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INTRODUCTION TO COAL BUSINESS
SPECIAL ANALYST MEETINGApril 22, 2009
Coals are fossil fuels formed through the oxidation and biodegradation of plant remains d b t d d
COAL TYPES AND ITS CHARACTERISTICS
preserved by water and mud.
HIGH MOISTURE CONTENT OF COAL
CARBON/ENERGY CONTENT OF COAL HIGH
Low Rank Coals
47%
Hard Coal
53%d re
sere
s%
of W
orld
Lignite
17%
Sub-Bituminous
30%
Bituminous
52%
Anthracite
1%
USES Largel po er THERMAL COAL THERMAL & METALLURGICAL COAL Domestic/USES Largely power generation
THERMAL COALPower generation
Cement manufactureIndustrial uses
THERMAL & METALLURGICAL COALPower generation
Cement ManufactureIndustrial uses
Manufacture of iron and steel
Domestic/ Industrial including
smokeless fuel
CV(GAR)( kcal/kg) 4,000-5,000 5,000-6,000 6,000-6,700 6,800-7,000CV: Calorific Values GAR: Gross As Received 2
COAL VALUE CHAIN AND ITS APPLICATIONS
Upstream Intermediate Downstream End Use
Coal MineCoal Mine
Steel and CementCoal Industry
ain
ElectricityPower Plants
IGCCLNG
alue
Cha
ElectricityCoalbedMethane
Power PlantsCH4
PipelineFertilizers
Coa
l Va
Feedstocks
CCS
PetrochemicalProductseg
rate
d
PETCHEM Plants
CCS
SynGas
Gasification
Coal Liquefaction LPG
Di l/
Cooking
Inte
Diesel/Gasoline
Remark: IGCC = Integrated Gas Combined Cycle3
RESOURCE AND RESERVE CLASSIFICATION
4
SEABORNE THERMAL COAL TRADE
Source: Barlow Jonker
• Total global seaborne thermal coal trade accounts for more than 600 mtpa
• Pacific Trade is the largest market for seaborne thermal coal
5
ASIA MARKET CONTINUES TO GROW
4 6%
2.5% CAGR
9.8%
4.6%
CAGR
CAGR
Source: Barlow Junker
Coal demand growth is the highest among other fuels.6
THERMAL COAL SALES AND MARKET OPTIONS
• Currently producers offer mid-term contract, lasting 2 or max 3 years, due to volatility in production cost and market price
• Pricing in the Pacific market is based on the Newcastle Thermal Coal benchmark at reference energy 6322 kcal / kg GAR
TermContract / kg GARContract
• Fixed terms, price is based on Newcastle Thermal Coal benchmark • Adjustments are in line with those in long term contract on energy, ash, sulphur and moisture sub bituminous
One-yeardjust e ts a e l e w t t ose lo g te co t act o e e gy, as , sulp u a d o stu e sub b tu ous
coals)contract
• Commonly used by power utilities for a certain tonnage or cargoes if a shortage in stocks appearsT d • Commonly used by power utilities for a certain tonnage or cargoes if a shortage in stocks appears• One off contract, some on a delivered basis (C&F)Tender
• Pricing reflects supply and demand balance• Actual / physical settlements on the spot market is ~10 % of sales due to the volatility in pricing Spot market
• Popular in Europe where coal is commoditised • Regulations on credit and risk limit entry by Asian coal producers• Reluctance by Asian buyers to move away from physical trade due to reliance on energy imports
Derivatives
7
MINING TECHNIQUES
• Two types of mining techniques – Open Cut mining and Underground mining.
• Depending on the location and depth of cover of the deposit, the mine will be epe d g o t e ocat o a d dept o co e o t e depos t, t e e bedeveloped as either an open-cut or underground operation, or a combination of both
All operations in Indonesia are open-cut mining8
PRODUCTION PROCESS & INDONESIAN MINING COSTS
Production rates vary significantly across mines depending on geological and operating conditions.
Production 8-10% of reserves per annum
40-50% of reserves produced by end of plateau period
Mining method is location-specificMining method is location specific
(Mining Cost Components)
Overburden Removal (46%) Coal Removal (5%) ROM Haul (9%)• Digging soil & rock above coal seams • Digging coal in coal seam • Transfer coal to process area
RoyaltyRoyalty
• Grinding and sieving • Transfer process coal to barge
Processing (3%) Product Haul (8%) & Barging (9%) (20%)Grinding and sieving p g
9
COAL MINING DEVELOPMENT PROCESSES
General Survey
10
INVESTMENT STRUCTURE
(Invest through “LintsPTT SRL
60% 40%
(Australian based)(Invest through “LintsLimited” a fully-own subsidiary of PTT International)
SBI (C l A t H ldi C )
Straits Salt(Australian
60% 40%
(Coal Assets Holding Company) (Australian based)
SAR(Singapore Based)
Madagascar(Coal Greenfield Project)
Brunei(Coal Greenfield
Project)
47.1%35% 33.5%
( g p )Project)
Indonesia Based
100% 100% 80%
Laung(Coal Exploration
Project)
Jembayan(Coal Mine Operation)
Sebuku(Coal Mine Operation)
100% 100% 80%
Project)
SBI
SPECIAL ANALYST MEETINGApril 22, 2009
Important Notice
Nothing in this presentation constitutes an offer of securities for sale.
Th iti h t b d ill t b i t d d th US S iti A t f 1933 d d (th “S iti A t") thThe securities have not been, and will not be, registered under the US Securities Act of 1933 as amended (the “Securities Act"), or the securities laws of any state of the US or other jurisdiction and the securities may not be offered or sold within the US or to, or for the account or benefit of, US Persons (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws. Neither this presentation nor any copy of it is for distribution directly or indirectly in or into the US.p y py y y
This presentation contains certain forward looking statements and forward-looking financial information. Such statements and financial information are based on certain assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Straits Resources or Straits Asia Resources to be materially different from those forecast The inclusion of such statements and information should not be regarded as a representation warranty or prediction withforecast. The inclusion of such statements and information should not be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions or that forecast results will or are likely to be achieved.
This presentation is for information purposes only and does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied in any connection with, any contract or
it t h t Thi t ti h t b fil d l d d i t d d i j i di ti d i i t f thicommitment whatsoever. This presentation has not been filed, lodged, registered or approved in any jurisdiction and recipients of this presentation should keep themselves informed of and comply with and observe all applicable legal and regulatory requirements. This presentation is provided to the recipients on the basis that each recipient warrants that it/he is a person who may receive it without any requirement for filings, lodgements, registrations or approvals in the jurisdiction in which this presentation is received by such recipient.
2
Transaction Drivers
Vision:
• SBI established as an energy coal platform, with the financial, technical and operational capability to actively pursue and develop opportunities in p p y y p p ppthe global coal sector.
• Consolidate and expand existing operations and progress development• Consolidate and expand existing operations and progress development of SBI portfolio of high quality projects.
• Form a regionally significant, diversified and reliable supplier of energy coal to global markets.
• Contribute and participate in providing energy security, economic growth and environmental solutions to the emerging nations of Asia.
3
Rationale:Transaction Drivers
• Transaction provides both stakeholders with a strong strategic platform from which to grow an international coal business.
• Coal represents an important long term diversification strategy and international growth opportunity for PTT.
C l id l i d th ld’ f t t i d t d i• Coal now widely recognised as the world’s fastest growing and most enduring energy source.
• Application of PTT’s regional expertise and relationships in the energy sector to• Application of PTT s regional expertise and relationships in the energy sector to capture new coal opportunities.
• The acquisition of 60% of SBI will enable PTT to diversify its resource base, ti l f t i t d i toperational footprint and income streams.
• Straits Resources will contribute:
Low cost operations generating high demand thermal coal products with substantial long-term growth potential.
High quality and diversified customer base.
Extensive expertise in the mining resource sector.
4
te s e e pe t se t e g esou ce secto
Diversified growth platform with two major coal project opportunities in the pipeline.
Key Assets of SBI
b k• Sebuku• One of the world’s lowest cost export coal operations.• Top quality power station brand.• Total production capacity target of 8Mtpa• Total production capacity target of 8Mtpa• 3.5Mt of sales in 2008• 381Mt JORC Resources
• Jembayan• Total production capacity increased to 11Mtpa • Jembayan and Prangat recognised ‘enviro coals’• Production target for 2009 of 7.0-7.5Mt
254Mt JORC R & 112Mt JORC R
Sebuku
JembayanBrunei
• 254Mt JORC Resources & 112Mt JORC Reserves• Exploration target of 600-700 Mt.
• Sakoa (Madagascar) Coal• Coal inventory (non-JORC) estimated at greater than 100Mt• Coal inventory (non JORC) estimated at greater than 100Mt.
Exploration target could exceed 500Mt.• Feasibility study in 2009, targeting production of 3 to 5 million
tonnes of export thermal coal within 3 to 4 yearsB i C l Madagascar• Brunei Coal
• Joint Venture with Far East Energy (FEE) to explore entire country for coal projects.
• PL’s currently under application.
Madagascar(Sakoa Coal)
5
y pp• Exploration and drilling in 2009 (under EL’s)
Operating Coal Mines
Location Map
6
Sebuku
7
8
SakoaSakoa
9
Coal’s Position in the Global Energy Equation
11
Source: IEA
The global seaborne traded thermal coal market has grown steadily since its establishmentsteadily since its establishment
Global seaborne traded thermal coal market (Mt)
516554
583631
660 681 669
286260 265
294 310 327 346 355407
455 463
116 125 133 137 142 162188 196 193 212 209 225 237
260 265
101
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
E
Source: Australian Mineral Economics
12The increased dependence on coal-fired power generation and declining domestic availability of coal continue
to drive the growth in seaborne traded thermal coal market
Global end uses of the primary sources of energy - coal, oil, and natural gas
2010E global end uses of coal 2010E global end uses of oil 2010E global end uses of natural gas
2010E global end uses of COAL
2010E global end uses of OIL
2010E global end uses of NATURAL GAS
Commercial0.6%
Residential2.4%
Transportation
0.1%
Power generation
5.1%
Residential5 7%
Commercial2.7%
Transportati
Commercial6.3%
Residential
Transportation
0.9%
Industrial42.8%
Power generation
64.1%
Industrial32.8%
5.7% on54.2%
Industrial
Residential17.1%
Power generation
Total consumption = 140.2 quadrillion Btu Total consumption = 181.1 quadrillion Btu Total consumption = 120.3 quadrillion Btu
Industrial32.3%
g32.9%
Essential commodity for base load power generation, accounting for almost two-thirds of its end usage
Predominantly used in transportation, accounting for more than half of its demand
Predominantly used in industrial and power generation (peaking capacity)
Source: International Energy Outlook 2008, Energy Information AdministrationNote: Btu stands for British Thermal Unit
thirds of its end usage demand capacity)
13
Thermal coal is the key foundation energy source for power generation
Coal is the most cost competitive fuel source globally
Long Run Marginal Cost for new build Base-load Power Stations160
Long Run Marginal Cost for new build base-load power stations
Thermal coal is the
140
Thermal coal is the essential commodity for base load power
100
120
S$/M
Wh
load power generationSubstantial long 60
80
US
run cost advantage over other energy sources20
40
CAPEX
OPEXFuel
0Import Coal ST Domestic Gas
CCGTNuclear Import Gas
CCGTFuel Oil Fired
ST
CAPEX
14
CCGT CCGT ST
Source: WoodMackenzie1 ST: Steam Turbine; CCGT: Combine Cycle Gas Turbine; Long term fuel price outlook (2008-2025); 2008 prices
Coal is the most sustainable energy source globally
Proved reserves (Bnt) World proved reserve life1 (years)
133847
133
Significantly longer
reserve life
60
~6.0x ~5.0x
reserve life
142 169
42
142
Coal Gas Oil Coal Gas Oil22
Source: BP Statistical reviewNote: Conversion rates used — 1 million tonne of oil equivalent = 7.33 million barrels of oil equivalent
1 B d d f 31 D 2007 d 2007A d ti
Coal Gas Oil Coal Gas Oil
15
1 Based on proved reserves as of 31 Dec 2007 and 2007A production2 Coal includes Anthracite, bituminus, sub-bituminous and lignite quality coaloma
Oil and gas continue to face rising finding and development costs
Global finding and development costs—actual for selected reporting companies ($/boe)30
$27.97
20
25 $24.10
15
20
$11 21
10$7.27
$11.21
0
5
1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: Independent Oil & Gas Consultant
16
Rapidly increasing F&D costs for oil & gas further establishes the long term cost competitiveness of thermal coal as a fuel source
Increase in global energy demand to be fueled by strong demand growth from China and India
OECD China India Rest of world
Global energy demand 2005A—2030E (quadrillion Btu) 2005A—2030E global energy demand growth by region (%)
3.4%2.9%
2005E-2030E global energy demand growth by region (%)
220563608
652695
OECD China India Rest of world 9%
0.7% 0 5%
2327
3033
156175
192206
220
138
462513
563 0.5%
China India USA OECD Europe2005A—2030E delivered energy consumption by fuel (%)India
Rest of the world
6787
104 121 138 155
1619
23138
Nuclear5.9%
Renewables 7.7%
Oil
Nuclear5.7%
Renewables 8.5%
gy p y ( )
China2005E-2030E delivered energy consumption by Fuel (%)
241 250 261 269 278 286
2005A 2010E 2015E 2020E 2025E 2030E
Oil36.6%Coal
26.5%
Natural Gas 23 2%
33.0%Coal
29.1%Natural Gas
23.7%
OECD
2005A 2010E 2015E 2020E 2025E 2030E
Source: International Energy Outlook 2008, Energy Information AdministrationNote: Btu stands for British Thermal Unitma
23.2%
2005A 2030E
17
Global energy demand is expected to grow steadily, with higher growth contributed by China / India
Coal is forecast to continue increasing its share within global energy consumption
Large and Expanding Production Base
Sebuku and Jembayan Coal Production (Mt)
20
16
18
JEMBAYAN
10.0
10
12
14
4 05.2
7.0 -8.0
6
8
10
1 5 2 0 2.1 2 0 2.6 3.0 3.5 3.4 3.6
8.01.02.1
4.0
2.0-3.0
2
4
SEBUKU1.5 2.0 2.1 2.0
02000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E Medium
to LongTerm
18
Supply – Demand Fundamentals: The Price Equation
220 C l i f ll 68%
Newcastle coal benchmark prices (US$/ton) Comment
180
200
220
Newcastle Spot Contract 2004 —2006, average thermal coal price was around US$50/t
Coal price fell c. 68% from historical high of US$192/t to US$62/t
120
140
160Market tightened significantly in 2007 and first half of 2008, where spot thermal coal prices
Coal price increasedc. 270%
60
80
100 rose by 270% to a peak of US$192/t in July 2008
Spot coal price has come down
Coal price average c. US$ 50/t
0
20
40
p pby approx 68% since its peak to around US$62/t currently
Source: Bloomberg (as at April 10, 2009), AME
0
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
19
g ( p )
Consensus thermal coal price forecast
Benchmark thermal coal prices (December YE)
220 Historical spot prices Current consensus forecast
Comment
Near to medium term of broker consensus forecasts have come down
160
180
200
Historical spot prices
Historical contract prices
Current consensus forecast
Consensus forecast (July 2008)
significantly as a result of the recent economic slowdown120
140
160
However, the near term weakness does not deflect from an increasingly bullish long-term view — reflected
60
80
100
LT: US$60/t
LT: US$70/t
long term view reflected in increase in long term price forecasts
0
20
40Forecast
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Bloomberg (as at April 10, 2009), CoalPortal, broker reports
20
Cost Competitive Producer
Energy Adjusted to 6,350 Kcal/kg GAR
2007 Seaborne Thermal FOB Cash Cost Curve
70
80
50
60
$/t
30
40US$
Jembayan
Sebuku
10
20
50 100 150 200 250 300 350 400 450 500 55050 100 150 200 250 300 350 400 450 500 55050 100 150 200 250 300 350 400 500 550
Global Seaborne Production (Mt)
21
Source: Barlow Jonker 2007\
Sebuku Brand Coal
The Sebuku brand name is well known and well regarded in both Asia and Europe where power generators and other users have been relying on delivery of the high quality Sebuku Coal for over ten years
Quality Specifications
Coal for over ten years
Parameter Sebuku
Ash % (adb) 9.3
Sulphur % (adb) 0.68 - 0.91
CV Kcal/kg (GAR) 6,000
Total Moisture % (GAR) 15.0
Ash Fusion Temperature oC >1,600
22
Jembayan Coal Products
Quality Specifications
Parameter Jembayan Prangat
Ash % (adb) 4.0 7.0
Sulphur % (adb) 0.2 0.6
CV Kcal/kg (GAR) 5,414 5,700
Total Moisture % (GAR) 22.0 18.5
Ash Fusion Temperature 1,200 1,230oC
23
Indonesian Coal Comparison
5 900
6,100 Mahakam Sumber Jaya - MSJ Coal
Adaro - EnvirocoalSebuku - Sebuku Coal
5,700
5,900
Kaltim Prima Coal- Melawan
PTBA - Air LayaSebuku Sebuku Coal
Jembayan –
5 300
5,500
cal/k
g)
Banpu - Jorong
Kideco - Roto South
Jembayan - Jembayan Coal
yPrangat Coal
5,100
5,300
CV
(kc Banpu Jorong
4,700
4,900Berau - Lati
Arutmin - Ecocoal
4,500
,
10.00 15.00 20.00 25.00 30.00 35.00 40.00
24
Total Moisture (%)Source: Company data, Barlow Jonker Nov 2008
High Quality, Diversified Customer Base
• 32% of Total Sales to Japanese Power Companies (2008)
• 80-90% of sales concluded under long-term contracts
• Outstanding reputation for reliable product delivery and quality control
Name Country Credit rating (S&P / Moody’s)
Ch b El i P C I J AA / A 2
Key Customers of SAR (by country, by rating)
Chubu Electric Power Co Inc. Japan AA / Aa2
Tosoh Corporation Japan NR / Baa3
Kansai Electric Power Co Inc Japan AA / Aa2
ENEL SpA Italy A / A1
Korea East-West Power Co Ltd. South Korea A- / A1
Tenaga Nasional Berhad Malaysia BBB / Baa1
J Power Japan AA / Aa2
Korea South-East Power Co Ltd. South Korea A- / A1
Glencore International AG Switzerland BBB- / Baa3
25
/
Taipower Taiwan NR / 1
2008 Financial Performance Summary
• Sales of 8.6 million tonnesSales of 8.6 million tonnes
• Revenue of US$ 585.2 million
• Profit after tax of US$ 124.4 million
• Cash flow from operations US$ 191.5 million
• Average Sales Price USD 70 50/t• Average Sales Price USD 70.50/t
26
Coal is the Centre of Rapidly Developing Markets
Clean Coal TechnologyCarbon Trading
Coal FuturesClean Coal Technology
C b C t d St
Coal Futures
Coal Derivatives & SwapsCarbon Capture and Storage
p
Coal Trading:Ph i l & Fi i l
Combustion Technology COAL Physical & Financialgy
Emissions Control Coal Pricing
COAL
Hydrogen Generation Risk Management
Coal to LiquidsCoal Seam GasBiofuels
27
Global COAL
PHYSICAL PRODUCTS-- fixed price –
Phys NEWC
FINANCIAL PRODUCTS-- OTC --
S NEWC I dPhys NEWCPhys RB
Phys ARA (DES)Phys ARA (FOB Barge)
Swap NEWC IndexSwap API#2 (ARA)Swap API#4 (RB)
-- cleared --Phys ARA (FOB Barge)Phys INDO A / A2 / B
-- index-linked –Phys NEWC Index
-- cleared --ICE Rotterdam Futures
ICE Richards Bay FuturesgC ICE Newcastle FuturesPhys NEWC Index
Phys API#4 IndexPhys API#2 Index (DES)
Phys API#2 Index (FOB Barge)
g
-- spreads (OTC or cleared) --
Time spreadsy ( g ) Time spreadsFOB spreads
Implied Freight
28
Transaction volume growth on global COAL
30
35
es ■ Physical ■ Financial
25
30
Mill
ion
tonn
e
20
M
10
15
5
10
0
Q2'
01
Q3'
01
Q4'
01
Q1'
02
Q2'
02
Q3'
02
Q4'
02
Q1'
03
Q2'
03
Q3'
03
Q4'
03
Q1'
04
Q2'
04
Q3'
04
Q4'
04
Q1'
05
Q2'
05
Q3'
05
Q4'
05
Q1'
06
Q2'
06
Q3'
06
Q4'
06
Q1'
07
Q2'
07
Q3'
07
Q4'
07
Q1'
08
Q2'
08
Q3'
08
Q4'
08
29
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
Clean Coal Technologies
Coal's technical response to the environmental challenge is ongoing.....
………… with three core elements………………
•Reducing carbon dioxide emissions with the development of carbon capture and storage
•Improving combustion technologies to increase efficiency and to reduce carbon dioxide and other emissions
•Eliminating emissions of pollutants such as particulates, oxides of sulphur and nitrogen
30
The Carbon Capture and Storage Process
2CR
C
31
© C
O2
Injection and Storage
CR
C
32
© C
O2C
Latest Developments:~ Global Carbon Capture and Storage Institute ~ p g
• Officially launched last week in Australia to:
– Drive global cooperation on CCS projects and technologies.– Accelerate the deployment of carbon capture and storage CCS
technology globally.technology globally.– Assist in achieving the G8 group's goal of 20 large scale CCS
demonstration projects globally by 2020.
• Widespread international support with 85 bodies, including 16 national Governments and more than 40 major companies, signing on as foundation members andcompanies, signing on as foundation members and collaborating participants.
• Annual funding of up to $100 million• Annual funding of up to $100 million.
33
Carbon Capture and Storage Projects in Australia
34
Global Response - Global Solutions~ Existing and Planned CCS Projects ~~ Existing and Planned CCS Projects ~
35
A Multi-step Process to near Zero Emissions
36
Conclusions and Outlook for SBI
• Attractive coal industry fundamentals• Attractive coal industry fundamentals.
• Energy security and economic growth to underpinEnergy security and economic growth to underpin thermal coal as a dominant fuel for decades.
• Environmental solutions gathering global momentum and support.
• SBI ideally positioned to grow an international and diversified coal business with strongand diversified coal business with strong economic credentials.
37
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THANK YOU
38