Energy Absolute (EA) in crisis as fraud allegations hit. Confidence in Thailand’s EV industry, Stock Exchange, and leading banks damaged. EA’s share price decimated while top executives resigned. The firm is over ฿81 billion in debt to financial institutions.
Confidence in Thailand’s EV industry, its Stock Exchange, financial markets, and its leading banks have been damaged this week by a fraud scandal at one of the Kingdom’s cutting-edge firms. Energy Absolute (EA) saw its share price decimated since Tuesday after the Securities and Exchange Commission (SEC) filed fraud charges against its top executives. The EV vehicles and alternative energy conglomerate has lost nearly 95% of its share price since November 2022 and is over ฿81 billion in debt to financial institutions.
Thailand’s already embattled economy was dealt another blow this week. In short, a scandal emerged at one of the country’s investment darlings, further damaging confidence in the Stock Exchange of Thailand (SET).
Energy Absolute (EA), a pioneer in the alternative energy sector, is also a leading player in electric vehicles.
However, last week the Securities and Exchange Commission (SEC) filed a case against two top executives: Chief Executive Officer Somphote Ahunai and his deputy Amorn Sapthaweekul. They were implicated in the alleged fraud.
Fraud allegations involve the procurement of solar power equipment linked to 2013-2015 projects
The probe launched by the oversight agency involves the procurement of systems outside Thailand. The allegation is that there was fraud in purchasing solar power equipment and software from 2013-2015, linked to the development of solar farms in Nakhon Sawan and Lampang provinces.
In brief, the SEC alleges that three individuals gained ฿3.5 billion from the projects.
In response, the top executives at Energy Absolute (EA) have denied the charges. They point to an independent third-party contractor and claim that the firm has always been able to carry out projects at cost rates that are highly competitive.
However, both Mr. Somphote and his deputy, Mr. Amorn, announced their resignation this week. This was to allow an uninterrupted investigation of the firm’s affairs.
Financial market reacts with EA share prices plummeting and further instability feared
The reaction in Thailand’s financial market has been one of consternation. On Tuesday, the firm’s share price plummeted by 30.1%. Then on Wednesday, it fell a further 29.5%. On Thursday, it continued to fall, ending up at ฿5.30 per share, a fall of 17.19%.
Meanwhile, the share price of the firm, the embodiment of Thailand’s futuristic vision of an EV revolution, has been left at just 5.38% of its peak value in November 2022. At that time, they were worth ฿98.50, a fall of nearly 95%.
There is reported to be a third person involved in the fraud allegations, identified as Mr. Phornlert Techarattanopas.
Nevertheless, the firm is carrying on with board member Somchainuk Engtrakul appointed Chief Executive Officer and Mr. Vasu Klomkliang named Chief Financial Officer. Energy Absolute (EA) is proceeding with a plan to issue ฿5.5 billion in bonds.
On Monday, under the spotlight of a media grilling, Mr. Vasu expressed optimism about this. He indicated that the firm was in discussions with the SEC related to the new issue.
‘With EA’s current revenue of about ฿1 billion a month, we don’t see any difficulty in repaying the existing debts and servicing new bond payments of ฿5.5 billion,’ he explained.
Market scepticism grows as EA fraud case unfolds amidst Stark Corporation scandal backdrop
However, the market has quickly turned sceptical of the firm because of the fraud allegation.
All SET firms are currently operating under the shadow of the massive Stark Corporation fraud exposed last year. That scandal is before the courts with several high-profile former Stark executives behind bars. Total losses in that case were ฿15 billion.
Meanwhile, Thailand’s Stock Exchange of Thailand (SET) itself has fallen 12.91% since this time last year and 6.43% in 2024.
In the Energy Absolute (EA) case, the firm has debt obligations this year.
In a regulatory filing on Monday, it suggested it was seeking a rollover of repayments while using its cash flow of ฿1 billion per month from power plants to fund business expansion.
Nevertheless, one rating agency downgraded the firm, but it was not yet to junk status. TRIS, an S&P Global partner, downgraded Energy Absolute (EA) to BB+ from BBB+ with a negative outlook.
In summary, it cited a ‘heightened liquidity risk’ as a key source of concern in the short term.
The company faces financial obligations of ฿3.2 billion in debt repayments and bond obligations of ฿5.5 billion in the third and fourth quarters of the year. Overall, the firm has long-term debt to financial institutions of ฿62.2 billion. In addition, it has ฿19.5 billion in short-term debt.
EA crisis causes concerns in bank boardrooms and impacts Bond market amid trading suspension
This unfolding crisis for the firm is causing concern in Thailand’s bank boardrooms. Furthermore, it is another blow to the country’s bond market.
Before shares in the firm collapsed over the last three days, they were suspended by the Bangkok Stock Exchange.
‘The SEC has accused EA’s directors and management along with others of fraudulent activities, which have inflicted harm upon EA and its subsidiaries. This information is crucial as it may significantly affect the financial status and business operations, including the making of decisions on the trading of EA’s securities,’ the SET explained as it halted trading. ‘The SET has already asked the company to provide the aforementioned information, but the company has not yet added the information completely. Therefore, the SET has ordered a temporary suspension of trading on EA’s securities until EA completely clarifies the information required.’
Nonetheless, trading resumed on Monday resulting in a blood bath for investors in the firm.
EA’s complex network of relationships and transactions under scrutiny amid removal from ESG index
Energy Absolute (EA) is part of a labyrinth of energy and financial firms linked to EV mobility. The network of company relationships and transactions includes links to Chinese automaker BYD.
In brief, BYD is a creditor of Thai Smile Bus Co. Ltd, which is 49.9% held by ACE Incorporation Co Ltd. All these are related to other firms involved in the purchase of buses from Energy Absolute (EA) in 2022 and 2023 for just over ฿10 billion.
At the same time this week, the SET withdrew Energy Absolute (EA) from its ESG index of firms.
On Monday, the acting Chief Executive Officer Mr. Somchainuk warned the public and investors not to make hasty judgments.
‘Mr. Somphote and Mr. Amorn have not yet been found definitely guilty in this case. But they decided to step down to allow the committee to investigate the case for the sake of transparency,’ he said.
Wheels in motion as Anti-Money Laundering Office investigates EA’s executives and procurements
Nevertheless, the wheels are now in motion. The Anti-Money Laundering Office (AMLO) is to investigate Energy Absolute (EA) and its executives, particularly for breaches of the Anti-Money Laundering Act.
Some of Thailand’s leading banks are anticipating large loan amounts being set off against Energy Absolute (EA) loans as bad debt provisions. It is understood that these provisions may impact the earnings of some of the country’s top banks.
Nontheless, they remain committed to continuing to provide it with financial facilities.
Large mutual funds and investment concerns in Bangkok are hesitant to pre-empt what is an emerging situation. Certainly, the firm’s strong monthly cash flow has been noted.
On Tuesday, the Association of Investment Management Companies (AIMC) said it had restricted any future investment in Energy Absolute (EA). Chairwoman Chavinda Hanratanakool explained that they would seek clarity on the status of the firm.
In essence, what is being proposed by some of Bangkok’s leading investment houses is to ‘side pocket’ their stakes in Energy Absolute (EA). Investors in mutual funds are being assured that the net asset value of their holdings will not be severely impacted by what could be a total or near collapse of the firm.
Investment houses adopt Side Pocket strategy to mitigate risk from EA’s potential collapse
One investment house, Asset Plus Fund Management, has promised to pay 40% of unit holders’ value as of Tuesday within 7 days. After that, it said it would pay 98% by January 2025 and the remainder by October 2025.
Similarly, SCB Asset Management (SCBAM) is also ‘side pocketing’ its Energy Absolute (EA) investments. The investment firm associated with Siam Commercial Bank clarified its approach in a statement.
‘For the benefit of investors, SCBAM considers separating investments in EA bonds from other assets of the mutual fund. By using a liquidity risk management tool called a side pocket, EA bonds will not be included in the calculation of the fund’s NAV, meaning investors who invest in the fund later on will not be affected by the EA bonds,’ the firm explained.
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Nevertheless, this remains a challenging situation for the country’s financial sector. It raises questions about the SET, investment funds, and particularly the EV industry.
For instance, it is coming at a time of an unexpected downturn in the EV industry not only in other markets but also in Thailand.
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