Risk Factor

Dependence on client risks
Risks of dependence on government sector clients

Major and important clients of the Company and its subsidiaries in government sector include the electricity-related agencies such as the Provincial Electricity Authority, the Metropolitan Electricity Authority and the Electricity Generating Authority of Thailand in terms of business to distribute high pressure electrical equipment and business to procure and construct the power plant and transmission line.

  • Business to distribute high pressure electrical equipment

    The revenue from sales to these customers is based on the government’s budget for the development of production capacity and supply. If there is a change of the cabinet that results in alteration of electricity investment policy or any delay in approval of procurement for various projects, the Company’s revenue in relation to these clients may be affected. Moreover, procurement processes of the government agencies are carried out mostly by competitive bids that sometimes involve many bidders. If the Company does not win the bids, it will lose revenue from these clients.

    So it can be said that the risks arising from the change of investment policy in the government power sector is quite low. As for the bids for government projects, they tend to be carried out separately according to product groups. The Company’s products are not only of great variety, but also accredited by ISO 9001 quality standards. Many of them are registered with the Ministry of Industry as well as guaranteed by the tests of independent institutes, both domestically and internationally. Some of its products are certified by the Office of Industrial Standards (TIS) as well. The Company is therefore at an advantage when competing in bids for supply of products to the government agencies and state enterprises, which generally promote and encourage the procurement of products accredited and certified by the Ministry of Industry. For this reason, the chance of the Company to be selected in a project bid of any type is quite high as well.

  • Business to procure and construct the power plant and transmission line

    Investment in electricity capacity development and supply is regarded as investment in basic public infrastructure that grows continually in the past few years and continually in the next 3 years. Due to the unbalance of electricity production and usage in each region of a country: in south the electricity production as a contract at 3,059 MW and demand of electricity usage at 2,467 MW. In case that any large power plant in south stop working only 1 station in peak time; China Power Plant, that has a capacity at 710 MW will reduce electricity production to 2,349 MW (3,059 - 710) which will cause an insufficient electricity. Also, a promotion of coal power plant production in south to be a reserve capacity is not obviousness yet. Thus, a policy of reserve capacity transfer through transmission system or distribution system from other regions is still necessary for south area. Although, an obviously construction plan of transmission line in other regions and has started to open an auction already in the past year. Also, there have more budgets in the auction of transmission line in this year and next year as well. In this slow down economic condition that has not yet recovered from World economic condition, might result in a necessary of capacity reservation and rapidity in expand a large high voltage transmission line type 230 - 500 Kv. In terms of the Company’s station and transmission line construction, it is considered as a risk to rely on a government customer; in case that, the projects are not completed by the due date of the plan.

Risk of dependence on large clients

In 2017, the company sold products to approximately PEA offices in different areas for the value of 304.19 million baht or equal to 6.38% of the company’s sale income and private sector for the value of 930.13 million baht or equal to 19.51% according to consolidated financial statements.

Major customers of the company are regular customers who have maintained contact and business with the company for a long time and have a good relationship. Maintaining good standards of goods and services quality for over 30 years, the company is confident that it will continue to gain trust of customers. However, the company has a policy to reduce risk of dependence on any particular customer in each market, by constantly seeking new customers in order to expand customer base and to create more business opportunities and development of new products such as development of energy-saving LED light bulbs for distribution to the government sector and private sector, the LED lamps classified under the consumer products with a high market value. The lighting products are available in all buildings. Also, it is a product that has been promoted by the government for purchasing to replace instead of the traditional lamp that uses more electricity or power.