President Chaiwat Kovavisarach told a news conference yesterday that Bangchak expected its power subsidiary BCPG to maintain its dividend contributions to the parent company even after it is spun off for listing on the Stock Exchange of Thailand in late September.
Nevertheless, he said Bangchak was searching for the “fourth engine” to drive its future growth, in addition to its three existing core businesses – oil refining, fuel marketing, and green power – which each |currently contribute roughly one-third |of the group’s EBITDA (earnings before |interest, taxes, depreciation and amortisation).
“Like the Boeing 747, we would like to have four engines,” he said.
The new business, which Bangchak hopes to have in place by the end of this year, will still be in the energy industry.
“Upstream is one choice,” Chaiwat said.
Bangchak has already jumped into the upstream oil and gas exploration business but that unit, Nido Petroleum, is in cost-reduction mode because of the slump in world oil prices.
Chaiwat said its oil-refining business would grow through its so-called 3E efficiency-improvement and “de-bottlenecking” projects, while its marketing business has a lot of room to grow further, from both its oil and non-oil divisions.
Bangchak reported EBITDA for the second quarter of Bt4.085 billion, down 21 per cent from a year ago.
EBITDA from its marketing business, however, totalled Bt882 million, growing |34 per cent from a year earlier. Chaiwat said BCPG was expected to raise between Bt5 billion and Bt6 billion from its initial public offering and as a result would have a total of Bt10 billion in funding, sufficient for expanding its power-generating capacity by 500 megawatts by 2020.
“BCPG currently has 118MW of solar-power capacity under its 10-year power-purchase contracts.
After that it will lose the adder [bonus rates given to solar farms by the state], which means a lot of income will be lost.
But if it can expand to 500-600MW, its income will be sustained,” he explained.
BCPG’s EBITDA currently amounts to Bt3 billion annually. After deducting expenses, it can pay dividends of about Bt1 billion to Bt2 billion annually. Chaiwat said Bangchak had managed to grow its fuel-marketing business from monthly sales volume of 220 million litres per month four years ago to 320 million litres at present, even with the same number of petrol stations, 1,075.
“What if we add 100-200 more pumps? And there is also the non-oil business,” which will be expanded, he said.
The company plans to set up the Bangchak Initiatives and Innovations Centre next year to spearhead its research and development drive, focusing on three areas: R&D on biofuels and energy-storage technology; collaborations with domestic and foreign organisations; and incubation.
Bangchak is maintaining its 2016 EBITDA target of Bt12.6 billion, although refining margin is considered a challenge in the second half.
Three brokerage houses – Maybank Kim Eng Securities (Thailand), Trinity Securities and DBS Vickers Securities (Thailand) – issued their stock-analysis reports yesterday, recommending “buy” on Bangchak stocks, citing its better-than-expected second-quarter results.