Banpu may face Bt19bn loss after compensation verdict: Asia Plus
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Banpu will post a net loss of Bt19.2 billion in 2012 against estimated net profit of Bt11.7 billion after the huge compensation to Thai-Lao Lignite (TTL) related to its investment in the Hongsa Power project, according to Asia Plus Securities.
The loss figure is based on the assumption that Banpu has to pay all Bt31 billion in one-time compensation this year. However, the company still reserves the right to appeal the September 20 verdict of the Civil Court. And Bualuang Securities said yesterday that it was too early to assume that Banpu would end up paying out the massive sum.
While recommending that short-term investors sell shares as this loss significantly pressures the share price, the house suggested that long-term investors hold on to the stock because of the bottoming-out of the coal price.
The dispute arose after TTL, the former concession holder of the coal-fired plant in Laos, was displeased by the Laotian government’s decision to terminate its contract and award it to a Banpu-led group.
Banpu and Ratchaburi Electricity Generating Holding each hold 40 per cent of the power project, and the remaining 20 per cent is held by Lao Holding State Enterprise.
Banpu’s stock price dropped by 8.6 per cent to Bt404 per share yesterday.
Bualuang Securities said that taking accrued interest expenses on the Bt4 billion up-front charge plus 7.5 per cent annual interest into account, it calculated a total cost of Bt33.483 billion. The case has taken five years to reach a judgement in the Civil Court. Even if Banpu were to lose in the Court of Appeal (which may take several more years), it could still petition the Supreme Court. The case is likely to be won by whichever party has the greatest endurance.
Bualuang said that based on the historical record of civil-damages litigation in recent years, the auditor is likely to require Banpu to set a provision for the Civil Court award to Siva Nganthavee. But it believes that the amount is likely to be only the Bt4 billion in damages (plus accrued interest back to August 2007) – a total of Bt5.743 billion (equal to Bt21 per share).
The award for the opportunity loss (to be paid 2015-39) – at worst – need not be provisioned against till the first payment is due in 2015. If the firm were to lose in the Supreme Court, its payouts to the Nganthavee group would probably result in Bualuang slashing its annual Hongsa profit contribution projection to Banpu by 30 per cent.
Pegged to Bualuang’s base-case scenario, the securities firm said the anticipated provisions would cause it to slash its fiscal 2012 profit projection for Banpu to Bt4.219 billion from Bt9.961 billion previously.
It is adopting a more conservative stance in valuing the firm by assuming a yearly payment for the opportunity loss to the Nganthavee group for 2015-39. As such, it has cut its DCF-derived target price to Bt504 from Bt540.
