Banpu expects 20% growth in revenue

Optimism based on higher coal prices

SET-listed Banpu Plc, Thailand’s largest coal producer, expects 2017 revenue to grow by 20% from US$2.26 billion (76.9 billion baht) last year on the back of rising global coal prices, according to chief executive Somrudee Chaimongkol.

She said that while many countries have developed renewable power projects over the past two years, demand for coal-fired power is still growing steadily, enabling Banpu to reap higher revenue as coal prices climb.

The company forecasts an average sales price for coal of $63 a tonne this year, up 20% from last year’s $51.50, pushing coal sales revenue higher despite flat sales volume.

Ms Somrudee said Banpu has agreed to deals for selling 21 million tonnes of coal in advance. Of the total, 60% is committed at a fixed price to secure revenue.

Demand for coal from China’s powergenerating system is expected to be even higher next year as major reservoirs need to discharge little water to prevent floods, forcing the operations of major hydropower plants to be automatically suspended, Ms Somrudee said.

She said the company is also planning mergers and acquisitions in the long term, particularly in Australia, where Banpu is approaching a deal worth $2.5-$2.8 billion.

On the Chinese front, she said demand for coal is steadily rising. Even though most major cities are switching to cleaner energy from renewable sources, fossil fuels are still needed for China’s real sector.

Ms Somrudee said Banpu is also in talks to acquire a coal mine in Indonesia, but gave no details, only saying the deal is expected to be finalised by year-end.

She said Banpu is implementing a plan to expand its existing coal mine reserve in Indonesia to 15 years of production, up from 11 years. That increase in reserve could raise the company’s total coal production volume to 375 million tonnes.

Coal production in Indonesia represents almost half of Banpu’s total sales volume each year, she added.

The International Energy Agency (IEA) estimates that global energy demand could rise 40% to 18 billion barrels of oil in 2035, up from 13 billion in 2017. But fossil fuels’ portion of global energy demand will drop to 60% in 2035 from 70% this year, the IEA said.

BANPU shares closed yesterday on the SET at 16 baht, up 30 satang, in trade worth 946 million baht.