Lignite miner Sahakol plans IPO to expand

The lignite-mining contractor plans to float 230 million shares, equivalent to 23 per cent of total outstanding shares after the initial public offering, expecting to raise between Bt700 million and Bt1 billion from the IPO slated for the third quarter.
According to Sahakol’s IPO prospectus approved by the Securities and Exchange Commission, during the past three years, the company earned nearly all of its income from excavating and transporting lignite for Egat’s Mae Moh mine in Lampang under a Phase 7 contract that will end in 2020. The company’s annual revenue ranged from Bt1.6 billion to Bt1.9 billion from 2012-2015, although net profits fluctuated more substantially.
The filing shows that Sahakol recently won a Phase 8 contract from Egat that will provide Bt22 billion in revenue over the next 10 years, as well as a similar 10-year contract from Hongsa Power, a Laos-based lignite-fired power-plant joint venture by Banpu Power, Ratchaburi Electricity Generating Holding and Lao Holding State Enterprise, worth Bt11 billion.
“We’re also preparing to bid for the Mae Moh Phase 9 contract next year, which is expected to be valued at about Bt30 billion,” Sasavat said in an interview with The Nation.
Siam Commercial Bank and Maybank Kim Eng Securities (Thailand), the joint financial advisers, lead arrangers and underwriters, are appraising the appropriate valuation of the IPO, which could be priced somewhere between power-company and contractor stocks.
“We earn stable income like power producers, although our contracts are for 10 years, while power firms have 25-year [power-purchase contracts with Egat],” he said.
The Sahakol CEO said the barrier to entry for this business was high because existing players – currently only his company and Italian-Thai Development –already have the required equipment in which they have invested for years, while newcomers would have to invest a huge sum from a zero base.
“The investment required for Phase 8 alone would be to the tune of tens of billions of baht, whereas I have accumulated equipment valued at nearly Bt20 billion,” he said.
Sasavat said Sahakol had never posted a loss except during the Asian financial crisis two decades ago.
After the IPO, the Sirison family will reduce their shareholding from 43.14 per cent to 33.02 per cent, and the Areekul family from 28 per cent to 21.43 per cent. Other shareholders include former deputy prime minister MR Pridiyathorn Devakula, who will dilute his shareholding from 9.33 per cent to 7.14 per cent.
Sahakol reported net profit of Bt80 million on total revenue of Bt1.8 billion last year.
Sasavat said Sahakol was also looking to expand into solar and wind power to add more growth dynamic to its stable revenue profile from the mining-contractor business. It is also looking to tap new mining contracts from CLMV (Cambodia, Laos, Myanmar and Vietnam) countries.
He said Sahakol and its partners had already secured some land in Chaiyaphum and Nakhon Ratchasima provinces for wind farms and would be ready to bid as soon as the energy regulators open a tender.