SET-listed and mostly state-owned Bangchak Corporation Plc (BCP) is planning an amalgamation with Khon Kaen Sugar Industry Plc (KSL), Thailand's fourth-largest sugar miller, to form a new biofuel producing company.
BCP president and chief executive Chaiwat Kovavisarach said the move is aimed at capitalising on the rising demand for biofuel along with the upward trend of alternative renewables.
The amalgamation will be done through BCP's 99.99%-owned subsidiary BBP Holding Co Ltd and Khon Kaen's 99.99%-owned subsidiary, KSLGI Co Ltd.
He said the companies are working on the legislative process and the amalgamation is expected to complete by October.
"The new company is named BBGI Co Ltd with registered capital of 2.5 billion baht. It will be a flagship company of Bangchak, which will hold a 60% stake, while Khon Kaen will hold the remaining 40%," Mr Chaiwat said.
The amalgamation would rank BBGI the biggest biofuel producer in Thailand with total capacity of 1.71 million litres per day. Of the total, around 900,000 litres will be sugar-made ethanol and the rest 810,000 litres biodiesel, he added.
"This was a part of BCP's strategy to create added value on the company's biofuel products to match the Thailand 4.0 concept as well as to comply with the concept of BCP going green," Mr Chaiwat said.
Apart from biofuel projects, BCP also seeks to capitalise on the rising demand for lithium in the power storage business. It has spent C$42.5 million (1.1 billion baht) to acquire more shares in Lithium Americas Corporation (LAC).
Under the terms of acquisition, Bangchak has agreed to lend LAC up to US$80 million (2.7 billion baht) and has committed to buying lithium ore from the LAC-run Cauchari-Olaroz mine in Argentina for 20 years.
BCP is also investing 15 billion baht to revamp both its oil-retailing and non-oil businesses over the next three years, a senior executive said. The first phase could see the addition of 300 petrol stations by 2019 nationwide, up from 1,000, while the second phase of the revamp entails building up its non-oil business through the purchase of a European food store chain franchise to be sited at its petrol stations.
BCP posted a net profit of 2 billion baht in the first quarter of this year, up from 269 million on year.
The amalgamation, however, will pose a negative outlook for KSL, said an analyst at Capital Nomura Securities who asked for anonymity. This is because the net margin from the new ethanol business is expected to decline due to the limited and high cost of raw materials as well as a rise in production costs.
Net margin for KSL after the amalgamation will be lower than the current margin, said the analyst. The only benefit for KSL is BCP's larger customer base.
BCP shares closed yesterday on the SET at 34 baht, down 25 satang, in a trade worth 221 million baht.