Geo Energy redeems outstanding bonds, expects 'much stronger' H2 2021 showing

INDONESIAN coal producer Geo Energy Resources no longer has any outstanding US-dollar bonds, having fully redeemed and cancelled its 8 per cent, due-2022 senior notes.

This has strengthened its credit profile and has saved the mainboard-listed company up to US$4.8 million in annual financing costs, it said in a bourse filing on Wednesday (Oct 13) evening.

Geo Energy chief executive Tung Kum Hong noted that the bond redemption "will give the group flexibility to declare and pay higher dividends, as the bond covenants previously restricted us from doing so".

The stronger balance sheet and capital structure will also place the group in good stead to explore diversification opportunities, he added. Geo Energy is looking to expand its revenue streams by way of potential joint ventures, trading and value-accretive acquisitions that are self-funding.

As at Oct 10, the group's cash position stood at US$62.4 million, after fully redeeming the US-dollar bonds and paying the accrued coupon interest and increased working capital.

In the same filing, Geo Energy said it expects its H2 2021 performance to be "much stronger" than that in H1 2021, with revenue likely to exceed US$700 million for the year.

This is considering that the Indonesian Coal Index price for 4,200 GAR coal had jumped to a record high of about US$122 per tonne as at Oct 8.

For the fourth quarter this year, the group is targeting production and sales volume of more than a million tonnes per month, in line with its optimised mining plan.

At today's coal prices, the group is raking in an average cash profit of over US$50 per tonne, more than triple the US$15 per tonne in H1 2021.

This also takes into account the lower selling prices of its domestic market obligation set by the Indonesian government at 25 per cent of total production, with a price cap of about US$38 per tonne.

Tung noted that the group has been able to "capitalise on the strong momentum of the coal industry, notwithstanding the pandemic-related disruption". "Coal prices are expected to remain strong, at least for the near future," he added.

Shares of Geo Energy closed flat at S$0.385 on Wednesday (Oct 13) before the announcement.

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