Banpu plans cost cuts, increased coal sales to Japan

Thai energy conglomerate Banpu Public Company Limited said it's focusing on cutting costs at its mines in Indonesia and hopes to increase sales to Japan to boost profit, Bloomberg reported Wednesday.

?Banpu expects to save about Baht 200 million (or around US $4.7 million) a year by spending as much as $102 million by 2006 on building roads to its coal mines in Indonesia, known as Indocoal, improving production processes and lowering transportation costs,? said Chanin Vongkusolkit, chief executive at the mining company.

The company needs to cut costs as coal prices decline and sales growth slows to about 15 percent. Costs surged 37 percent last year to Baht 1.5 billion after Banpu started including PT Indominco Mandiri's revenue in its accounts. Banpu expects coal prices to decline about 7 percent this year.

Bangkok-based Banpu also expects sales to Japan to rise by half because a tax on imports may force utilities in the world's second-biggest economy to buy coal that generates more heat per unit of coal.

The company forecasts sales to Japan, its biggest market after Thailand, to rise to 6 million tons by 2006, from about 4 million tons currently.

The Japanese tax on imported coal would start at 230 yen a metric ton on Oct. 1 this year and increase to 700 yen by April 1, 2007. Japan plans to introduce the tax to reduce emissions of so-called greenhouse gases.

?The affect will be higher-yielding coal will go into Japan,? Chanin said in an interview. ?We can increase our sales to Japan because we are nearer to Japan and the coal quality we are producing is high-yielding.?

Banpu is also hoping that Japanese utilities will switch to coal from countries such as Indonesia instead of Australia to cut transportation costs to reduce the effect of the new tax.

Japanese demand is rising as power companies start up mothballed coal-fired power plants to compensate for lower output from nuclear reactors that have been shut for safety checks.

Coal-fired generators provided 18 percent of electricity generation by Japan's top 10 power producers in the fiscal year ended March 2002, up from 10 percent of total generation a decade ago, according to Tokyo Electric Power Co., Japan's largest power producer.

Australia was Japan's top coal supplier in 2001, at 91.4 million metric tons last year, followed by China on 27.1 million tons, Indonesia on 16.2 million, Canada on 11.6 million and Russia on 5.7 million. (*)