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. They wondered how long this new venture called Banpu might last.
Twenty-nine years later Banpu now is one of the leading coal companies in Asia, with reserves of just over one billion tones, market capitalisation of 108 billion baht, and net profit of 20 billion last year.
It’s been sweet vindication for founder Chanin Vongkusolkit, though he points out that Banpu is still just medium-sized in terms of market capitalisation, at 108 billion baht, ranked fifth or sixth in Asia Pacific.
“At the start, I didn’t think about bringing Banpu to grow in the global market,” he recalls. “The first time I thought about this issue was when Banpu acquired operations in Indonesia in 1998. It was only eight years ago that we set a target to become a regional coal company.”
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,” he says.
Mr Chanin’s brother had some ideas but coal wasn’t one of them. He favoured property development and steel. The former did well and his family is still active in property today, but the latter was different.
Mr Chanin might be a steel tycoon instead of a coal magnate today, but steel is a highly cyclical business. Mr Chanin experienced a down cycle, with two years of high costs and thin margins, and decided to sell to another investor.
He doesn’t see his exit from steel as a failure but as the turning point that led him to coal, which has been far more successful.
His journey to the coal business started at the suggestion of his friend, Metee Auapinyakul. Their first coal mine was located in Banpu village in Lampang province. The villagers had to relocate to a new residential area three kilometres from the mine site. To thank the villagers for their sacrifice, Mr Chanin and Metee named the company Banpu. To this day the name reminds him how and where the success began.
Mr Chanin has been the only president and chief executive of Banpu since its establishment in 1983. Although his background is in finance, he has learned about coal from other experts who work with the company.
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) as organic growth opportunities were limited. Its biggest acquisition came in 2010 when Banpu offered to pay A$2.3 billion to control Australia’s Centennial Coal.
Every acquisition has a degree of risk and the financial stakes are high, and Mr Chanin admits that he’s always concerned about the acquisition results. He views the company’s operations in Indonesia as a success but says it’s too early to pass judgement on Centennial.
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.
Reflecting on nearly three decades since he set out, Mr Chanin is grateful that his family was open to the idea of something that might have been considered risky.
“If my family had not given me an opportunity, limited my ability or even asked me to stay with our sugar business, I might not be a coal company owner,” he said. “Luckily, I was the youngest child, so what I wanted to do, I was allowed to do it with the strong support from my family.”
The openness of his family has been transferred to the company’s working culture, which is based on Mr Chanin’s belief in empowering people. For him, good human resource development is the toughest job.
Now that the founder is 59, he has started to think about his successor. It doesn’t matter whether that person has the surname Vongkusolkit, though Mr Chanin began a training programme for the younger family members five years ago. The goal, he said, was to prepare effective people to carry on the businesses of the family.
Mr Chanin designed the training programme himself. Some experts in management were asked to be trainers. They’ve trained two generations already, and now he feels happy that he can empower the family’s heirs, unlock their potential and create feelings of ownership.
“I passed a number of obstacles and crises myself. I faced many challenges,” he says. “Whether the industry is going through a boom or a bust, I as the leader have to open to those challenges and pass them.
“In doing business, from now on, I have no concerns anymore. The only thing I fear is whether the decisions made during my time will yield good results in the future, and whether we’re going on the right track. Whenever I have to make a decision, I have to think about this.
“However, Banpu cannot grow without good people and teamwork. I couldn’t drive the company alone. I created this programme because of my belief that anyone who succeeds me has to understand how to run and manage the business successfully, and learn to sacrifice for the whole company. This is one of the tough jobs that I have to do before I retire.”
