EUR 113.09 For Business Accounts Only

Energy Absolute: Absolutely Negative Energy

Energy Absolute Public Company Limited (EA)’s negative headlines have gradually emerged since the beginning of the year. First, the Adder, which is fixed revenue per KWh from the Thai government, is expiring and the electric bus delivery has been below expectations. EA’s stock price has consistently underperformed the market in the past year, leading to market talk that insiders have sold the shares (EXHIBIT 1). Mr. Somphote Ahunai, the former CEO, subsequently admitted to the force sell of a small portion of his stake. The most negative news came on 12-July when Thailand’s Securities Exchange Commission (SEC) accused Mr. Ahunai together with his deputy CEO and his business partner of committing fraud during 2013-2015.

Our liquidity analysis of EA’s latest financial statements ending in March tells us EA does not necessarily have to resort to bankruptcy. A confidence loss in EA’s business model and Mr. Ahunai’s potential wrongdoing as a “key man”, together with a 3-notch downgrade from “BBB+” to “BB+” by TRIS on 15-July, will prevent EA from issuing any bonds in the near term, in our opinion. Our liquidity calculation has a cash shortfall at EA at approximately THB10bn in the next 6 months. EA should be able to roll over short-term borrowing from banks and perhaps ask the bondholders to extend the THB bonds maturing in August. With a Capex cut and/or asset sale in the next 6 months, we expect EA to have breathing room.