Banpu joins tender to develop South Sumatra power plant

Tony Hotland, The Jakarta Post, Samarinda

Thailand's largest coal miner Banpu Plc. said it would invest up to US$200 million to build a power plant in South Sumatra next year should it win a project to supply power tendered by state electricity company PT PLN.

Banpu business development director Pongsak Thongampai said the company had already submitted a proposal for the pre- qualification bid in September to PLN.

"PLN will later pick the three most-qualified bidders and will negotiate with them about the implementation of the project," he said here during the weekend.

Pongsak said the $200 million power plant was expected to cover power supply shortages in Sumatra and possibly Java, and that Banpu would power the plant with coal from its Bara Sentosa mine in South Sumatra.

"We'll use our coal reserves from this mine, which is still in the feasibility study phase, mostly because the reserves there are relatively low quality and don't meet the standard for export," Pongsak said.

Pongsak said Banpu's total coal production next year from its business in Indonesia was expected to jump to about 16 million tons, up from this year's target of about 14.5 million tons.

"The boost will come from our new mine in Muara Lawa in East Kalimantan operated by PT Trubaindo. The mine will start production later this year," he said.

Regardless of whether it wins the power supply tender, Banpu plans to spend another $300 million here next year -- the same total as last year -- mostly on feasibility studies and further construction.

"But we have no plans yet to make more acquisitions," Pongsak said.

Banpu exports most of its coal to countries like China, Japan, Korea, Taiwan, India and to some European nations.

The company and other coal miners are now making handsome profits from higher coal prices partly because of rising demand from energy-hungry China and Japan amid soaring prices of oil and gas.

Demand for the fossil fuel, the source of about a quarter of the world's energy, rose faster last year than for any other, as China, the world's largest coal consumer, burned about a sixth more coal.

"I'm positive the high prices will extend until next year, but would probably start declining in the second semester as fuel supplies, mostly for oil, become more stable," Pongsak said.

Aiming for a leading position in Asia, Banpu entered the Indonesian coal business in 1996 as a producer and distributor of coal and later acquired mines from the now-defunct Indonesian Bank Restructuring Agency, which were previously owned by the Salim Group.

The company has three operating mines in East Kalimantan and South Kalimantan, while three more in South Sumatra and East Kalimantan are yet to produce.

Banpu is the third-largest coal producer here after PT Kaltim Prima Coal and PT Arutmin Indonesia; both controlled by publicly listed PT Bumi Resources.