Acquisitions to boost electricity generation assets to 35% of total
Banpu is expected to acquire one or two power plants this year, while targeting assets from the power-generation business to reach 35 per cent of the total by 2016, up from 25 per cent now.
Chief executive officer Chanin Vongkusolkit said the company had seen investment opportunities through mergers and acquisitions after the coal price bottomed out. The price is now US$74 per tonne, up $2 from last year’s.
“The coal price has hit bottom. Some mines may encounter high production costs and shut down. We have seen this opportunity. We are interested in mines in the same [area as] our mine in Indonesia, and those in China and Vietnam where demand for power will rise. Such mines are newly opened or in the development process,” he said.
Banpu has also paid attention to other types of power plants such as solar or wind farms, particularly in China, which can generate short-term profits.
The company will be able to borrow $600 million to $700 million from banks for power-plant M&As in the next two to three years. Banpu also plans to raise $200 million through debentures with maturities of five, seven and 10 years to finance the redemption of previous debentures that have matured. Its present debt-to-equity ratio is 1.07 times with a ceiling of 1.1 times.
Banpu aims to raise its power-based assets to 35 per cent of total assets, from 25 per cent currently, within two years.
This year, the company has set $358 million (Bt11.5 billion) for investment excluding M&As. About $85 million will be invested in the Hongsa power plant in Myanmar, coal-mine expansion in Indonesia and power-plant investment in China.
Banpu expects this year’s operating performance to remain steady from last year. Its coal production and sales targets are set at 47 million tonnes with an estimated total cost reduction of 5 per cent and a focus on cash flow to cope with future uncertainty.
Chief financial officer Somrudee Chaimongkol said local investors might sell some Banpu stocks on concerns over short-term drops in profit as a result of the book closure for dividend payments. However, institutional investors were holding more Banpu shares on the company’s good prospects for electricity and coal. Foreign shareholding in Banpu has risen to 28 per cent of the total from 21 per cent last year.
After Banpu’s book closure on March 6, HSBC (Singapore) Nominees holds a 3.27-per-cent stake, up from 2.13 per cent, while GIC owns 1.90 per cent, up from 1.77 per cent, according to Stock Exchange of Thailand data. New institutional investor State Street Bank Europe holds a 1.93-per-cent stake in Banpu.