Coal Asia IPO gets SEC nod

MANILA, Philippines - Coal Asia Holdings Inc.’s planned P800-million initial public offering (IPO) has secured the Philippine Stock Exchange’s approval, clearing the way for the listing of its shares on the local bourse.

The company is offering to sell 800 million shares, representing 20 percent of total issued capital stock at a par value of P1.

Net proceeds from the offering, amounting to P726 million, will be used to bring the company’s Davao Oriental and Zamboanga-Sibugay coal mines into commercial production by 2014 and 2015, respectively.

Coal Asia produces high-grade coal of less than 100,000 metric tons a year. It hopes to ramp up production to up to 600,000 MT per year beginning 2014.

The company is eyeing a net income of P500 million by 2014. In 2011, it more than doubled its profit to P4.91 million from P2.03 million as sales expanded 63 percent to P21.84 million.

Based on the Department of Energy’s 2009-2030 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 at slightly over 15,000 MW.

Bulk of the capacity is needed by the Luzon grid at 11,900 MW, followed by Mindanao at 2,500 MW and Visayas at 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.

A Philippine Mineral Reporting Code standard geological report done in April 2012 on the two mines identified total coal reserves of 120 million metric tons.

The Davao mine which covers a 214-hectare area from Old Macopa to Bactinan alone has observable coal reserves of 28,000 tons per hectare, translating to an estimated market value of P23.8 billion.

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.

To date, the company’s coal assets amount to P12.5 billion, based on a valuation report by Multinational Investment Bancorporation.

Coal Asia has already bagged off-take contracts both here and abroad but is also eyeing the export markets including India, Japan, Taiwan, Hong Kong and Vietnam.

The company 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.