TET: In the past few years, SCI has expanded regionally. Please explain how this has progressed.
SCI: SCI initially expanded into Lao PDR in 2006 as we saw the market demand for our products specifically transmission towers as Lao PDR aimed to become the Battery of Asia. Our strategy when approaching a new market is to also become an investor in their infrastructure. Therefore, we made an investment in a small scale hydropower plant, Tadsalen Hydropower, in Xepone, Savannakhet Province in 2006 which began commissioning in 2013 with a concessionary period of 30 years selling electricity to Electricite du Laos (EDL). With such an approach SCI became a recognised firm that provides both services and investment capabilities in Lao PDR.
Following on from this the first major EPC project from EDL came in 2009 for a 115kV transmission line project valued at USD 20 million and post project completion SCI received another project called PDSR1, a distribution system improvement project valued at USD 94 million.
With Myanmar we had been exploring opportunities there since 2010 but with issues surrounding the military government at the time, we did not make any moves. As their government system continually improved to becoming a democracy, we returned to the country and found that there was a market for telecommunication towers, transmission towers and steel structures. Thus, in 2017 we invested in setting up a manufacturing facility at the Thilawa Special Economic Zone to manufacture high voltage transmission and telecom towers and to provide galvanising services for the domestic market.
TET: Despite the expansion regionally, SCI’s revenues and profits have been declining. What are the reasons for this and how will management improve the company’s performance?
SCI: Since SCI became a publicly listed company, the initial years until 2016 were positive due to the fact that we had a stable business in Thailand with the switchboards, cable trays, transmission towers, telecommunication towers and steel structures and the additional growth was coming from the services in Lao PDR. In May 2016 we signed an additional services project with EDL for a 500/230 kV transmission line and substation project from M. Houn to M. Nan, with a contract value of $416 million. As Lao PDR focuses on becoming the Battery of Asia, their infrastructure has strong investment requirements such as creating a strong power grid backbone throughout the country to bring power supply from the North to the South of the country. This infrastructure is also driven by demand of its neighbouring countries. For example, EGAT has a MOU with EDL to buy 9,000 MW annually but only 6,000 MW has been purchased today and their plan to purchase more power from EDL has been delayed for sometimes. This has led to the delay of the execution of our project and therefore a decline in our business. However, because this project is a necessity for Lao PDR long term electricity infrastructure plans, we are confident in the continuation of it.
Domestically in Thailand, in the past the telecommunication sector was growing rapidly with the expansion of 3G & 4G requiring investments for new cell sites by the major players and when this was completed one could see that the network coverage is at full capacity and therefore demand for towers has been decreased. Also, the Thai market is dependent upon the government investment which has been delayed and decreased over the past two years. Finally, our raw material’s price such as steel and especially zinc has increased by more than 60-70% which impacted our margins. As a result of the changes we expanded our business regionally and invested in joint ventures domestically in Thailand with the aim to diversify our business geographically as well as diversify revenue streams in the future.
TET: SCI has a JV with Property Perfect, T Utilities. How is this progressing and what other JV’s has or will the company initiate?
SCI: T Utilities (TU) is focused on investments in renewable energy and utility sector such as solar power, hydro power, tap water as well as waste water management. The JV began in 2017 with 300 million baht in investments and in mid 2018 it successfully installed COD 3 MW of industrial solar roof tops and expects to reach 10 MW this year. The next focus for TU shall be the water business where it will expand into tap water and water management services. We hope in the future that TU will continue to grow and that it may eventually be listed on the Stock Exchange of Thailand as well.
SCI has another two joint ventures, firstly SCI Enesys (SE) which is a joint venture between us and Tokyo Energy & System, a major listed Japanese firm specilaised in the power plant construction. The purpose of SE is to target the electrical switchboard for solar power businesses and solar system installations utilising both our companies production base and Tokyo Energy & System customers. Secondly SCI has recently announced a JV with Gold Elite Paris for cell phone trading and leasing business. The detailed plans and opening date of the company will be announced in the future.
TET: What are the biggest risks facing your business?
SCI: In Thailand as we are going through an election process at the moment, we only hope that the outcome would be good and the new government would continue the megaprojects and speed up the government spending. If this goes as we hope, the outlook of Thai business would become very positive. In Laos, our two major risks are the delays of our EPC projects since it has big impact on our service revenue and the difficulties of finding new EPC projects to continue in Laos. For Myanmar despite the risks related to the government issues, we view that the risks are outweighed by its long-term potential.
TET: Where do you expect to see SCI in the coming years?
SCI: When looking throughout the region, our traditional core businesses in Thailand are likely to remain stable with growth coming from our investments in joint venture companies such as TU which will provide recurring income in the long term. We want to see TU continue to grow in the future so that it may potentially be listed on the Stock Exchange of Thailand as well. In Laos, our current projects would only range from three to five years. We hope to obtain more projects in Laos and we are now working for it. For Myanmar it is too early to conclude anything at the moment, but within four years from now we should have a clearer outlook regarding the country’s true potential. Finally, SCI is going to continue looking for new growth opportunities throughout the region including Cambodia and Vietnam and when we are able to find one we shall definitely jump at it.