Banpu cutting operating costs, defferring investment to maintain stable earnings

“Our strategy places heavy emphasis not just on growth, but on sustainable growth. That means a proactive approach to risk management, contingency planning and financial management,” said CEO Chanin Vongkusolkit.
Given the current market conditions, Banpu will also now take additional action to reduce operating costs and postpone some capital expenditure, he said.
This should ensure the impact on earnings of further coal price weakness is minimised and that the company maintains a strong balance sheet, he added.
The reason for maintaining stable earnings is that increased revenue has offset some temporary operational issues at Centennial in Australia, as well as a weaker seaborne coal market environment.
In Indonesia, although Banpu’s average coal selling price was down to about US$95 (Bt2,985) per tonne in the second quarter, coal sales increased by more than 1 million tonnes compared to the first quarter on the back of higher output from the Indominco and Trubaindo operations.
Total Indonesian coal output was 6.8 million tonnes in the period, and the company is targeting more than 7.2 million tonnes in the current quarter and around 27 million tonnes for the full year.
The contribution to Banpu’s earnings before interest, tax, depreciation and amortisation (Ebitda) from Indonesia increased 2 per cent quarter on quarter to Bt4.89 billion.
Meanwhile, Centennial’s production was down to just under 3 million tonnes due to an extended long-wall changeover at Mandalong and some poor geological conditions at Springvale.
As a result, the Ebitda contribution from Australia fell by 25 per cent versus the first quarter, to Bt1.25 billion.
Centennial expects full production at its main long-wall operations of Angus Place, Mandalong and Springvale and total output for the year of more than 15 million tonnes.
Banpu’s power business achieved a 78-per-cent increase in Ebitda contribution to Bt848 million in the second quarter, thanks mainly to increased availability payments and cost improvements at BLCP.
In Laos, the Hongsa coal-fired power-plant project reported 20- per-cent construction progress and is on schedule for first commissioning by 2015.
Banpu’s net profit after tax was 2 per cent down on the first quarter, at Bt2.73 billion.
With reference to operating cost and capital expenditure reduction plans, Chanin said the impact on the company’s coal reserves should be minimal and that Banpu’s drive for organic growth would continue.
The company is now targeting consolidated coal output of about 55 million tonnes by 2015, up from around 40 million tonnes in 2010.
Banpu is a leading coal-based energy producer with coal and coal-fired power businesses in six countries across the Asia-Pacific: Thailand, Indonesia, Australia, China, Mongolia and Laos.
The company is listed on the Stock Exchange of Thailand.