Zinc smelting company preparing for switch to green businesses

Corporate August 23, 2014 01:00

By Pichaya Changsorn
The Nation

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THE OPERATOR of Southeast Asia's sole zinc smelter, Padaeng Industry, yesterday announced a Bt1.5-billion investment programme to turn itself into a "green business" operation, in a bid to avert bankruptcy when it has to close the smelter within 30 mon

Managing director Francis Vanbellen told a press conference yesterday that PDI’s future hinged on the government’s approvals of licences for its planned renewable-energy and waste-management projects.
“If I don’t get the PPAs [power purchase agreements for the planned renewable projects], we’ll  [have] a big problem. If we have to import minerals to feed the refinery, we will go bankrupt in three years,” he said.
Because of depleting local supplies of raw zinc, Vanbellen said PDI planned to close its mine and smelter in Tak province in about 30 months. To find new revenue sources, the company has decided to move towards green businesses and has devised a plan to invest in three projects over the next three years, comprising a solar farm in Tak, a wind farm in Nakhon Ratchasima, and an industrial-waste-management project in Rayong.
Because of Thailand’s reversion to a military-run government, companies hoping for a slice of 586 megawatts worth of renewable-energy projects have to resubmit their bids. Vanbellen said he hoped the government would use “fair rules” to pick the winners of these projects, with no corruption by involved authorities, as vowed by the new prime minister, General Prayuth Chan-ocha.
PDI’s 24MW solar farm will be built on top of residue and neutralisation ponds that are not usable for agriculture and other purposes, and are close to a high-voltage power substation and transmission grid, originally built to service the smelter. 
With the 18MW wind-farm project, the company will be the first developer in Thailand to use low-speed wind-power technology that is more suitable to the country’s relatively soft wind conditions and is getting ready to allot some shares in the project to villagers near the area, he said.
Vanbellen said PDI would turn its roaster plant in Map Ta Phut into an industrial-waste-management facility. After completing a feasibility study in October or November, the company will have to undergo an environmental health impact assessment (EHIA) process that includes public hearings before it can win an official permit to rebuild the facility.
Provided it gets all the necessary approvals, PDI expects these three projects to generate a satisfactory 15-per-cent annual rate of return on equity, helping the firm to book a profit of about Bt600 million per annum three years from now.
Thanks to a 6-per-cent increase in the zinc price and depreciation of the baht, PDI reported a net consolidated profit of Bt314 million in the first half of this year, a turnaround from its net loss of Bt72 million a year earlier. Nevertheless, the firm blames higher costs of electricity and chemical reagents, reserves for severance payments, and accelerated depreciation of its mining assets as the reasons for a Bt125-million drop in quarterly net profit, from Bt220 million in the first quarter to Bt95 million in the second quarter.
PDI expects its financial results to remain positive for the rest of this year, because of an anticipated high London Metal Exchange zinc price of more than US$2,200 a tonne.
The company has restructured its businesses into three business units, comprising PDI Materials, which will engage in alloys and other value-added zinc products; PDI Eco that will focus on waste management; and PDI Energy that will develop renewable power projects.
Vanbellen said PDI would continue value-added zinc production at its facilities in Tak, to help keep some jobs there after the closure of its smelter, although it will not be the most economical option because of its remote location.
The company plans to run the smelter at 75,000 tonnes per annum this year, compared with the full capacity of 110,000 tonnes per annum, to optimise costs.