AEC And the Challenges in Mining Business. Worapone Pongsuwan Banpu Public Company Limited October 17, 2013

Transcription

1 AEC And the Challenges in Mining Business Worapone Pongsuwan Banpu Public Company Limited October 17, 2013

2 Contents 1 Banpu Business Overview Banpu 3 Decades of Growth Banpu Overseas Investment 4 Challenges in Mining Business : Based on speaker s experiences 2

3 Contents 1 Banpu Business Overview Banpu 3 Decades of Growth Banpu Overseas Investment 4 Challenges in Mining Business : 3

4 Vision of Banpu Vision To be an energetic Asian energy provider of quality products & services and be recognized for its fairness, professionalism, and concerns for society and environment Mission To develop businesses in the fields of energy in pursuit of Asian leadership position To diversify and invest in strategic businesses to enhance competitiveness To provide a variety of quality products and services with commitment, reliability, and flexibility To conduct business in a socially, ethically and environmentally responsible manner. To build sustainable value for shareholders, customers, business partners, employees, local communities, and to be a good citizen to host governments 4

5 The Banpu Spirit Synergy A critical element for collaboration, teamwork, win-win solutions, fairness and networks in all three countries. Care Being open, humane, warm, friendly, respectful and sympathetic to each other, as well as to external stakeholders. Innovation Continuous improvement through taking the initiative, thinking out of the box, being pro-active, flexible and resilient to change. Integrity Mindset of being ethical, honest and transparent, trustworthy and commitment-oriented, disciplined and persistent. 5

6 Banpu Business Overview : Key Business Expansion Listed on Stock Exchange of Thailand Entered into China through investment in AACI Established JV for Hongsa Project in Laos Established Banpu Coal Company Limited Started operation of coal mine in Indonesia Jorong Acquired Indocoal Project Banpu s Subsidiary, ITM listed in the Indonesian Stock Exchange Acquired Centennial Coal (Listed on ASX with assets in NSW) Acquired Hunnu Coal (Listed on ASX with projects in Mongolia) 6

7 Banpu Today BANPU S OPERATIONS IN 2013 BANPU STATUS REVIEW Coal mine Coal mine project Coal-fired power Coal-fired power project MONGOLIA Hunnu (100%) CHINA Gaohe (45%) LAOS Hongsa (40%) (COD 2015) THAILAND Trubaindo (64.99%) Bharinto (64.35%) * Some Centennial mines owned <100% Luannan (100%) Zhengding (100%) Hebi (40%) Zouping (70%) BLCP (50%) Kitadin-TM (64.99%) Indominco (64.99%) Kitadin (64.99%) Jorong (64.79%) INDONESIA AUSTRALIA Centennial (100%)* 30 year track record Fundamentals are strong: cash flow, high CV coal, customers, power earnings, dividends Highly experienced and committed senior management team 2012 and into 2013, focus on strengthening fundamentals further: rationalisation, costs, efficiency, productivity Synergy drive between Banpu businesses including M&L synergies between Australia and Indonesia Organic growth : Bharinto, Gaohe, Hongsa, Mongolia Inorganic growth : ITM add-on acquisitions; vertically integrated coal-power 7

8 30 Year Track Record External Annual Revenues $bn Oil price spike Asian economic crisis Lehman crisis $2.1bn Eurozone crisis Banpu established 1983 $0.6bn $3.8 bn in s 1980s 1990s Coal Mtpa Thailand BPI, Lanna EGAT contract 2008 Mines close 32 Mtpa Indonesia 23 Mtpa 4 Mtpa 14 Mtpa 23 Mtpa China & Mongolia (equity basis) Australia 0.4 Mtpa 0.6 Mtpa 3 Mtpa 4 Mtpa 1.5 Mtpa 15 Mtpa 16 Mtpa Power GW (equity) 0.3 GW COCO 0.3 GW TECO 0.9 GW BLCP, BIC 0.9 GW 1.6 GW BLCP, BIC,Hongsa 8

9 Contents 1 Banpu Business Overview Banpu 3 Decades of Growth Banpu Overseas Investment 4 Challenges in Mining Business : 9

10 Banpu : 3 Decades of Growth The Early Years : Indigenous Energy The 1990s : Breakout Expansion and Diversification : Years of Crisis Management and Reflection : Becoming a Regional and Local Coal-based Energy Player : Consolidation and Preparation for New Era of Growth 10

11 Banpu : 3 Decades of Growth The Early Years : Indigenous Energy Established in 1983 as a small lignite mining venture in the north of Thailand. Severe global oil supply disruption and price spikes. Developed domestic coal resources as alternative fuel for Thai industry. Late 1980s Banpu was selling around 1 MT of coal per annum and listed in SET in 1989 raising towards THB 100 million. 11

12 Mae Teeb Mine, Amphoe Mae Ta, Lampang 12

13 Banpu : 3 Decades of Growth The 1990s : Breakout Expansion and Diversification Coal Business - Raised capital throughout early and mid-1990s and start overseas investment Large-scale coal contract mining with EGAT s lignite mine at Mae Moh in 1992 pushed Banpu to become large-scale mining expertise Entered Indonesia in 1990 and started coal exploration in Sumatra, acquired Jorong concession in South Kalimantan in 1996 and started operation in 1998 with 3 Mtpa 13

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15 Banpu : 3 Decades of Growth The 1990s : Breakout Expansion and Diversification (con d) Power & Steam Business Set-up Thai Cogeneration COCO in 1993 in Map Ta Phut IE and in 1995 formed 2 joint ventures to bid for EGAT s new IPP projects ; Tri-Energy Co.(700MW gas-fired in Ratchaburi) and BLCP (1,400 MW coal-fired in Rayong) Other Businesses Diversified business into other industrial minerals in Thailand and Vietnam in the 1990s including a gold mine in Thailand Earned Kingsgate shares, an Australian listed company in Australian Stock Exchange 15

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18 Banpu : 3 Decades of Growth : Becoming a Regional and Local Coal-based Energy Player Strategically focused on core skills i.e. coal & coal-fired power divested non-core investments and reinvested in core businesses Indonesia - March 2001,acquired a group of Indo Coal with 2 existing operations and 2 undeveloped deposits - In 2007,consolidated coal businesses into one identity PT Indotambangraya Megah Tbk (ITM) and listed in JSX 18

19 Banpu : 3 Decades of Growth : Becoming a Regional and Local Coal-based Energy Player (cont d) Power Business - During decade to 2010, Banpu divested its gas-fired interests (TECO & RATCH) but expanded coal-fired power business (BLCP) with total power generation capacity of 1,434 MW commissioned in 2006 & In 2006, acquired 3 power plants in Hebei and Shandong of China and reached an agreement with the government of Laos PDR to develop Hongsa, a lignite-fired power project in Xayaburi Province 19

20 Laos PDR Hongsa,Mine-mouth Power Plant, Xayaburi, Laos PDR 20

21 Contents 1 Banpu Business Overview Banpu 3 Decades of Growth Banpu Overseas Investment 4 Challenges in Mining Business : 21

22 Banpu Overseas Investment : Theory & Practicality 1. Targeting Country Politics, Administration, and Government Culture & Community National Development Policy & Macro Economics Market Size & Strategies Tax & Interest Rate Commercial Bank System Rules, Regulations, Licence 22

23 Banpu Overseas Investment : Theory & Practicality 2. Finding Optimum Business Directions Corporate Set-up Models Joint Venture especially with Local Company Local Employment and Labor Laws Increasing of Salary,Wages, and other Production Cost Clear Vision and Mission 23

24 Banpu Overseas Investment : Theory & Practicality 3. Banpu SD Framework License to Operate Health and Safety Environment Community Development Localization Good Governance Business Ethic Compliance Good Citizen Competitiveness People Development Operational Excellence Technology 24

25 Contents 1 Banpu Business Overview Banpu 3 Decades of Growth Banpu Overseas Investment 4 Challenges in Mining Business : 25

26 Challenges in Mining Business 1 Project Study-Pre-development Stage 2 Contractual framework-key Project Documents 3 Development Stage-Project Implementation 26

27 Challenges in Mining Business 1 Project Study-Pre-Development Stage and start risks undertaking 1. Exclusive MOU to acquire target areas and share benefits with Partner and /or Government M&A to acquire operating assets: Indominco, Indonesia and CEY, Australia Cashflow generation from day one Slightly upside Operating risk profile Bid Proposal to compete for Government s Project: Hongsa Project, Laos Government s support Higher cost for wining the project caused low return High exposure from commitment with Government Greenfield prospect with Local Partner : Jorong, Indonesia Yenbai, Vietnam Rely on partner s network High risk high return if success 27

28 Challenges in Mining Business 1 Project Study-Pre-Development Stage and start risks undertaking Vietnam Greenfield Project at Yenbai Province Ground Calcium Carbonate 28

29 Challenges in Mining Business 1 Project Study-Pre-Development Stage and start risks undertaking Laos Greenfield Project Hongsa Mine Mouth Power Plant 29

30 Challenges in Mining Business 1 Project Study-Pre-Development Stage and start risks undertaking 2.Key Laws and Regulations Foreign Investment Laws Clarify scope of investment Clarify privileges especially tax holiday In general no 100% for minerals investment Minerals Laws Clarify step of implementation Clarify scope of authorization granted to local government: Autonomy in Indonesia Taxes Laws May differ from the privileges of the project Conflict of interpretation and must clarify with tax officials Import taxation 30

31 Challenges in Mining Business 1 Project Study-Pre-Development Stage and start risks undertaking 2.Key Laws and Regulations Labor Laws Different from country by country Working hour planning Terms and contract of engagement Land Laws May add double cost to the project if not clarify Resettlement and Compensation Obligations under concession agreement Policy and rate under local government s approval Environment Laws Become more stringent specifically dust and noise Lender s require higher standard 31

32 Challenges in Mining Business 1 Project Study-Pre-Development Stage and start risks undertaking 2.Key Laws and Regulations JVC with State Enterprise Share portions Lead role and responsibilities Secure equity contribution from local partner Change in Laws New laws may heavily impact project value Limit amount of damages stated in CA Arbitration Exit strategy if default 32

33 Challenges in Mining Business 1 Project Study-Pre-development Stage (cont d) 3. Economic of the Project Exploration and Resource Estimation Mine Planning Hydrology Transportation in remote areas both internal and external 33

34 Challenges in Mining Business 1 Project Study-Pre-development Stage (cont d) 3. Economic of the Project Key assumptions for Project Valuation plus contingency Project Management Skill Cross Cultural Management Do and Don t Project Schedule Adjustment Profit Sharing/Free carried interest of JVC (State Own) Must be aware on financial status of local partner Don t look down on this burden Key Work Forces and Motivation 34

35 Challenges in Mining Business 1 Project Study-Pre-development Stage (cont d) 4. Health Safety Environment and Community (HSEC) Health and Safety: for employees who work at site especially hi-gene of local foods so must provide hardship and allowance for motivation of working at site Environment management in terms of EIA Study and standard measures so must select and engage only a well known EIA consultant company to conduct EIA study Community relations and community development including Resettlement Action Plan and compensation fees Negotiation with Government regarding standard of EIA protection measures : for example World Bank Guideline or Equator Principle 35

36 Challenges in Mining Business 1 Project Study-Pre-development Stage (cont d) 5. Company s Brand and Image Financial Health: To ensure the financial capability to develop the project successfully Technology: To ensure the knowledge and technical capabilities to develop the project References: Past performances related to such mineral project development 36

37 Challenges in Mining Business 1 Project Study-Pre-development Stage (cont d) 6. Government Relations: Must Have!!! High level Authorities: To ensure all key approvals of the project Middle level Authorities: To ensure the conclusion of all negotiated issues within project time frame Low level Authorities: To help expedite the procedure of document flow Right or wrong channel selection may encourage or destroy the project with or without achievement 37

38 Challenges in Mining Business 1 Project Study-Pre-development Stage (cont d) 6. Project Financing (Non-Recourse) Country Risk Rating: Add financial cost or may impact on nonrecourse financing Project Information Memo (IM): To provide summary of project information to Finance Institutions Project Insurance Advisor to assure adequate coverage to protect the financial interests of the Shareholders and Lenders Equity Finance for State Enterprise: Usually the State Enterprise is unable to secure equity amount prior to conclude Financial Agreement 38

39 Challenges in Mining Business 2 Contractual Framework-Key Project Documents 1. Shareholders Agreement to register the Company 2. Mine Concession Agreement 3. EPC Agreement 4. Conditions Precedent 5. Project Land 6. Water Right 7. Compensation and Taxes 8. Environment and Social Obligations 9. Resettlement Obligations 10.Insurance 11.Supply Agreement 12.Government Approval 13.Force majeure 39

40 Challenges in Mining Business 3 Development Stage-Project Implementation 1. Financial Agreement with Lenders 2. First draw down after complete conditions precedent 3. Mine Construction Phase Contractor s privileges on taxes must be similar to developer Contractor management to comply with SD policy Construction risk and mitigation 4. Operation Phase 40

41 End of Presentation Thank You Q&A 41