Banpu Power PCL, a subsidiary of Bangkok, Thailand-based coal mining and power plants operator Banpu Public Company Limited (BKK: BANPU), has agreed to acquire four solar power plants in China’s Shandong province with an aggregate capacity of 78.5 MW, for $93 million (RMB 604 million).
The deal expected to close by mid-2016, subject to successful on-grid connection of the projects. The acquisition will be financed through a combination of debt and equity.
The move comes a few weeks after Banpu said it acquired a 29.4% stake in the Chaffee Corners Joint Exploration Agreement (JEA), a shale gas operation in Pennsylvania, for $112 million. The low-cost Chaffee Corners JEA’s operation is in the northeast section of the Marcellus Shale, the largest source of natural gas in the US and one of the world’s biggest. The JEA is 65.4%-owned and operated by Talisman Energy Inc. (NYSE: TLM).
Banpu, Thailand’s largest coal miner, is a pioneering Asian energy company, with power, coal and renewable energy businesses in nine countries; Thailand, Indonesia, China, Australia, Lao PDR, Mongolia, Singapore, Japan and the United States. The company was founded in 1983 by the Vongkusolkit and Auapinyakul families.
In 2010 Banpu acquired Australian mining company Centennial Coal Co. Ltd for US$2 billion. Centennial operates 12 mines in New South Wales (supplying coal for export and approximately 40% of the southeastern Australian state’s coal-fired electricity.
“Entry into solar power in China is part of Banpu Power’s strategy to invest in markets with attractive growth fundamentals and strong government support,” said Somruedee Chaimongkol, CEO of Banpu PCL.
“We are building on the success of our solar business in Japan and a decade of power sector experience in China. With the addition of these solar operations in Shandong and the completion of the 1,320 MW Shanxi Lu Guang power project in 2017, Banpu is on track to increase its power generating capacity to 4,300 MWe by 2025 of which around 20% should be renewables-based,” she added.
Shandong is China’s third largest province by GDP with a population of over 90 million people. Banpu Power has operated a 70%-owned coal-fired combined heat and power plant, Zouping, in Shandong since 2006. Electricity generated from all the four solar projects will be supplied to the provincial grid with an agreed structure for power tariffs and subsidies.
In the first quarter of 2016, Banpu’s power business EBITDA increased 10% QoQ to USD 42 million with net profit contribution from China Power maintained at a solid level of USD 18 million.
In Thailand BLCP reported a strong quarter with smooth operation, high dispatch rate, with an equity income contribution to Banpu of USD 20 million. Reporting an equity income of USD 1.4 million, the Hongsa operation in Laos was still in the ramp-up process with the last unit commencing commercial operation on 2nd March 2016.
During the first quarter, Banpu’s coal operations continued to achieve cost savings and productivity gains. Coal business EBITDA was down only slightly versus the previous quarter at USD 78 million. Banpu is targeting average costs for its Indonesian coal operations of USD 43 per tonne in 2016 down from USD 49 per tonne in 2015 and AUD 48 per tonne in Australia versus AUD 49 per tonne in 2015.
In Australia, Mandalong resumed full operation after undergoing a Longwall changeover in the previous quarter. As a result of this and other productivity improvements total sales volume from Australia was up 22% QoQ from the previous quarter at 3.4 million tonnes and the gross profit margin increased from 17% to 23%.
“Thanks to the solid performance of our power business and careful cost management at our coal operations, our quarterly consolidated EBITDA stabilized at around USD 120 million, the same as the previous quarter. Looking ahead we expect to see contributions from our new US shale gas business and additional cashflow growth from our power business,” concluded Chaimongkol.