TTA invests $25mn in Philippines' coal business
Thoresen Thai Agencies Plc has made a direct investment in SKI Energy Resources Inc (SERI), a coal mining business that controls an active coal mine as well as additional concessions in the Philippines' Cebu province.
In a statement to the Stock Exchange of Thailand, the company said that it will invest $5 million in cash and convert $20.3 million debt to equity. Following the capital increase in SERI, TTA’s direct economic interest in the venture will stand at 47.07 per cent. The transaction is expected to be completed in February next year.
SERI now holds 12,000 hectares (about 75,000 rai) under Coal Operating Contracts granted by the Department of Energy in the Philippines and has an ongoing application for a further 8,000 hectares, of which the award of an additional 6,000 hectares, is expected imminently.
TTA said in the statement that global demand for energy continues to increase, and coal remains a primary fuel for power generation, particularly in the Asian region. A variety of forecasts from industry experts and investment analysts project coal demand to grow strongly over the next twenty years or more. The Philippines currently imports more than 12 million tonnes of coal annually, and the government is seeking to actively encourage investment in the coal-mining sector to develop
the substantial domestic coal reserves. Cebu, the site of SERI’s initial mining operations, has local coal demand for power generation, which is presently being met largely by imports. As regards export potential, other mining operations in the Philippines do currently export coal (largely to China for industrial use). Existing production at SERI is being sold domestically
to power producers and the cement industry, and local demand is far in excess of SERI’s projected production in the next several years.
"The investment is consistent with TTA’s business strategy to increase its exposure to the energy sector, while making investments, which offer synergies with its established shipping and logistics activities," the Thai company said.
TTA has been involved in the venture since 2009, through a minority investment in Merton Group (Cyprus) Ltd. Merton was at the time was the sole international partner in SERI. The US$ 25.3 million investment gives TTA, through its wholly owned subsidiary Soleado Holdings Pte Ltd, 40 per cent of the voting rights in SERI.
After the investment, Merton and SKI Construction Group Inc will each hold 26.47 per cent in SERI.
