Thai Rating and Information Services Co., Ltd. (TRIS) announced Thursday 22 March 2001 that it has assigned "A-" ratings to the Bt2,500 million and Bt500 million senior debentures of Banpu PLC (BANPU), which have the total combined amount of Bt3,000 million excluding greenshoe. The ratings reflect BANPU's strong market position in the coal business, professional management team and diversification into the power business. However, these strengths are partially offset by intensifying competition in the coal market from imports and high political risk from investments in Indonesia.
Founded by the Vongkusolkit and Auapinyakul families, BANPU started its mining operation in 1983. TRIS reported that the company dominates the coal mining market in Thailand, holding 39% of total market share among private operators in 2000. With 20 years experience in the industry, the company's proficient management team should have the capability to operate in international markets, which the company entered in August 1998 with its mining operation in Jorong, Indonesia, just as competition is intensifying with heightened pressure from imported coal.
BANPU continues to focus on acquiring new, high-quality coal reserves in Indonesia. In addition to its investment in the Jorong mine, BANPU increased its coal reserve in Indonesia by providing a US$54 million convertible loan to the Indonesian mining company PT. Centralink Wisesa International to acquire four coal mines in Indonesia in March 2001. This loan will be converted to equity in the future when BANPU is granted the legal right to hold interest in the Indonesian company. Adding this investment will increase BANPU's coal production capacity from its current 6.4 million tons per year to 11.4 million tons per year. However, this aggressive investment in Indonesia creates higher leverage and more exposure to political risk, TRIS said.
BANPU has entered the Independent Power Producers (IPP) program by beginning the development of two power projects, a 700 MW gas-fired combined cycle power plant and a 1,347 MW coal-fired power plant. These projects were structured through joint venture companies, Tri Energy Co., Ltd. (TECO) and BLCP Power Ltd.(BLCP). TECO came on line in July 2000, becoming the first privately owned IPP project operating. BLCP, which has postponed its target date for power delivery to October 2006, requires an investment of approximately US$1,300 million that will require equity injection during 2003 - 2006. TRIS sees that the company's holding a 12.4% stake in Ratchaburi Electricity Generating Holding PLC (RATCH) will provide a stable cash flow stream to the company in the future.
TRIS said that BANPU's operating income before depreciation and amortization as a percentage of sales decreased from 37.5% in 1999 to 32.2% in 2000, mainly because of a greater portion of sales from imported coal, which has a lower profit margin than domestic coal. BANPU's pretax return on permanent capital decreased from 11.0% in 1999 to 1.6% in 2000. Reducing its debt burden from Bt8,217 million in 1998 to Bt6,463 million in 2000 improved BANPU's funds from operation-to-total debt from 11.0% to 15.2% in the same period. The earnings before interest, tax, and depreciation and amortization (EBITDA) coverage ratio increased from 1.6 times in 1998 to 3.1 times in 2000, while the total debt to capitalization ratio improved from 64.3% in 1998 to 49.5% in 2000. In addition, TRIS expects that a stable earning contribution from BANPU's investment in power projects will stabilize company cash flow, which should improve its financial profile in the medium term.
Banpu PLC (BANPU) Issue Rating BP064A: Bt2,500 million senior debentures due 2006 A- BP084A: Bt500 million senior debentures due 2008 A-
Note: Total combined amount is up to Bt3,500 million including greenshoe.
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Founded by the Vongkusolkit and Auapinyakul families, BANPU started its mining operation in 1983. TRIS reported that the company dominates the coal mining market in Thailand, holding 39% of total market share among private operators in 2000. With 20 years experience in the industry, the company's proficient management team should have the capability to operate in international markets, which the company entered in August 1998 with its mining operation in Jorong, Indonesia, just as competition is intensifying with heightened pressure from imported coal.
BANPU continues to focus on acquiring new, high-quality coal reserves in Indonesia. In addition to its investment in the Jorong mine, BANPU increased its coal reserve in Indonesia by providing a US$54 million convertible loan to the Indonesian mining company PT. Centralink Wisesa International to acquire four coal mines in Indonesia in March 2001. This loan will be converted to equity in the future when BANPU is granted the legal right to hold interest in the Indonesian company. Adding this investment will increase BANPU's coal production capacity from its current 6.4 million tons per year to 11.4 million tons per year. However, this aggressive investment in Indonesia creates higher leverage and more exposure to political risk, TRIS said.
BANPU has entered the Independent Power Producers (IPP) program by beginning the development of two power projects, a 700 MW gas-fired combined cycle power plant and a 1,347 MW coal-fired power plant. These projects were structured through joint venture companies, Tri Energy Co., Ltd. (TECO) and BLCP Power Ltd.(BLCP). TECO came on line in July 2000, becoming the first privately owned IPP project operating. BLCP, which has postponed its target date for power delivery to October 2006, requires an investment of approximately US$1,300 million that will require equity injection during 2003 - 2006. TRIS sees that the company's holding a 12.4% stake in Ratchaburi Electricity Generating Holding PLC (RATCH) will provide a stable cash flow stream to the company in the future.
TRIS said that BANPU's operating income before depreciation and amortization as a percentage of sales decreased from 37.5% in 1999 to 32.2% in 2000, mainly because of a greater portion of sales from imported coal, which has a lower profit margin than domestic coal. BANPU's pretax return on permanent capital decreased from 11.0% in 1999 to 1.6% in 2000. Reducing its debt burden from Bt8,217 million in 1998 to Bt6,463 million in 2000 improved BANPU's funds from operation-to-total debt from 11.0% to 15.2% in the same period. The earnings before interest, tax, and depreciation and amortization (EBITDA) coverage ratio increased from 1.6 times in 1998 to 3.1 times in 2000, while the total debt to capitalization ratio improved from 64.3% in 1998 to 49.5% in 2000. In addition, TRIS expects that a stable earning contribution from BANPU's investment in power projects will stabilize company cash flow, which should improve its financial profile in the medium term.
Banpu PLC (BANPU) Issue Rating BP064A: Bt2,500 million senior debentures due 2006 A- BP084A: Bt500 million senior debentures due 2008 A-
Note: Total combined amount is up to Bt3,500 million including greenshoe.
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