thailand, namely Amata Nakorn Industrial Estate, Amata City Industrial Estate, Bangkadi Industrial Park, Hemaraj Industrial Estate, and Laem Chabang Industrial Estate.

According to the deal timetable, the management road show will be conducted in Singapore, Hong Kong, Kuala Lumpur, and London until July 5. The shares will be priced a day later and are expected to begin trading on July 19.

Joint international bookrunners of the IPO are CIMB and Deutsche Bank. Joint domestic bookrunners are Bualuang, Kasikorn and Phatra Securities

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