TRIS Rating Co., Ltd. has affirmed the company rating of Banpu PLC (BANPU) and has also affirmed the ratings of BANPU’s existing senior debentures at “AA-” with “stable” outlook. The ratings reflect BANPU’s leading position in the regional coal market, diversified coal reserves and customer base, solid financial profile, as well as a reliable stream of dividend income from the power business. The ratings also take into consideration the company’s efforts to refocus its strategy toward international opportunities in the coal industry. The fluctuations in coal prices and changes in mining regulations in Indonesia and China remain rating concerns.
The “stable” outlook reflects the expectation that BANPU will continue to adopt a conservative business policy and be able to maintain a strong financial position when pursuing its growth strategy. Dividends from the power business will provide a reliable stream of cash flow. The favourable coal price from the global economic recovery will support BANPU’s performance in the medium term.
TRIS Rating reported that BANPU is one of the major energy companies in Asia. It was established in 1983 to mine coal in Thailand. The company has continuously expanded and now has coal operations in Indonesia and China. The firm simultaneously increased its investments in the power business in both Thailand and China. During the last two years, the coal business accounted for approximately 80% of earnings before interest, tax, depreciation and amortization (EBITDA); while the remaining 20% was from the power business. In terms of country diversification, 77% of EBITDA in 2009 (Bt23,687 million) was from the Indonesian operation and 23% was from China.
TRIS Rating said, coal production of BANPU comes mainly from Indonesian mines. In 2009, coal production totaled 21.4 million tonnes, excluding operations in China. BANPU remained the fourth largest coal producer in Indonesia, with 7.7% share in terms of production. Current reserves in Indonesia are quite abundant at 294 million tonnes or the equivalent of 14 years of production.
Operating performance of BANPU in 2009 reached a record with net profit of Bt14,229 million, a 54% increase compared with 2008. The favorable prices of long-term contracts and a 14% increase in coal sales volume pushed revenue up by 15% to Bt57,865 million. The contribution from China also improved significantly due to higher coal sales, lower production costs from economies of scale and a higher margin from the power business in China. However, in the first quarter of 2010, net profit decreased by 43% over the same period of last year (year-on-year or y-o-y) to Bt2,717 million due to a steep drop in the selling price of long-term contracts following sharp drops in coal price in 2009. However, coal sales volume increased by 51% y-o-y in the first quarter of 2010 to 6.2 million tonnes. This was attributable to smooth production from favorable weather in Indonesia and the expansion of mining area which has taken place since the second half of 2009. For the rest of 2010, BANPU’s performance will be more stabilized by additional coal production from the Gaohe mine in China and currently favorable coal price, offsetting a halt in production at the Jorong mine in Indonesia.
In May 2010, BANPU bought a long-term strategic stake of 14.9% (58.83 million shares) in Centennial Coal Co., Ltd. (CEY), Australia. BANPU bought the shares from various sellers at an average of A$4.8 per share, spending A$282 million (Bt8,345 million) in total. This investment is in line with BANPU’s growth strategy and the mission of the company to become a leading energy company in Asia. The investment helps BANPU achieve the goal of raising the contribution from the coal business to 85% of total profit, up from the current level of 70%. The investment will also help diversify the mining sources of BANPU in the future.
The power business continued to generate satisfactory returns. For 2009 operations, BANPU received Bt3,154 million in dividends from its power investments: a 50% stake in BLCP Power Ltd. (BLCP), and a 14.99% holding in Ratchaburi Electricity Generating Holding PLC (RATCH). In addition, BANPU also recognized profit from its power business in China of Bt591 million in 2009.
TRIS Rating said, BANPU plans to invest approximately US$466 million in 2010-2015 for its existing operations and is scheduled to repay borrowings of Bt4,500-Bt6,500 million per year during 2010-2012. These capital needs will be sufficiently funded by its EBITDA of approximately Bt18,000-Bt20,000 million per year. However, for any sizable investment or acquisition, the company may need additional borrowings. The net debt to capitalization ratio is expected to remain below the stated policy level of 50%. As of March 2010, total debt was Bt31,071 million and the total debt to capitalization ratio was healthy at 35%. -- End
Company Rating: Affirmed at AA- Issue Ratings: BP109A: Bt2,000 million senior debentures due 2010 Affirmed at AA- BP10NA: Bt1,500 million senior debentures due 2010 Affirmed at AA- BP10NB: Bt1,000 million senior debentures due 2010 Affirmed at AA- BP111A: Bt1,500 million senior debentures due 2011 Affirmed at AA- BP125A: Bt2,000 million senior debentures due 2012 Affirmed at AA- BP145A: Bt2,200 million senior debentures due 2014 Affirmed at AA- BP15NA: Bt2,500 million senior debentures due 2015 Affirmed at AA- BP165A: Bt2,100 million senior debentures due 2016 Affirmed at AA- Rating Outlook: Stable
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