PTT Plc to finalise coal plan

PTT Plc to finalise coal plan

Spin-off delayed by cost-cutting measures

PTT's headquarters on Vibhavadi Rangsit Road. The company will make a final decision this week on whether to unload its coal business. PATIPAT JANTHONG
PTT's headquarters on Vibhavadi Rangsit Road. The company will make a final decision this week on whether to unload its coal business. PATIPAT JANTHONG

PTT Plc, the national oil and gas conglomerate, will finalise plans for spinning off its coal business at a board meeting on Friday, says president and chief executive Tevin Vongvanich.

The company had last year decided to sell its coal mining operation amid falling coal prices, but postponed the plan after applying measures that reduced coal production costs substantially.

Operating costs at coal mines in Indonesia's Jembayan and Sebuku fell from US$35 a tonne to $30. With global coal prices at $50 a tonne, Mr Tevin said there is room to make a profit.

"We will maintain coal production only if it can be profitable. We can cut transport costs and share facilities, while other coal miners have to cut operating costs," he said.

PTT started diversifying into coal in 2009 through PTT Mining Co, a wholly owned subsidiary of PTT International Co, by purchasing Straits Asia Resources, a Singapore-listed firm, for $900 million.

Straits Asia Resources has coal mines in Indonesia, Brunei and Madagascar. Some are operational, while others need time to develop.

PTT's annual coal production reached 11 million tonnes last year and is forecast at 8 million tonnes this year -- well below previous forecasts of 15 million by 2015 and 20 million by 2020.

The drop in production is in line with plunging global coal prices, which fell from $120 a tonne in 2008 to $50 now.

Last year, PTT booked an impairment loss of 20.3 billion baht from its coal assets as prices hit an 11-year low in late 2015.

In the fourth quarter of 2015, Straits Asia Resources recorded a loss of $100 million, though it posted a net profit of $7 million baht in the first quarter of this year.

"We are not spinning off the coal business because we want cash, since we have hefty cash flow of more than 380 billion baht," said Wirat Uanarumit, PTT's chief financial officer. "If the business can go further, we will maintain it."

Meanwhile, PTT expects its compressed natural gas business to turn around this year after suffering losses since the start of commercial sales in 1993.

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