Bangchak Petroleum Plc has forecast that its earnings before interest, tax, depreciation and amortisation will jump from Bt2 billion-Bt2.3 billion to Bt7 billion-Bt8 billion after its petroleum quality improvement (PQI) project worth US$378 million (Bt14.7 billion) is completed in 2008.

The project, of which $348 million will be spent on construction while $30 million will be set aside for contingencies, will add value to fuel to be refined by Bangchak and raise the company's gross earnings, its president Anusorn Sangnim-nuan told reporters yesterday.

The project will increase annual capacity to 100,000-120,000 barrels from 70,000 barrels at present, he said.

"The project will improve the company's earnings in the future and strengthen the company because diesel production will increase to 60 per cent from 40 per cent while the proportion of bunker oil will drop from 30 per cent to 10 per cent," said Anusorn.

"The margin between the two products currently stands at about $20 a barrel, and we expect to benefit from the change in product mix that the cracker unit will allow," said Anusorn.

Bunker oil typically offers narrower margins to Bangchak.

Proceeds to finance the project will be derived from the company's massive recapitalisation and convertible debenture issuance and $200 million in syndicate loans from TMB Bank, Bank of Ayudhya, and Siam City Bank.

He said the company's board had approved the earmarking of a maximum of 283 million shares and convertible debentures, which can be exercised into 135 million shares to PTT Plc worth about $120 million. The new shares will be sold at Bt14 each.

The company has been granted a float not exceeding 161 million shares to specific investors to raise about $50 million to $55 million, and 85.5 million warrants to be issued to existing shareholders at Bt2.50 each.

It is expected to obtain the proceeds from these financial measures by the middle of the year.

Anusorn said Bangchak expected to generate Bt80 billion in income this year, compared with Bt86.53 billion last year. The company posted a net profit of Bt2.92 billion last year.

Bangchak has also signed a contract with CTCI Corp, under which the Taiwan-based company will build the PQI project.

Construction will commence in April, he said.

Anusorn predicted that the company's refinery margin would be lower than last year, but did not give an estimate.

Bangchak's stock and depository receipts lost 0.7 per cent to close the day at Bt14.10.