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BANPU to seek cheaper acquisition targets

Banpu will continue to look for new acquisition targets after the takeover of a coal mine in Mongolia, but the value of any deals will be lower than those sealed to date.

President Chanin Vongkusolkit yesterday said the company needed to be wary of the potential financial burden imposed by mergers and acquisitions.

Banpu is raising Bt15 billion through debentures with a maturity of 10-15 years to finance its merger and acquisition (M&A) activity.

Last year, it took over Australia’s Centennial Coal for about US$2 billion (Bt60.6 billion), while the Mongolian coal mine cost the company $45 million in an acquisition financed by a short-term loan.

The Mongolian mine was recently jointly acquired by its subsidiary Banpu Minerals (Singapore) and a strategic partnership with Hunnu Coal, an Australialisted company.

Banpu expects the project to be operational in the next two to three years, producing coking coal for the steel industry.

Banpu has also divested a 56per cent stake in the Daning mine in China for $669 million. The mine had contributed Bt2.5 million to Bt3 billion annually to the company’s net profit.

Chanin said the company had not yet evaluated how much net gain would be reaped from the transaction, or whether it would affect Banpu’s 2011 net profit. One certain impact is that the Daning sale requires the company to increase output at its mines in Indonesia and Australia to offset the lost production.

Despite the divestment of Daning, the company is maintaining its projected annual sales volume at 44 million to 45 million tonnes this year.

The chief executive said the recent earthquake and tsunami disaster in Japan had not yet affected the company’s business, although Sendai – the country’s main port for coal shipments – remains closed.

Banpu is contracted to supply 1 million tonnes per annum to Tokyo Electric Power and another Japanese firm. Chanin said the company was waiting for the clients to notify it which port the coal should now be shipped to.

He added that the disaster in Japan could drive up coal demand, which should then stabilise in the next one to two years.

Despite the radiation crisis in Japan after the quake and tsunami, Chanin said nuclear power was still worth exploring, as it provided energy security. He believes new technology could guarantee higher safety, given that the disaster at the Fukushima plant derived from the use 40 year old technology.

Coal and gasdriven power plants can be quickly constructed to meet power demand, but nuclear power is a good choice in the long term, he said.

Source: The Nation

ThaiVest Editorial Team