Energy Absolute Plots Asian Project Rivaling Musk's Gigafactory

(Bloomberg) -- A little-known company from Thailand with grand ambitions in clean energy wants to take on Tesla Inc. at its own game.

Energy Absolute Pcl, which has morphed in recent years from a producer of biodiesel to Thailand’s leading renewable energy company, is eyeing a major push into energy storage with plans to develop a factory somewhere in Asia that would rival Tesla’s Gigafactory in both size and scope.

The Thai company is currently considering its home nation and three other Asian countries as a manufacturing base for a lithium-ion battery project that could eventually be worth as much as 100 billion baht ($2.9 billion), Amorn Sapthaweekul, the company’s deputy chief executive officer, said in an interview in Bangkok.

The project’s first phase would consist of production capacity of 1 gigawatt-hour, according to a company statement issued last month.

“We will choose just one location for the manufacturing plant,” Amorn said. “We would prefer to have the plant in Thailand, which will be beneficial for the country’s development. Still, we need to see clear government policy.”

Battery Manufacturing

Energy Absolute’s ambitious plans in energy storage would catapult Thailand into a top tier location for battery manufacturing, according to a Bloomberg New Energy Finance analysis of the market conducted in April. If Energy Absolute were to make good on its plans, Thailand would become the largest center for lithium-ion battery production after China, according to London-based BNEF.

It’s a big bet for a company better known locally as a renewable energy producer and with only limited experience in storage through its 35.2 percent stake in Amita Technologies Inc., a Taiwan-based manufacturer of lithium ion and polymer batteries.

But it’s also in character. Energy Absolute, founded by Somphote Ahunai, vowed in 2014 to spend about 46 billion baht to increase its renewable energy generation capacity to as much as 570 megawatts by 2017. Capacity at Energy Absolute’s renewable power plants will increase to 404 megawatts this year and will climb further to 664 megawatts next year, according to Amorn.

Since embarking on its renewable energy push, Energy Absolute’s shares have surged, leaping about 135 percent in the past three years.

“Given its sound financial status with cash inflows of at least 6 billion baht annually, it would be able to materialize the first phase,” Thanatphat Suksrichavalit, a Bangkok-based analyst at Phillip Securities Pte Ltd., said by phone. “Funding isn’t an issue. The first phase is to test market demand.”

Energy Absolute’s interest in batteries coincides with the spread of lithium-ion batteries from consumer electronics to such uses as electronic vehicles and the power industry. Globally, utilities and homeowners are looking at batteries as a way to make better use of solar and wind power. Energy Absolute first confirmed its interest in the battery project in April.

Battery Costs

Lithium-ion battery costs are dropping as mass marketing picks up, making electric vehicles more affordable. Batteries are currently the most expensive component of electric cars. As battery usage spreads, companies such as Tesla and South Korea’s LG Chem Ltd. are aggressively expanding. One of the biggest bets is Tesla’s Gigafactory, a sprawling complex near Reno, Nevada, that began battery cell and pack production in January.

Though Energy Absolute is considering Thailand for its project, it has also been approached by governments from several Asian countries interested in hosting the battery factory, Amorn said, declining to name the countries. The decision on the location will take into account long-term government policy, supportive regulations and the availability of components as part of the supply chain.

The investment decision will be finalized around the end of the third quarter or early in the fourth quarter, Amorn said. The first phase is projected to start operations by the end of next year.

For the initial phase, the company will use internal cash and loans to fund 3 billion baht of investment. The factory will be scaled up to 50 gigawatts-hours of annual capacity by 2020 at a total investment of 100 billion baht, although the exact pace of expansion will depend on demand, Amorn said.

“A number of challenges need to be overcome if Energy Absolute is to achieve the 50GWh/year level, such as technical competitiveness, financing, and stability of demand,” said I-Chun Hsiao, a Tokyo-based analyst at BNEF.

Tesla said earlier this month that it expects to surpass its goal of 35 gigawatt-hours of battery cell production in 2018 at its Nevada Gigafactory on the way to ultimately producing more than 100 gigawatt-hours at that location.

Customer Targets

For its part, Energy Absolute is targeting power plant operators as customers for its batteries, though it may also produce storage for electrical vehicles as that market grows.

“As it will be mainly used for power plants, the size of 50 gigawatts isn’t big,” Amorn said.

Energy Absolute has been in talk with companies both in Thailand and overseas to jointly invest in the project and may eventually select at least two partners.

“The key point isn’t the money,” Amorn said. “Our partner should have strength in marketing product overseas and have a customer base in other industries.”

Separately, Energy Absolute has been in talks with potential partners pertaining to renewable energy projects in Indonesia, Myanmar and Vietnam, Amorn said, adding that any project would use energy storage to help stabilize power supply.

Sales and earnings this year at Energy Absolute are expected to reach a new high with the help of revenue from two wind farm projects that began operating this year, Amorn said. Energy Absolute also operates four solar plants with combined capacity of 278 megawatts.

The company’s net income may reach 4.75 billion baht in 2017 compared with 3.26 billion baht last year, according to a Bloomberg survey.

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net.

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Reed Landberg at landberg@bloomberg.net, Iain Wilson, Sunil Jagtiani