Dear K.Prateep/K.Atipong,
Please find the write-up below that we intend to change the useful lives of Amata machinery and revised calculation of depreciation. Please advise if this is fine. This reflects much better actual situation than leaving at current useful lives of 15 years.
Background
The Amata project has commenced Commercial Operating Date (COD) since Aug 2009 and the Adder will be enjoyed for period of 7 years per the Thai Energy regulation for electricity selling for waste to energy. Amata plant incineration project has stopped since March 2013 for 2 main reason –
(1) Insufficient waste
(2) Machine need further repair to improve the output efficiency.
Reassessment and reduction Amata machinery useful lives
Original depreciation of machinery is 15 years being the period contract awarded.
Beginning Year 2013, PJT/IRIS management reassessed that Amata plant machinery useful lives based on expected usageby reference to the machinery golden period of revenue generation between Jan 2013 to July 2016 (3 years and 7 months) whereby adder incentive of THB 3.5/unit still available. This is considering the condition of machinery which has low output capacity experienced in Year 2012.
After July 2016, there is no point continuing under the Power Purchase Agreement (PPA) granted to company PJT, as the adder incentive is gone and profit can no longer be maximized.
Management plan and intention
Even though the Amata plant stopped operation since March 2013, the Amata plant has not been abandoned and still maintained 5 to 6 staff to be at site for the main plan of transferring the Amata project out to a new company and new contract so that adder period of 7 years + new tipping fees rate can be negotiated.
The reason why this is not done is because Amata assets has been pledged to GSB Bank and GSB Bank refused to let go this assets.
If the new company purchase the Amata plant and machineries under the revised lower NBV price, the Internal Rate of Return (IRR) would be more attractive to go ahead, rather than old NBV price at higher than market rate.
Regards,
Kevin Siew