Analysts Upgrade GULF’s Earning CAGR to 28% after Acquiring Jackson Generation in U.S.

Thailand’s Gulf Energy Development (SET: GULF) announced its first step into the U.S. energy market with the purchase of a 49% equity stake in Jackson Generation, a 1,200 MW gas-fired power plant in Will County, Illinois, for a total investment of USD 409.6 million.

The investment in Jackson Generation marks GULF’s first step into the U.S. energy market and is aligned with the company’s commitment to enhance energy security through the provision of reliable, low-cost electricity through the energy transition towards a low-carbon society. Furthermore, the company will be able to recognize profits immediately since Jackson Generation has already begun commercial operation.

KGI Securities is positive toward the acquisition, citing GULF’s new footprint in a high growth market. GULF was expected to gain three advantages from the deal: 1) it will boost GULF’s capacity by 588 MW or +7.3% of 8,090 MW to 8,678 MW, 2) Jackson Generation has an edge over neighboring power plants in terms of lower heat rate from completed facilities, modern technology, and age and 3) the deal will fortify the relationship between GULF and J-Power (the owner of Jackson Generation). 

KGI expects to see more deals in the U.S. with partners going forward, and has increased its profits projections for GULF in 2022 by 3.8% o reflect: i) Jackson Generation project, based on project EIRR of 18%, 1:1 D/E, 40 PPA years, capacity factor of 85%, AF of 95%; and ii) lower share in BKR2 (25% from 50%), currently predict 2022-24 earnings to grow CAGR 28% YoY.

Analysts maintain a rating of Outperform on GULF, and raised a target price to THB60.00, from THB57.00.