The listed coal and electricity company surprised the market last month when it announced a Bt12.9-billion rights offering – its first in 16 years.Many research houses reacted coolly to the fund-raising plan, the proceeds of which will go merely to repaying part of its outstanding debts of $3 billion.

CEO Somruedee Chaimongkol said Banpu’s capital expenditure (capex) budget of $554 million geared up for 2016-2020 included only the organic expansion plans of its existing projects, and not new projects and merger and acquisition opportunities.

“We have a rather huge ‘capex growth’ plan, which we will announce together with the deal when it is done,” she said.

Somruedee said the rights offering, due to be tabled for shareholders’ approval on April 19, would cut Banpu’s net debt-to-equity ratio to 0.8 times, from 1.2 at present, as part of the company’s plan to prepare itself for “a new era of growth”.

Banpu hopes to take advantage of the current down cycle in commodity prices to acquire coal-mining assets, grow its renewable-power business and conventional power plants, as well as entering new businesses, such as natural gas and energy distribution, she explained.

“If one looks at our capital-increase record, the last time we did it was in 2000. Therefore, if there is not a good enough reason to do so, we don’t do it,” she said.

The group expects to increase its power-plant capacity to 4.3 gigawatts by 2025, of which 20 per cent will be renewable power.

After sliding since 2011, coal prices have been much more stable this year, as supply and demand are becoming more balanced.

The company expects coal prices to be similar to last year’s level, and targets increasing its sales volume to 46.1 million tonnes, from 45.4 million tonnes in 2015.

The second major step in Banpu’s financial plan will be the initial public offering (IPO) and spin-off of its power and renewable-energy business, Banpu Power.

The IPO filing was approved by the Securities and Exchange Commission early this week.

Coal’s contribution to the group’s earnings before interest, tax, depreciation and amortisation is expected to reduce from 70 per cent to 60 per cent in the future, with power business increasing its share to 40 per cent.

In a research note issued on March 14, Krungsri Securities said Banpu’s capital-increase plan, which would result in a 50-per-cent dilution of the firm’s earnings per share, signalled a difficult outlook for its coal business, as it would also receive an estimated Bt20 billion from listing Banpu Power this year. Banpu has announced a 1-for-2 rights offering at Bt5 per share.

The price is at a large discount to the closing price of Bt18.90 prior to the announcement, suggesting Banpu wants to ensure full subscription of the new shares, the research house noted.