Banpu takes on China

Thai coal company targets India and Vietnam in the future

UMESH PANDEY, The Bangkok Post

Banpu Plc, one of Thailand's largest energy companies, says it plans to gradually take opportunities to increase its assets in China as part of its efforts to diversify its portfolio.

"There are fears of a slowdown in the Chinese economy and that is another factor that has kept us at bay, but we want to take this as an opportunity to possibly acquire more assets in the future," Chanin Vongkusolkit, the chief executive officer of Banpu, said in a recent interview.

Banpu has managed to diversify its operations outside Thailand, and now about 85% of its bottom-line contributions come from China and Indonesia. The company eventually wants to expand its operations into new countries, such as Vietnam and India.

But for now, its focus is squarely on China.

"We look at China as a market where there is a potential for huge opportunity, and if and when opportunities arise, we will acquire," Mr Chanin said, adding that any moves by Banpu would be done gradually and only once the company feels comfortable operating in the current environment.

Banpu started investing in China after the Asian financial crisis in the late 1990s. Since then, it has built a business that has become one of the leading coal producers in the region.

Now Banpu has nearly 110 Thai staff stationed outside Thailand: 100 in Indonesia, and 10 in China.

In China, the company currently operates a few coal mines and has acquired stakes in power plants. Its latest acquisition added 223 megawatts and 468 tonnes per hour of steam to the company's aggregate capacity.

Despite achieving success in Indonesia and now China, Mr Chanin says that he will continue to remain cautious when it comes to investing.

"We would like to have a diversified asset base, but would want to invest about $250 million in each country that we operate in," he said, citing the figure that his company has invested in Indonesia.

"The structure in the coal-mining operation in China is not very clear yet, but we want to have control over two or three mines through holding companies in the near future. We are also expanding into the power production in China. We have found some assets we want to acquire."

Currently, Banpu has a 100% stake in two stations and 70% in another. All these assets, he says, are in good condition and some are already undertaking organic expansion.

"The team is now looking at more niche plants that can be added to the portfolio," he said, although he stressed that the income stream from China would not reach the 85% that now comes from Indonesia.

"In the next two years, we want to make the size of our investment in China to be similar to Indonesia and Thailand. In Indonesia, we have $250 million and so far in China we already have invested about $150 million.

" All these investments, Mr Chanin said, are insured as part of its efforts to minimise the impact of any unforeseen circumstances.

Banpu also wants to synergise the coal-mining and power-plant business in China, Mr Chanin said. His plan is to use the coal from Banpu's mines for electricity generation at Banpu power plants.

"Our forecast is that oil will not fall below $40 a barrel in the near future, and therefore we do not want to rely too much on logistic costs for our coal sourcing, and therefore we would like to use our production from the mines to fire the power plants," Mr Chanin said.

Banpu now has its sights set on other regional markets, such as India and Vietnam.

"If you look at the way we expanded in Indonesia, that is the same way we would want to do it in China and maybe other countries as well," he said.

The company has already looked at the Indian market and has studied various proposals for power and coal development, according to Banpu sources.

India, which boasts more than one billion people and robust economic growth, is seen along with Vietnam as a country that is likely to yield good potential for the company.

"We have studied the markets and would be interested," he said, when asked about India.

Banpu had previously invested in Vietnam and has been looking for a way back into the market.

"Vietnam is an old place where we invested," Mr Chanin said. "We always go back to look at ways to do things there. We have a good relationship, and could go back once the opportunity arose."