Coal Asia gets SEC nod for IPO-A A +A
Tuesday, September 11, 2012
COAL Asia Holdings will push through with its coal mining exploration in the provinces of Davao Oriental and Zamboanga Sibugay after the Securities and Exchange Commission (SEC) has approved its application for an initial public offering (IPO) listing 800-million shares on the Philippine Stock Exchange's first board.
Coal Asia, the parent company of Titan Mining and Energy Corporation, earlier announced its planned IPO aiming to raise P726.87-million net of IPO expenses to complete exploration and further expand production works for both Davao Oriental and Zamboanga-Sibugay mines to bring them into commercial production by 2014 and 2015 respectively. Currently, it is producing less than 100,000 metric ton of coal per annum.
The offered shares, representing 20 percent of the company's total issued capital stock, are being made available at par value of P1 apiece to attract retail investors to own a stake in Coal Asia.
And all indications are pointing towards Coal Asia becoming the second major player in supplying the country's energy generation sector after industry leader Semirara Mining Corp. that controls 94 percent of the market. To date, Coal Asia has been grabbing market share from Semirara.
Under the Department of Energy's 2009 to 2030 Philippine Energy Plan, some 16,550 megawatts of additional power capacity is needed between now and 2030.
The country's installed generating capacity is currently only slightly over 15,000 megawatts (MW).
Bulk of the capacity is needed by Luzon of 11,900 MW, followed by Mindanao of 2,500 MW and Visayas of 2,150 MW.
In total, there are over 3,000 MW of coal projects in the pipeline that would need a secure source of fuel supply.
Energy Secretary Jose Rene Almendras is pushing for baseload power generation such as coal to address the power deficit in Mindanao, which is heavily dependent on hydro. Hydropower plant's seasonality has caused widespread power outage in Mindanao during summer.
According to Almendras, the government would like to promote coal exploration "in the same breadth that we would like to promote geothermal exploration, upstream oil exploration."
"We are looking for energy supply security, we're looking for ways in which we are going to have a lot more domestic component to the supply of energy," Almendras was quoted as saying.
"The only choice we have today for baseload generation is coal and we have got to secure supply for these coal plants," he said.
Considering that majority of these expansion and new coal power projects will adopt circulating fluidized bed (CFB) combustion technology that can utilize blended coal, demand for coal is seen to increase tremendously.
Not counting the increased utilization of coal from about 15 cement plants around the country and continuing demand for coal from industries such as alcohol, garment/textile, canning, coconut oil, rubber, plastic and seaweed processing plants.
Coal Asia has been drawing interest from potential strategic and financial investors from the power generation and cement industries to help ensure steady supply of coal and possibly hedge against another significant run-up in coal prices given the energy crisis in Mindanao.
Proving the company's potential in the coal market, a Philippine Mineral Reporting Code standard geological report, done in April 2012, on COC# 159, 166 and 167 in Davao Oriental and Zamboanga Sibugay identified total Coal Reserves of 120 million metric tons.
The company's Davao Oriental Mine covering a small 214-hectare area from Old Macopa to Bactinan alone has observable coal reserves of 28,000 tons per hectare translating it to an estimated market value of P23.8 billion and is on track for an initial commercial production of 600,000 metric tons of high grade coal per year scheduled for 2014.
To date, the company's coal assets amount to P12.5 billion based on a valuation report by Multinational Investment Bancorporation.
Coal Asia is also looking to supply steam-grade coal to cement plants, canneries, and manufacturing plants that have converted their diesel-powered plants into coal-powered plants to reduce costs and expects increase in coal demand as more coal-powered plants are being built.
Published in the Sun.Star Davao newspaper on September 12, 2012.