Banpu rolls out 5-year plan of sustainable growth across the Asia-Pacific region
Banpu Public Company Limited (BANPU), one of Asia’s leading energy companies, unveils its 5-year business plan entitled “Balanced Growth, World-Class Sustainability,” supported by solid cash flows and over three decades of experience in developing and managing large-scale energy projects throughout the region.
The company is charting a course for sustainable growth which balances the development of its renewable energy, conventional power and coal businesses. Banpu’s strategy is in line with global policy initiatives which emphasize both energy security and the need for cleaner energy. Banpu is confident in seizing investment opportunities with potential to increase its equity-based power generating capacity to 4,300 MWe by the end of 2025, of which renewable energy will account for 20 percent.
“Banpu operates on the principle of balanced and sustainable growth in three dimensions: environmental responsibility, social development and economic return. In recent years we have identified and commenced evaluation of a number of renewable energy investments. We have already concluded investment agreements for solar operations and projects in Japan and going forward are aiming to secure further opportunities in Japan, China, Thailand and other countries. Banpu’s plans are very much in accordance with the guidelines agreed at the United Nations Climate Change Conference, ‘COP21’ and the objectives of energy and fuel diversification,” said Ms. Somruedee Chaimongkol, Chief Executive Officer of Banpu.
The strategic plan for “Balanced Growth, World-Class Sustainability” sets guidelines for 2016-2020 around five main themes. These are: 1) Strategic flexibility in the face of economic uncertainty; 2) Cost reduction and rationalization, with organic capital expenditure reduced to US$554 million; 3) Productivity optimization; 4) Value-add strategies; and 5) Asset and Corporate Finance strategy, including launching the IPO of its subsidiary “Banpu Power Public Company Limited” or “BPP”.
“Over the next five years electricity demand in Thailand, Laos and China – i.e. countries where we are already present – is forecast to expand at a compound annual growth rate of towards 7 per cent. And Japan’s solar power demand is likely to grow at over 25 per cent over this period. We therefore think Banpu’s power business is well placed for substantial growth. Our filing process for the IPO is on track as planned. But we are in no rush. We will monitor market conditions this year to achieve optimal timing,” added Ms. Chaimongkol.
According to its current on-going investment plan across the region, it is expected that by the end of 2020 Banpu Power will achieve a total equity-based power generating capacity of nearly 2,394 MWe. The Shanxi Lu Guang Power Project in China, with an installed-capacity of 1,320 megawatts, is in the development process, with commercial operation due by year-end 2017. The seven incremental solar energy projects, with a total of 54 megawatts on an equity basis, will gradually start commercial operations over the period 2016-2018. By 2025, the company will have unlocked its potential of increasing the equity-based power generating capacity to around 4,300 MWe, of which 20 percent will be renewables based.
For the coal business, Banpu plans to continue the cost reduction program throughout the value chain with an emphasis on its product development strategy, targeting premium markets such as Japan, Korea and Taiwan. Banpu’s 2016 coal sales target is set at approximately 44 million tonnes from its operations in Indonesia, Australia and China. The company will aim to take advantage of low coal asset prices by making synergistic acquisitions which should further drive growth as the coal market recovers.
“Banpu has a philosophy of flexibility and resilience which enables us to overcome challenging macro environments. This, coupled with our proactive financial strategy of maintaining strong cash flows and balance sheet liquidity, has enabled us to keep the momentum of dividend payouts despite volatile commodity market. It also puts us in an excellent position to take advantage of new growth opportunities,” said Ms. Chaimongkol.
Since 2013, Banpu has been one of the leading companies listed in the Dow Jones Sustainability Index (DJSI). The company has also been recognized by RebecoSAM for two consecutive years as the ‘Industry Leader’ in the coal and consumable fuels sector. Additionally, in 2016, Banpu has been recognized as the ‘Industry Mover’ with the largest proportional improvement in its sustainability performance. “This is clear recognition of Banpu’s efforts and commitment to sustainability,” concluded Ms. Chaimongkol.
Summary of Banpu 2015 Performance:
Banpu is a coal-mining and power generation group with a presence in eight countries across the Asia-Pacific region: Thailand, Lao PDR, Indonesia, Singapore, Australia, China, Mongolia and Japan. Banpu’s coal sales in 2015 were 41.15 million tonnes, a net decrease of seven percent YOY, comprising a lower sale volume of 2.48 million tonnes from Australia mines, and a lower sales volume of 0.82 million tonnes from Indonesia. The average coal selling price in 2015 was USD 55.53 per tonne compared to USD 65.36 per tonne in 2014, a 15 percent decrease. In 2015, the company’s sales revenue was reported at USD 2,477 million (equivalent to THB 84,650 million*). Coal sales accounted for USD 2,285 million, 92 percent of total sales revenue. The remaining eight percent, which amounted to USD 191 million, came from sales of power, steam and others.
Thanks to the successful implementation of a cost reduction program, and a lower average strip ratio of 8.65 times versus 9.76 times, together with the lower fuel cost resulting from the global decline in oil prices, the 2015 cost of sales decreased by 22 percent YOY, equivalent to USD 1,672 million. The profit margins from Banpu’s coal business and power business were at 32 and 38 percent respectively.
According to the Board of Director’s resolutions on 18 February 2016, the meeting resolved that the payment of the dividend will be proposed to the Annual General Meeting of Shareholders for the year 2015 for consideration and approval at the rate of one Baht per share, which is the annual dividend for the period during 1 January 2015 – 31 December 2015.
* Calculated using average foreign exchange rate at USD 1: THB 34.17