PRESS RELEASE: TRIS ups Thai Banpu to A+; Outlook stable
Wednesday, November 9 2005 - 10:50 AM WIB
BANGKOK, Wednesday Nov. 9--TRIS Rating Co., Ltd. has upgraded the company rating of Banpu PLC (BANPU) and the ratings of its current debentures to A+ from A. The outlook has been changed to stable from positive. At the same time, TRIS Rating has assigned the ratings of BANPU's proposed senior debentures totaling Bt5,000 million at A+ with stable outlook.
The ratings reflect BANPU's strong financial profile, its proven record as a regional coal producer, its diversified base of coal reserves and capable and experienced management team. The ratings also take into consideration the company's greater exposure in international markets as well as the political instability and uncertain investment climate in Indonesia. BANPU's diversification into the power generation business should provide reliable sources of income to withstand the fluctuations in coal price cycles.
The "stable" outlook of BANPU reflects TRIS Rating's expectations that the company will maintain its strong financial position to accommodate higher business risk and forthcoming capital expenditures. Higher diesel prices and the possibility of an export tax in Indonesia will result in higher operating costs. However, relatively high coal prices and a product mix of better quality coals should partly alleviate the margin squeeze.
TRIS Rating reported that BANPU continues to maintain its leading position in the Thai coal market while strategically expanding its coal operations into other Asian countries. More than 20 years of experience in the industry enables the company to successfully expand its coal operations in Indonesia. Currently, BANPU ranks among the top five coal producers in Indonesia. Having a variety of coal sources and different grades of coal strengthens the company's competitive advantage in international markets.
The company also diversified geographically by acquiring a 22.3% stake in Asian American Coal Inc. (AACI), owner of an underground coal project in China. Based on a technical study conducted by international mining consultant companies, as of December 2004, the company had total coal reserves of 300.8 million tonnes (100% basis), an increase of 81% from 2003, partly due to additional reserves from the Chinese mine and an increase in coal prices.
The company's coal production surged to 15.0 million tonnes in 2004 and 8.4 million tonnes for the first six months of 2005 with Indonesian mines accounting for roughly 80% of total production. For the first six months of 2005, coal sales were Bt10,512 million, a 49% increase from the same period last year. Gross margin increased to 46.7% for the first six months of 2005. The company's operating profitability is expected to drop in 2006 onwards because floating diesel oil prices in Indonesia will increase production costs.
Besides the coal business, BANPU has investments in the power generation business worth approximately Bt9,000 million as of June 2005, almost 2.5 times its initial investment. The power business consists of a 50% holding in BLCP Power Ltd. (BLCP) and a 14.99% holding in Ratchaburi Electricity Generating Holding PLC (RATCH). The company received Bt413 million in dividends from RATCH in 2004, said TRIS Rating. (end of release)