Thai Tap Water Supply Plc (TTW) has been the tap water producer and distributor since 2004 for the Provincial Waterworks Authority (PWA) in two provinces west of Bangkok: Nakhon Pathom (Nakhon Chaisi, Sam Phran and Buddha Monthon districts) and Samut Sakhon (Muang and Krathum Baen districts). The company has a maximum production capacity of 440,000 cubic metres per day and a minimum tap water purchase contract from the PWA for 327,000 cmpd or about 70% of capacity. Somkiat Pattamamongkolchai, the accounting and finance manager, discusses the company’s strategy and outlook.
What is TTW’s business model?
TTW has three businesses, all of which are involved in the water industry. Since 2004 we have been the producer and distributor to the PWA in two provinces west of Bangkok: Nakhon Pathom and Samut Sakhon. Our subsidiary, Pathum Thani Water (PTW), has been the tap water producer and distributor to the PWA in the Pathum Thani-Rangsit area since 1998. And finally in 2009, we expanded into wastewater management by purchasing the rights to produce tap water and treat wastewater at Bangpa-in Industrial Estate. There are three key components to the business of tap water: the production system, the transmission system and the local distribution network. TTW has all three, while PTW has production and transmission.
What are TTW’s contract lengths, current capacity and utilisation?
TTW’s agreement with the PWA is a build-own-operate contract for 30 years that expires in 2034. Currently our capacity is 440,000 cmpd, and we are operating at 85% utilisation or 370,000 cmpd. The contract with the PWA has a minimum purchase agreement as well as an annual adjustment in selling prices linked to the consumer price index. The PTW agreement is similar to that of TTW, except it is a build-own-operate-transfer agreement and expires in 2023. PTW’s capacity is 388,000 cmpd, and it is operating nearly at full capacity or 380,000 cmpd. Finally, at Bangpa-in Industrial Estate, the contract agreements are slightly different due to the nature of the industrial estate regulatory body and the business itself. Our capacity for tap water is 48,000 cmpd, while wastewater treatment capacity is 18,000 cmpd.
Does TTW have plans to expand its capacity further?
We do plan to expand, first with PTW, as it is operating at full capacity and we are awaiting approval from the PWA before expansion can begin. Furthermore, we have conducted feasibility studies forecasting potential future demand in the Nakhon Pathom and Samut Sakhon service areas and in a few years expect to increase capacity there as well.
Will TTW expand into other utilities or abroad?
Our board has mandated management to explore expansion and diversification into other utility and renewable energy businesses. The reason is we have grown from supplying only 95,000 cmpd of tap water in 2004 to 370,000 cmpd now, as there has been a fundamental shift by the PWA and end-users from using underground water to tap water. As a function of the higher base levels, our percentage growth from these levels is naturally lower. Thus, we will look to expand in the future into renewable energy businesses in Thailand and perhaps to neighbouring countries in the tap water business if we can find business opportunities similar to what we have in Thailand today.
Who are TTW’s competitors?
Globally it is very rare for a country to have two water companies supplying tap water to the same service area. Our key competitive advantage is we own the distribution system under TTW for the Nakhon Pathom and Samut Sakhon areas, thus rendering it very difficult for another company to come and compete within the same service area.
What is TTW’s dividend policy?
Since TTW has become a publicly listed company, we have increased our dividend payment annually on an absolute basis. We made our first dividend payment at 15 satang per share and in the last payment period it was 52 satang a share. We plan to continue increasing our dividend payment on an absolute basis annually.
What are the biggest risks facing your business?
The two key risks for this industry are political, similar to the transport and telecommunications industries, and water leakage. Thankfully, we have not been affected by politics and have been able to keep our water loss in the production and transmission system at 5%.
What impact will the Asean Economic Community have on your business?
The AEC won’t have a direct impact on our business, but indirect impacts will emerge from the end-user side. Half the current demand in Samut Sakhon and Nakhon Pathom is from industrial estates, and perhaps the industrial sector will continue to expand, thus increasing the demand for more tap water.
Where do expect to see TTW five years from now?
Our core focus will primarily still be on the tap water industry in our service areas, as we are expecting demand to continue growing. We plan to increase our total combined capacity to 1 million cmpd as well as potentially expand into renewable energy in Thailand and tap water businesses in neighbouring countries.
Source: Bangkok Post
Article originally published on the Bangkok Post 10/05/13