Coal Asia's IPO Said Oversubscribed

MANILA, Philippines - The Coal Asia Holdings Inc. initial public offering is already over two times oversubscribed even before the offering period has started.

In an interview, director for corporate finance of Coal Asia's underwriter Abacus Capital and Investments Corporation Manny Ocampo said this is based on the reservations for the 60 percent of the P800-million IPO that will be sold by the underwriter.

He explained that 30 percent of the IPO will be sold by Philippine Stock Exchange trading participants while 10 percent is allocated for the local small investors program.

Ocampo said half of the reservations are from institutional investors while the other half is from high net worth individuals.

The holder of the country's second largest coal reserves amounting to 123 million metric tons, Coal Asia is selling 800 million shares, representing 20 percent of its total issued capital stock, at the par value of P1.

Net proceeds from the offering will be used to bring Coal Asia's Davao Oriental and Zamboanga-Sibugay coal mines into commercial production by 2014 and 2015, respectively.

Initial coal production volume is expected at 600,000 MT per year. Coal Asia president Vicente Araña said they already have an agreement with a Chinese firm that will buy 300,000 Mt.

Coal Asia said that coal mined from two projects are tested with heating value of around 10,100- BTU/lb.

This compares favorably with leading coal producer Semirara Mining Corporation's with coal-heating value of around 8,600 BTU/lb.

Due to the high-grade thermal quality of its coal, Coal Asia expects strong demand from the power sector and the cement industry.

Positive discussions have been accomplished with Global Business Corporation, Aboitiz Power, Manila Electric Company (Meralco), Team Energy, Alcantara Group, FDC Utilities, Inc., DMCI Holdings, Inc. Ayala Corporation, and San Miguel Corporation.

In the industry of cement making, Coal Asia conducted talks for possible supply of thermal coal for Holcim, Cemex and Lafarge. In addition, Coal Asia has existing off-take contracts in both domestic and foreign markets significantly enhancing its prospect to become the second biggest producer of coal in the Philippines.

Other export markets being eyed include India, Japan, Taiwan, Hong Kong and Vietnam.

Coal Asia has also received strong interests from participating investors to jointly undertake energy development projects. It recently signed a MOA for a buy-in into VenturOil's stake for oil exploration in the Service Contract No. 6 in the Cadlao and Bonito fields off Northwestern Palawan.

The company has received proposals from two independent power producers for the development of mine-mouth power plant project in Davao Oriental, while in discussion with established mine operators for the joint development of the Zamboanga, Sibugay project.