Thailand – The Banpu Coal Story

 

Counting on coal

15/10/2012
Nalin Viboonchart

Coming from a family that built its fortune on sugar, Banpu’s founder made an unusual detour.

Some members of the Vongkusolkit family had their doubts when their youngest son proposed starting his own business. Sugar was what they knew and did well, but coal was a mystery to them.

Twenty-nine years later Banpu now is one of the leading coal companies in Asia, with reserves of just over one billion tons, market capitalisation of 108 billion baht, and net profit of 20 billion last year…

After following up his bachelor’s degree in economics from Thammasat University with an MBA in finance from Saint Louis University in the United States, Mr Chanin came back to Thailand with a dream to run a business. His family’s business – Mitr Phol Sugar Corp, which is Thailand’s largest sugar company – was not the answer, as his four brothers were already responsible for it. And the family itself did not want the youngest member to be involved in the sugar business as well.

“Four guys were enough for our family business. They wanted me to start something new,” …

His journey to the coal business started at the suggestion of [a friend]. Their first coal mine was located in Banpu village in Lampang province…

The business was in the hands of the Vongkusolkit and Auapinyakul families until Banpu went public in 1989. Limited coal resources remaining in Thailand and huge capital requirements for overseas expansion were the main drivers behind the decision to raise money through the Stock Exchange of Thailand.

Mr Chanin began surveying countries including China, Australia and Indonesia for new coal mines as far back as 1983-84. Banpu finally secured one mine site in Sumatra but the operation made little progress. Opportunity presented itself in the midst of the 1997-98 Asian financial crisis, which hit Indonesia almost as hard as it had hit Thailand. Banpu was able to acquire a coal company that had four mining concessions. This was the real starting point of Banpu’s business in Indonesia, the world’s largest thermal coal exporter.

The overseas expansion was then unstoppable. Banpu is no longer a domestic coal miner, but one of the top regional players. It invested in China for the first time in 2003. Three years later, it bought three power plants in the same country, and in 2008 it acquired a 100% stake in China’s Asian American Coal (AACI).

The two deals in China made Mr Chanin more confident that the company could grow through mergers & acquisitions (M&A) … Its biggest acquisition came in 2010 when Banpu offered to pay A$2.3 billion to control Australia’s Centennial Coal…

China is a bit different, as regulations have affected the company’s operation. The company decided to sell off its Daning coal mine while keeping two coal mine sites – Gaohe and Hebi Zhongtai – and three power plant businesses in which it holds 100% stakes. Despite the constraints, China remains Banpu’s main coal production base.

The lesson that Mr Chanin learned from China is that if Banpu ventures into any new companies there, it will focus on 100% shareholding control…

[In the future]….Banpu cannot grow without good people and teamwork. I couldn’t drive the company alone. …anyone who succeeds me has to understand how to run and manage the business successfully, and learn to sacrifice for the whole company. [Finding a successor] is one of the tough jobs that I have to do before I retire.

(Source: Bangkok Post, Economics, Counting on coal, 15/10/2012, Nalin Viboonchart, link) Silas Berry  – asiaconsult.org

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