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AEC & Monika Enter Joint Venture Agreement in Thailand

Wednesday, 18 July 2007

Thailand & Australia

West Australian based Advanced Engine Components Ltd (AEC) has entered into a joint venture arrangement in Thailand to build new natural gas (NG) powered vehicles and repower existing diesel vehicles with NG engines. AEC is partners in the joint venture with Monika Motors Limited (Monika) (51%), a Thai based strategic investment company (19%) and a Thai based individual with wide experience in Thailand’s public transport and government (9%). AEC has a 21% interest in the JV.

Monika is a member of the B. Grimm Group of Companies (http://www.bgrimmgroup.com/). The B. Grimm Group has been operating in Thailand since 1878 in a wide range of businesses from power generation to Bangkok’s mass transit system.

Initially the JV will purchase built up NG engines, through AEC, from AEC's China based natural gas vehicle system (NGVS) customers. Subsequently, when all infrastructure, operating facilities and staff are in place, the JV will purchase base engines through AEC and NGVS components from AEC for assembly and testing of a Monika brand NG engine in Thailand. Assembly in Thailand will facilitate significant import duty reductions.

Itochu (Thailand) Ltd, a subsidiary of Itochu Corporation one of Japans largest trading houses, has agreed to provide trade finance facilities of approximately A$5.5 million to fund the JV's purchase of the NG and base engines from China.

The Union Bus Service Company (Union), a Thai bus operator, has committed to purchase all of its NG engine requirements from the JV with a commitment to purchase a minimum 150 NG vehicles in the 12 months to 31 July 2008. This commitment does not prohibit the JV from selling the Monika NG engine to any other party in Thailand or elsewhere. The JV has an initial sales target of a minimum 600 engines per year.

The JV has already ordered 62 NG engines, through AEC, which have been or will be delivered in the near future. In addition, the JV has:

tendered to re-power 1,480 diesel buses with CNG engines for the Bangkok Mass Transit Authority. The JV has re-powered four trial buses with trials expected to be completed by the end of July 2007 and the contract let in August 2007; and
contracted to re-power six trucks, with NG engines, for one of Thailand's largest logistics companies as the first stage of converting over 1,000 of the 6,000 trucks owned by that company by 2010.
 

Thailand

Signing of the JV agreement coincides with the Thai Government's ‘Bangkok Clear Sky with NGV’ campaign announced in May 2007.

Thailand is a dynamic and rapidly expanding NG vehicle market.

Thailand's leading energy supplier, PTT Public Company Ltd ("PTT"), has been at the forefront of Thailand's NG vehicle programs. PTT is responsible for managing US$61m from the energy conservation promotion fund to lend to public bus operators installing NG engines or purchasing NG vehicles. PTT has also overseen the growth of Bangkok's CNG refuelling network from one station in 2001 to more than 100 at the beginning of 2007. By 2011 the number of refuelling stations is planned to exceed 300.

Since the beginning of this century a number of international factors have lead to Thailand establishing significant commercial scale NG vehicle programs. These factors include – rising oil prices; improved air quality as a result of the mass conversion of diesel buses to NG; the benefits of reduced greenhouse emissions; the proven reliability of NG as an alternative fuel; the importance of stable and locally available energy supplies; and Government policies in Thailand favouring NG displacing at least 10% of petroleum and diesel by 2010.

The Thai Government sets CNG pricing, in Thailand, to maintain a price advantage over other fuels. Ceiling prices have been set to ensure the relative price of NG does not go above 55% of the petrol price in 2007, increasing to 60% in 2008 and 65% in 2009.

Thailand represents an important and exciting market for AEC. The JV, with highly reputable partners, enables AEC to participate in the Thai market at all levels. That is, sale of base engines and NG vehicles, sale of NGVS and components, and sale of spares and consumables. In addition, AEC will benefit from its 21% share of profits earned by the JV on the sale of Monika NG engines and Monika branded NG vehicles.

Source: NGV Global