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Thai banks lead charge for Dawei contract

Siam Commercial Bank (SCB) is gearing up to offer financial facilities to fund investment by Italian-Thai Development Plc (ITD) in Burma’s Dawei deep-sea port and special economic zone (SEZ).

Thailand’s third-largest lender plans to be a leading arranger for the megaproject, said Arthid Nanthawithaya, deputy chairman and chief executive.

“SCB will resume its involvement in finance after the Dawei project has made progress. The bank will focus on projects with economic viability, particularly water-related and power infrastructure developments and the industrial estate,” he said.

The bank has been ITD’s financial adviser for the multibillion-dollar project since it started but has awaited a clearer direction from authorities ever since the scheme stalled.

Mr Arthid forecasts ITD will start bidding for project financing of the Dawei projects in the next three to six months.

To finance ITD-led investment projects at Dawei, ITD plans to borrow 70 percent of the capital required, with the rest coming from its own and its group’s funds.

SET-listed ITD has signed an agreement with the Burmese government to start developing the first phase.

The developer and its consortium partners have signed a concession agreement with Naypyidaw to develop Dawei, also known as Tavoy, for 50 years.

ITD expects a total investment budget of US$1.7 billion including $500 million for a 450-megawatt gas-fired power plant.

It plans to invest in another coal-fired power plant once the Dawei industrial zone is fully developed.

ITD president Premchai Karnasuta said Bangkok Bank was also interested in providing financial support for the project.

Japan, Thailand and Burma signed a memorandum of intent to hold equal shares in Dawei SEZ Development Co, the special-purpose vehicle that will manage the project, in Tokyo on 4 July.

Thailand and Burma previously agreed on a master plan covering an industrial estate spanning 132 square kilometres, a deep-sea port capable of handling 170 million tonnes of goods a year, a four-lane road linking the Thai border with Dawei, water supply and treatment, and power plants.

Mr Arthid said the port and transport system would not be SCB’s focus, as the bank could not fund the entire project under the Bank of Thailand’s single-lending limit.

Separately, despite low corporate loan demand, SCB plans to maintain its main financial ratios unchanged, especially its coverage ratio, capital adequacy ratio and profitability.

Amid economic uncertainties both internationally and locally, the bank will continue to strengthen its financial position as much as possible in a preparation for unexpected risks.

Meanwhile, RHB OSK Securities (Thailand) said in a note that SCB had revised up its credit costs to 100-110 basis points this year from 75-80 basis points estimated previously.

The bank has revised down its 2015 loan growth target to 4-6 percent from 5-7 percent.

SCB shares closed yesterday on the Stock Exchange of Thailand at 131.50 baht, down 7.50 baht, in heavy trade worth 2.3 billion baht.

ITD shares closed at seven baht, down 25 satang, in trade worth 842 million baht.

 

This article was originally published in the Bangkok Post on 25 August 2015.