Thai Tap Water Supply, the country's largest privately owned tap-water producer, may set up in the Middle East, to diversify risk from operating only in the domestic market.

"For this year, we'll take time to negotiate with local investors in the Middle East. I don't know when a deal will be clinched, but this is an opportunity for us to expand abroad," managing director Sompodh Sripoom said yesterday.

TTW is interested in producing water along with electricity in the Middle East. The local investors there would like to reduce the cost of water, which has been distributed from Europe.

The company may invest with local partners, possibly using the "build own transfer" business model.

Sixty per cent of TTW's revenue comes from selling water to residents and industry in Nakhon Pathom and Samut Sakhon provinces. Subsidiary Pathum Thani Water generates 35 per cent, while its tap-water and wastewater-treatment plant in Ayutthaya's Bang Pa-in Industrial Estate contributes 5 per cent.

The company will study water demand in Nakhon Pathom and Samut Sakhon over the next four years to determine whether it is feasible to build a second plant.

FUTURE DEMAND

The study will focus on where demand will come from and how to approach those markets. It is expected to be finished next year, and then the company will know how much to increase capacity.

TTW will expand its water treatment plant to from 320,000 cubic metres per day now 440,000cmpd.

"The demand for water increases 25,000-30,000cmpd a year on average. After the new production capacity goes on stream in the third quarter, our plant will run at full capacity to serve increasing demand for four years," Sompodh said.

"If we have to raise our capacity, it takes two years for studying and planning and two more years for construction, so we have to start the study process this year."

TTW may finance the capacity expansion with its internal cash flow and a loan. So far, it has no plans to raise its registered capital to mobilise funds.

TTW targets its net profit to grow faster this year than revenue, the latter of which is projected to increase 10 per cent to Bt4.4 billion, because of the lower cost of capital.

Last year, TTW earned Bt1.59 billion, up 17 per cent from 2008, on revenue of Bt4.07 billion, up 12 per cent.

It also issued Bt7 billion bonds to convert most of its long-term, floating-rate liabilities to fixed rate. Thus, the average cost of funds of the firm and its subsidiary has declined.