New Banpu CEO prepares to cash in when coal prices rise

 

Somruedee, who in April succeeded Chanin Vongkusolkit, a founder and CEO of the company, who stepped down after 32 years in the post, believes coal prices, after some four years of downtrend, have already bottomed out and would begin to gradually recover.

In an exclusive interview with The Nation, Somruedee said her biggest challenge is to ensure Banpu would be ready to tap the opportunities arising from the next upturn in international coal prices before other companies.

“How we can ride on this [gradual] price rise and grow as fast as we used to [is my challenge],” she said.

From a high-growth company, Banpu, a coal and power producer with its main operations in Indonesia, Australia, China, Laos, and Thailand, has seen its profit tumbling from Bt20 billion in 2011 to Bt9.29 billion in 2012, Bt3.15 billion in 2013 and Bt2.68 billion last year. 

Analysts from Moody’s Investors Service to Citigroup have predicted coal prices not recovering before next year. 

Banpu will focus on cashflow rather than profit. It is eyeing renewable energy projects that take less time to build and can start generating cash quickly for the company.

On the other hand, with coal prices to be less volatile, Banpu could anticipate opportunities to acquire additional coal-related assets in Indonesia and other countries, provided the prices are right. It has no plan to pour big money into new conventional power plants besides its existing projects, which include the lignite-fired Hongsa power plant in Laos and Shanxi Lu Guang power project in China.

Banpu is confident that it could disclose soon its first solar power projects with a combined capacity of 200 megawatts that could bring in cash to the company as early as next year. 

Banpu is developing its 2020 strategic business plan for conclusion by the end of this year. Its existing plan calls for the group to increase its power plants’ capacity in equity-megawatts (prorated according its equity holding in power plants) from 1.3 gigawatts to 2.25GW by 2017. The new plan could see more renewable power plants and an increase of annual coal production from 46 million tonnes to more than 50 million tonnes.

The coal business will be kept at 60-65 per cent of revenues and power at 35-40 per cent.

“This does not yet include the possibility [of expanding our coal-fired power business in Thailand] if Egat has a plan to increase [power purchases from privately-owned] coal-fired power plants,” she said.

In China, Banpu is expanding its Shanxi Lu Guang power plant, in which it has a 30-per-cent stake, to 1.2GW in 2017, increasing coal production capacity of its Gaohe mine from 8 million tonnes to 10 million tonnes and eyeing expanding its combined-heat power plants there, as the provinces where the small power plants are located near Beijing are growing as a result of the urbanisation policy of Chinese authorities.

Banpu would keep at least 50 per cent of Ban Pu Power after its initial public offering planned early next year for the power subsidiary. Renewable energy projects that can include solar, biomass and possibly wind and new hydro projects in the future will still account for less than 20 per cent of the company’s total power businesses. 

Banpu expects international coal prices at above US$65 a tonne this year.

“When it will recover is difficult to predict. But there is less chance [for coal prices] to go down than to increase,” she added.