Thailand: Bangchak CEO maps out goals for remaining tenure

Thailand: Bangchak CEO maps out goals for remaining tenure

HALFWAY through his four-year term as president and chief executive officer
of Bangchak Petroleum, Chaiwat Kovavisarach has outlined his vision and
goals for his remaining two years at the helm of the diversified oil
refiner.

Chaiwat is satisfied with most of the achievements that he has steered
Bangchak through during the past two years under his "3S" strategy:
security, stability, and sustainability. The only exception, he said, was
the valuation that investors had given to the company's stock: Bangchak
shares are being traded on the Stock Exchange of Thailand at lower than 10
times its earnings.

"That is what I'm dissatisfied with the most," he said.

During the past two years, the Bangchak brand has been refreshed to be
perceived as "younger". The marketing business has yielded better results,
as larger or flagship petrol stations have been built. Meanwhile the
company's non-oil business has undergone a retail-store expansion plan after
the signing of a partnership agreement last November with SPAR
International, a global food-retail franchising chain.

Bangchak's Bangkok refinery has been churning out more than 100,000 barrels
a day for the past two years, a more than 30-year record. BCPG, its
renewable-energy arm, made a successful debut on the SET last year. The
group also announced a management restructuring late last year, with the
appointments of a chief operating officer for the oil-refining unit and a
chief marketing officer.

After laying down good foundations for the company's three core businesses -
oil refining, marketing, and electricity generating - Chaiwat said he had
now moved to concentrate on incubating the fourth and fifth growth engines
for the group, namely bio-products and resources.

The group is also delegating more money and resources to research and
development and innovative activities, with its establishment of the
Bangchak Initiative Innovation Centre (BIIC) this year.

Chaiwat said the bio-products business would be an extension of Bangchak's
existing biofuel business, though it would aim at niche and high-value-added
products (HVA), rather than mass-volume products that would compete against
fossil fuels.

The group is looking at two or three HVA products, including phase-change
material (PCM), for which its pilot plant will be completed next month. A
joint venture with a Japanese partner may be formed later to commercialise
the product, which was conceptualised as an export to the Japanese market
after the 2015 United Nations Climate Change Conference (COP 21) agreement
instigated more demand for cooling materials.

Another research project is to develop algae for the food-supplement
industry.

"We should see major progress in the bio business this year because the
government has offered support in both infrastructure and taxation," Chaiwat
said.

Bangchak is also keen on growing its biofuel business, through both organic
methods and mergers and acquisitions, since its captive use of biofuel
products will ensure a cash flow that it can leverage for further extending
its business lines.

For ethanol alone, the company expects its internal demand (it uses it for
blending with petrol) to grow from about 800,000 litres a day to 1 million
litres a day soon, while its equity take from affiliated and subsidiary
firms currently totals only about 200,000 litres a day.

He said 400,000-500,000 litres a day would be more appropriate, referring to
Bangchak's targeted size of the ethanol business.

The resources businesses include the oil and gas exploration and production
unit run by its Australia-listed Nido Petroleum. In addition, it agreed in
January to provide US$112 million (Bt3.96 billion) in equity and debt
financing to Lithium Americas, in exchange for increasing its stake in the
firm to 16.4 per cent, which is expected to commence operations of its
Cauchari-Olaroz lithium-mining project in Jujuy, Argentina, in late 2019.

Chaiwat said his target was to grow both the resources and bio businesses so
they contribute significantly to the group's operating results, , each
generating more than Bt1 billion in earnings before interest, tax,
depreciation and amortisation ( EBITDA) by 2019, up from about Bt300 million
to Bt400 million and Bt500 million, respectively, at present. The overall
goal is to grow the firm's earnings before EBITDA by 20 per cent during each
of the next two years.

To reflect the firm's diversification towards non-petroleum businesses,
Bangchak will ask its shareholders at the annual meeting on April 5 to
delete "Petroleum" from its name and rename the firm "Bangchak Corporation".
Its stocks will continue to be traded on the SET under the BCP ticker
symbol, though.

"Companies that hinge on a few products can't survive long," Chaiwat said.

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com