The luxury Penthouse Residence of the Dara Dhevi Chiang Mai. The hotel has had an average occupancy rate of 51% this year.

SET-listed Inter Far East Energy Corporation Plc (IFEC) expects the acquisition of the Dara Dhevi Chiang Mai Hotel will generate an additional 600 million baht in net profit next year.

About 200 million baht will come from hotel operations and 400 million will be extra gains from debt restructuring, said IFEC chairman and executive director Wichai Thavornwattanayong.

The company's solar and wind energy operations are expected to contribute 1 billion baht in net profit in 2016.

IFEC spent 2.46 billion baht to buy a 100% stake in Dara Dhevi Hotel Chiang Mai Group (DDVG), which includes Dhara Dhevi Hotel Co, A.P.K. Development Co and Dhara Dhevi Co, and its liabilities of 2.52 billion baht.

Of the total investment, 1.6 billion baht was paid for the equity and 860 million baht for the liabilities. Funding came from cash flow and bank loans.

IFEC used its wholly owned subsidiary Inter Far East Cap Management Co to hold the shares in DDVG, while subsidiary Inter Far East Thermal Power Co bought the six-star hotel's liabilities.

"It's a good investment for IFEC as our core energy business will sometimes face policy and bidding uncertainties. The stable income from a reputable and luxury hotel like Dara Dhevi will be a safeguard for us," Mr Wichai said.

Moreover, Thailand's tourism business has fully recovered, with tourist arrivals expected to reach 30 million this year. 

The Dara Dhevi hotel has performed very well this year with an average occupancy rate of 51%, the highest since it opened 11 years ago.

The hotel expects its 2015 revenue will reach 520 million baht before rising to more than 600 million next year, said general manager Andrew Quinlan. 

Mr Wichai said the Dara Dhevi acquisition was worthwhile because its property valuation is around 4 billion baht. The hotel is on a 155-rai plot only a 15-minute drive from Chiang Mai airport.

"We can use the hotel asset as loan collateral when we want to borrow more money to finance new power plant investments at home and abroad," he added.

IFEC projects to book about 200 million baht in gains from Dara Dhevi's debt restructuring in the fourth quarter of this year.

Mr Wichai claimed that Dara Dhevi's shareholder conflicts were solved shortly before the IFEC deal.  

The hotel has a lot of potential to generate additional income through its spa and wellness centre and property development on a plot covering 80 rai.

DDVG still has a loan of 2.52 billion baht due for restructuring and IFEC expects to negotiate with creditors to get some haircuts. It is eyeing to sell a plot of land to repay creditors and the remaining land will be turned into a wellness residence to serve more guests.

The property project will come under a joint venture and be concluded in the first or second quarter next year.

In the first nine months of this year, IFEC posted net profit of 88.8 million baht on revenue of 559 million.

IFEC shares closed yesterday on the Stock Exchange of Thailand at 6.15 baht, up 55 satang, in trade worth 405 million baht.