Market News Vol Indonesia Has Large Coal Deposits that Can be Used as a Cheap Alternative Energy

Transcription

1 Market News Vol. 53 Content : 1. Indonesia Has Large Coal Deposits that Can be Used as a Cheap Alternative Energy 2. Indonesia Sets 24 Pct of Coal for Domestic Market in Indika Eyes 89.9 % Rise in 2010 Profit 4. Bayan Spent Rp. 1.6 Billion on Exploration Funds 5. Value Added Tax for Coal to Re-Introduce in Indonesia 6. Adani the Largest Coal Importer of India is Negotiating with Coal India Limited for A Supply Agreement 7. Delta Dunia 3Q Coal Output Rises 6,25% 8. MEC Woos Indian Power Firms for 50% Stake Sale 9. October Indonesia Coal Price Reference Has Up by 2.92 Percent 10. Thailand s Banpu Digging the Global Gold Mine 11. Borneo Energy to Pay Rp 1,95 Trio Debts 12. Borneo to Sell 1 Million Tons to Zhonglian 13. Straits Resources Received Approaches for Indonesian Coal Assets

2 14. Berau Coal Energy to Sell Up to 20 Pct Stake 15. Ancora Plans Rights Issue for Funding Coal Mine Acquisition 16. Indonesia Coal Output Seen Up 10 Pct in Adaro Delays US $ 260 Million Conveyor 18. PTBA Revenue Reach Rp 8.2 Trillion 19. Permit of 3,000 KP Converted Into IUP 20. Heavy Rains No Dampener for 2010 Coal Output Target, Ministry Says 21. Petrosea, Kideco, US $ 200 Million Contract

3 Indonesia Has Large Coal Deposits that Can be Used as a Cheap Alternative Energy Indonesia has large coal deposits that can be used as a cheap alternative energy to replace expensive fuel oils so that the government no longer needs to spend huge amounts of funds to subsidize state-owned electricity firm (PLN) which so far still uses costly oil to produce electricity for the people. However, most of Indonesia s coal production so far is for exports and only about 25 percent is for domestic consumption. Some of the coal production is exported so that supply for the need at home became small, Nurdin Tampubolon, deputy chairman of the House of Representatives (DPR) s Commission VI for energy affairs, said recently. Next year, for example, only about percent of the coal production in the country will be used for domestic consumption. Based on data from the Ministry of Energy and Mineral Resources (ESDM), Indonesia s coal production in 2011 is set at million tons. But only percent or million tons are earmarked for domestic consumption. Nurdin Tampubolon said that Indonesia actually had enough energy sources to meet the need of its electricity and industry at home. Indonesia is the biggest coal producer in the world with a huge amount of coal deposit which could be exploited for about 100 years. According to the ministry of energy, Indonesia has at least 19 billion tons of coal deposits that may replace oil and gas as a source of energy in the future. Only a small part of the coal deposits has so far been used while the country s coal production has reached over 250 million tons per year. The Ministry of Energy and Mineral Resources has predicted that Indonesia s coal production in 2011 would reach million tons, up percent from that a year earlier which stood at million tons. Based on ESDM Minister Darwin Saleh s decree August 31, 2010, the coal production for next year is expected to come from 53 coal mining companies in the country. Of the 53 firms, 42 are coal exploitation contract companies, one state-owned firm and 10 authorized coal mining enterprises. The ministry also predicted that coal need for domestic consumption would be about million tons in The minimum need for coal at home was set at percent of the targeted million tons. Of the total domestic consumption, the ministry predicted that generators need for coal in 2011 is about million tons while the need of the state-owned electricity firm PLN was set at million tons. Primary Energy Director of PLN Nur Pamudji said that the need for coal of PLN based on the energy ministry was in accordance with the state-owned power firm s request. He said that of the allocation of million tons, about million tons would be used for PLN s 10,000 megawatt power generators and the remaining 32.5 million tons for generators other than the 10,000 MW power program. This year, the need of PLN for coal reaches 38 million tons, he said. Other allocation of Next year s coal production would be channelled to private power generators amounting to 8.97 million tons, PT Freeport Indonesia 0.83 million tons, PT Newmont Nusa Tenggara 0.47 million tons and PT Pusaka Jaya Palu Power 0.19 million tons. In the meantime, metallurgy factories will need 0.43 million tons which consist of 0.14 tons for PT Inco and 0.2 million tons for PT Aneka Tambang. Allocation for cement, fertilizer, pulp and textile factories will amount to tons which consist of 8.86 million tons for cement factories,

4 0.92 million tons for fertilizer firm, 0.6 million tons for pulp and 1.97 million tons for textile and textile-product factories. Of the 53 coal mining companies which were expected to produce the million tons next year, publicly listed PT Batubara Bukit Asam (PT BA) is expected to produce 15 million. The company s present capacity is around 12 million tons a year. PT BA even intends to become Indonesia s biggest coal producer in 2016 with its production to reach 70 million tons a year. Its president director, Sukrisno, said. He was optimistic the target would be met. It would beat PT Adaro Tbk. s production which is around 45 million tons a year. He said that of the allocation of tons, about million tons would be used for 10,000 megawatt power generators and the remaining 32.5 million tons for generators other than the 10,000 MW power program. "This year, the need of PLN for coal reaches 38 million tons," he said. With the additional coal shipping railway infrastructure and coal collection port we are optimistic we will become the biggest national player, he said at the signing of cooperate to develop the 270 kilometers long coal shipping railway from Tanjung Enim to Tanjung Api-Api recently. Sukrisno said his company s coal production this year was expected to reach 12 million tons. To meet coal demands in the national and international market the company had raised its coal output significantly, Sukrisno said on the sidelines of the opening ceremony of Indonesian Fire and Rescue Challenge (IFRC) recently. The project worth US$1.6 billion and financed by an Indian investor is expected to be able to increase coal shipping capacity significantly and operate in 2014 with a load capacity of 35 million tons a year. Sukrisno said PT BA s coal reserves reached 6.5 billion tons. We will continue exploring them while acquiring mining companies in Kalimantan, he said. (Bisnis Indonesia, October 2010) Indonesia Sets 24 Pct of Coal for Domestic Market in 2011 Indonesia will require coal miners to sell a minimum of percent of their annual production for the domestic market next year, a slight fall from this year despite an increase in domestic consumption, an energy ministry decree shows. The market has been closely watching if the world's largest thermal coal exporting country will switch more coal output to home use and away from exports, particularly given the rapid growth in import demand from Asian giants China and India. The energy and mines ministry estimates domestic coal consumption will reach million tonnes in 2011, a 21.6 percent increase from million tonnes for this year, the ministry said in the decree. The minimum domestic sales requirement is slightly below this year's requirement of percent. The ministry did not give a reason for the fall. The minimum domestic sales requirement applies to coal miners including PT Berau Coal Energy Tbk (BRAU.JK: Quote), PT Bumi Resources Tbk (BUMI.JK: Quote), PT Adaro Energy Tbk (ADRO.JK: Quote), PT Bayan Resources Tbk (BYAN.JK: Quote) and PT Indo Tambangraya Megah (ITMG.JK: Quote). About 70 percent of domestic sales will go to power plants run by state utility firm PT Perusahaan Listrik Negara while the rest will be for the metal and cement industry, including for Freeport McMoran Copper & Gold's (FCX.N:

5 Quote) Indonesia unit and Newmont Mining Corp (NEM.N:Quote). The domestic sales requirement decree flows from a mining and coal law passed in December It aims to squeeze more revenue from the sector and assure supplies of minerals such as coal for the home market where demand is expected to surge as new power projects are completed. ( October 2010) Indika Eyes 89.9 % Rise in 2010 Profit PT Indika Energy Tbk (INDY), parent of Indonesia's coal company, eyes a 89.9% jump in earning this year, propelled by robust revenue. Vice President of Investor Relations Indika Retina Rosabai, in a presentation material during one on one meeting with Daiwa's clients, said the company is estimated to post US$146,6 million net profit from US$77,2 million last year. Indika's revenue in 2010 is estimated to jump 81.2% to US$479,4 million from US$264,5 million last year. The company plans to spend US$93 million capex this year, a 126,3% increase from US$41,1 million last year. (Insider Stories, October 2010) Bayan Spent Rp. 1.6 Billion on Exploration Funds PT Bayan Resources Tbk (BYAN) has spent Rp 1.64 billion on exploration funds for its seven subsidiaries in September The largest allocation went to PT Perkasa Inakerta with Rp 626 million. "Perkasa Inakerta used the funds for exploration in Block A and B, Beruang Block and Narut Block," said Bayan's President Director Chin Wai Fong in a disclosure of information to the Indonesian Stock Exchange in Jakarta on Thursday (7/10). The remaining exploration funds in September 2010 have been used by six other subsidiaries. PT Wahana Baratama Mining spent US$54,095 or approximately Rp million to explore areas in Cuka river in Tanah Laut and Bukit Baru in Tanah Bumbu, South Kalimantan. PT Gunungbayan Pratamacoal Block II was allocated Rp 43 million and PT Gunungbayan Pratamacoal block I with Rp million. PT Teguh Sinarabadi in Kinong Block obtained US$ 16,651 or approximately Rp million. "We have also realised exploration funds to PT Firman Ketaun Perkasa for Kinong and Lisat blocks worth US$ 30,236 or about Rp million and PT Bara Tabang for exploration activities on its 20.9 hectares area worth Rp 30 million," said Chin Wai. This year, the company targets to produce 13 to 13.5 million tonnes of coal. The figure is lower than the previous target of 13.8 million tones, although it is higher than the 12.4 million tonnes produced in Bayan s Corporate Secretary Jenny Quantero once said that the increased in production is expected to come from its expansion efforts. Throughout 2010, Bayan targeted a capital expenditure (capex) of around US$ million or around Rp billion, mainly allocated for infrastructure improvements. As per June 30, 2010, the company recorded a net income increase of 45% to Rp 161 billion compared to the actual figure of Rp 111 billion in the same period in The company recorded an operating revenue increase of 0.06% to Rp 3.78 trillion in the first half of 2010 from the first half of Gross profit rose 9.92% from Rp billion in semester to Rp billion. Shares of Bayan closed up by 250 points to Rp 11,950 in yesterday s trading. The volume of shares transacted was 220,500 units valued at US$ 2.62 billion (Investor Daily, October 2010)

6 Value Added Tax for Coal to Re-Introduce in Indonesia Indonesian government is drafting a ministerial decree to re-introduce value added tax for coal and mineral. Coalindo weekly news letter stated that, according to the secretary to the director general of mineral, coal and geothermal, the decree is being drafted by Indonesian Ministry of Energy and Mineral Resources (MEMR) and will be expected to issue the end of November However, there is no additional information available for the percentage of tax that will be introduced and whether VAT will be applicable to the only domestic market or including export market. If it is applicable to the export market, then Indoensian coal prices will jump drastically, as recently the government has issued a ministerial regulation 17/2010 to control selling price of Indonesian coal as per Indonesian coal price reference said a coal exporter. Based on Ministry of Energy and Mineral Resources recommendation Ministry of Finance will issue the decree, said a officer from mining company. ( October 2010) Adani the Largest Coal Importer of India is Negotiating with Coal India Limited for A Supply Agreement Top News reported that, negotitations are very much on between Adani Enterprises, the biggest coal importer of the country and Coal India Limited, the largest coal producer of the world regarding an agreement for a long-term supply. If the deal is struck then Adani based in Ahmedabad will be supplying coal linkages to CIL from its mines located in Indonesia and Australia. Top News further said, according to sources aware of the development there will be an agreement based on long-term pricing for the total purchase of coal. Under the deal coal will be supplied taking the help of the infrastructure, ports and shipping of Adani. In addition to that CIL had been offered equity participation by Adani for its project of Australia. The firm has purchased coal mines in Australia and Indonesia. The Indonesian mine has a capacity of producing seven million tons of coal annually where as the Australian mine can produce sixty million tons of coal yearly. In a recent cash and royalty deal Adani had acquired coal assets of an Australian firm called Linc energy for an amount of two decimal nine billion Australian dollars. The estimated reserves of the mines are in the tune of seven decimal eight billion tons. Coals from the Indonesian mine can reach India faster than coal from the Australian mine. According to estimates done India needs sixty million tons coal more to fulfill the rising demand. The demand is increasing by ten percent where as CIL is rising its production by just seven percent. The company was compelled to lower its production as seventeen of its projects got delayed due to problems regarding environmental issues. Adani spokesman could not be contacted for throwing light into the matter. According to sources Adani had talked with CIL in the beginning of October and the deal will be finalized by the end of this month. (Top News, October 2010) Delta Dunia 3Q Coal Output Rises 6,25% PT Delta Dunia Makmur Tbk (DOID), parent of Indonesia's second largest coal mining contractor, PT Bukit Makmur Mandiri Utama (BUMA), posted a 6.25% increase in coal

7 production volume for the first 9 months ended in September this year. Delta Dunia recently reported that the coal production volume reached 25.5 million tons at the end of the third quarter of this year from 24 million tons a year earlier. In the third quarter itself, Delta Dunia's coal output was 9 million tons, 0.7 million tons higher than the third quarter a year ago of 8.3 million tons. (Insider Stories, October 2010) MEC Woos Indian Power Firms for 50% Stake Sale Business-Standard reported that, Singaporebased MEC Coal plans to rope in an Indian power company as a 50 per cent equity partner. It is believed to have approached Essar Power, Reliance Power, Lanco Infratech, Navabharat Power and GVK Power for a possible alliance. Sources said MEC needed investments to set up infrastructure and give logistical support to its mines. It also requires a 130-kilometre rail line and a jetty to evacuate coal. "We don't comment on market speculation. MEC is already backed by committed investors and since beginning we have been exploring a number of different financing options for our coal mine, railway, port, power plant and aluminum smelter projects in Indonesia. These include swap deals with power companies and long-term off-take agreements," the company said in an ed statement. MEC Coal is a joint venture between the Trimex Group and the government of Ras Al Khaimah. It is developing one of the largest greenfield mines in Asia, located in the East Kalimantan province of Indonesia. Its Indonesian subsidiary, PT Tekno Orbit Persada, is developing the mine, which has estimated coal resources of two billion tonnes and measured reserves of 800 million tonnes. It has two adjoining coal blocks. Each block can produce 17 million tonnes per annum (mtpa) during the first phase of the production plan. Production from these mines would begin with two million tonnes in 2010, which would increase to seven million in 2011 and nine million in 2012, the company had said. The company has already acquired 5,000 hectares for the mines and completed feasibility and environmental studies."the mines produce thermal coal, which is more suited to fire coalbased power plants, and hence, it is in talks with power companies which are looking at coal assets in Indonesia," said a source close to the development. MEC's Executive Vice-Chairman, Madhu Koneru, had earlier talked about adopting a partnership strategy for India, where they would like to work with independent power producers (IPPs) by providing long-term assurance of supplying coal from its mines in Indonesia. A report by Fitch Ratings predicts that coal imports by Indian power companies will increase significantly. "During , India imported 70 million tonnes, and we expect it to rise to 85 million tonnes by the end of The power ministry has forecast that coal imports will increase to at least 100 million tonnes by ," said the report on coalfired power. (Business Standard, October 2010) October Indonesia Coal Price Reference Has Up by 2.92 Percent The Directorate General of Mineral, Coal and Geothermal of Indonesia has been publishing a monthly coal price reference (HBA) since February 2010 to be used by coal producers for all future spot and term coal sales contracts. Coal price reference (HBA) was calculated from the monthly average of four international coal indices such as Indonesian coal Index / ICI 1, Platts-1,New Castle Export Index and Newcastle

8 globalcoal Index. According to djmbp, the October Indonesian coal price reference was calculated based on 25% of ICI % of Platts % of NEX and 25% of GC. Assessment basis of coal price reference was calculated considering coal with GCV (GAR) 6,322 kcal/kg, Total Moisture (arb) 8.00%, Total Sulphur 0.8%, Ash Content 15.00% and delivery free on Board (FOB) Vessel. The declared coal price reference for October 2010 is US$ per Ton FOB vessel up by US$ 2.63 or 2.92 percent from September 2010 Coal price reference. September 2010 coal price reference was at US$ The coal price reference, which has been established to fulfil the requirement of mining law 04/2009 and latest ministerial decree 17/2010 and aims to increase government revenue from royalties from coal producers. However, the actual physical market condition of Indonesian coal is stable or stable to firm instead of falls of International coal index as well as HBA. According to coal producers, due to tight availability of coal for various reasons and recent new inquires from Korea, Taiwan and India, the actual physical coal prices of Indonesia are showing positive move and heading to north. ( October 2010) Thailand s Banpu Digging the Global Gold Mine Thai businesses should take their cue from the success story of Banpu Plc, which has over the past two decades managed to become one of the world's largest coal mining companies thanks to its vision to expand operations beyond Thai borders. Banpu, which today has a market capitalisation of nearly 200 billion baht, is the largest coal miner in Asia and among the largest in the world, but its journey to this pinnacle was not handed in a silver platter. Instead, it had to build its operations gradually in markets where it saw the potential to expand its core business. Banpu started its exploration phase in Indonesia, a market it felt was going to be the hub of coal mining in the future, back in 1991, says Somyot Ruchirawat, president director of PT Indo Tambangraya Megah TBK (ITM), a unit of Banpu Plc that is listed on the Jakarta Stock Exchange. But the company's first mine in Jorong did not begin its operations until 1998 as the company had wanted to use all of its resources to clear the regulatory hurdles and other issues such as financial and tax systems and to learn the local culture, while at the same time creating government links apart from networking and building community relations. All these, according to Mr Somyot, are crucial issues that any company has to sort out before taking its first step in a foreign country. Coal mining is not a business that is always welcomed by local communities. Therefore, having a good relation with the local people is a crucial issue. The steps Banpu undertook nearly two decades ago are just starting to pay off as it has managed to expand its operations beyond the boundaries of Indonesia and is now undertaking a $2-billion-plus takeover of Centennial Coal. Banpu is playing a role in the big league now. Its rivals such as the US miner Peabody Energy made a $7-billion bid for Australian mining firm Macarthur Coal, while Banpu's Chinese rival Yanzhou Coal Mining Co's has undertaken a $2.9-billion takeover of Felix Resources last year. The move by Banpu was out of necessity. With depleting mines at home, Banpu had very little option but to expand its operations abroad. Today, apart from the Australian operations,

9 Banpu has five mines in Indonesia and three in China. It has total coal reserves of about 300 million tonnes in Indonesia with a reserve life of about 13 years. But the company's Indonesian unit has a probable reserve of as much as 1,650 tonnes. Mr Somyot says that after the first mine started in Indonesia, the management of Banpu decided it was time to look at expanding the operations and the acquisition of Trubaindo, Kitadin and other mines were undertaken. All this helped the company to be large enough to list on the Indonesian Stock Exchange. To date, Banpu through its majority owned Banpu Minerals holds a 73.72% stake in ITM. Today ITM is the crown jewel of Banpu and its revenue and profits have surged in line with rising coal prices. Mr Somyot says that there are various areas of focus that companies looking to invest in Indonesia need to follow. One key issue is to have a long-term strategy, a structure and a system to manage and communicate with all parties, be it the employees, shareholders, communities or the government. (Asian Energy, October 2010) Borneo Energy to Pay Rp 1,95 Trio Debts PT Borneo Lumbung Energi & Metal Tbk (BLEM) aims to pay Rp1.95 trillion debts, using the proceed from the initial public offering (IPO) of 3.32 billion shares or 20% worth US$400 million. In the IPO prospectus published today, Borneo Energi plans to use some of the proceed to pay Rp600 billion senior secured notes to PT Sinarmas Sekuritas on December Borneo, controlling share holder of hard coking coal miner PT Asmin Koalindo Tuhup located in Kalimantan, also will pay a maximum of Rp670 billion debt to PT Bank CIMB Niaga Tbk and Rp685 billion debt to RZN Bank. CIMB Securities is lead underwriter for the IPO in coalition with two international arrangers Credit Suisse and Morgan Stanley. Borneo posted Rp1.07 trillion revenue in June 2010, Rp billion operating profit, and Rp20.65 billion net profit. (Insider Stories, October 2010) Borneo to Sell 1 Million Tons to Zhonglian Coking coal miner PT Asmin Koalindo Tuhup (AKT), wholly owned subsidiary of PT Borneo Lumbung Energi & Metal Tbk (BLEM), has secured coal sales agreement of 1 million tons from Chinese company dubbed Zhonglian Resources Company Limited on October Under the agreement, AKT will sell 1 million tons coking coal at the negotiation price based on the quarterly market coking coal. Borneo initiated a production commercial on September Since at that time to June , Borneo produced 1.7 million tons coking coal with average strip ratio of During the first 6 months of this year, Borneo's output reached 752,107 tons with annual capacity of 2.4 million tons. The company strives to jack up the output capacity to 3.6 million tons by the end of 2010 and 5 million tons in In the first half of 2010, Borneo sold 617,603 tons coking coal or Rp1.07 trillion at average selling price of US$191.5 per ton. The company's production cash cost and average strip ratio reached US$57.5 per ton and 12.9 in the first half of this year. AKT is estimated to have 69.2 million tons coking coal reserves at Kohong mine with total resources of million tons. Telakon mine is estimated to have 98.1 million tons resources. (Insider Stories, October 2010)

10 Straits Resources Received Approaches for Indonesian Coal Assets Straits Resources Ltd., the Australian mining company that sold coal and nickel assets in the past year, said it s been approached to sell its remaining S$489 million ($374 million) share in an Indonesian coal miner. Straits is considering spinning off its effective 18.2 percent stake in Straits Asia Resources Ltd. to concentrate on its copper and gold assets, Milan Jerkovic, the chief executive officer of the Perth-based company, said today in an interview in Sydney, without identifying the potential buyers. Interest in Straits Asia, which produced 10.5 million metric tons of energy coal last year, has been driven by India s growing coal demand as its electricity use increases, Jerkovic said. Thermal coal prices, set annually, rose 40 percent this year to $98 a ton, according to an Oct. 6 Morgan Stanley report. We have been approached by a number of different parties, said Jerkovic, who added he expects the tidy up of the stake to be complete within 12 months. Divesting the coal assets will better reflect the value of Straits Resources producing and exploration copper assets in Australia, he said. Straits Resources closed unchanged at A$1.85 at 4:10 p.m. in Sydney, after climbing 42 percent since June 30, giving it a market value of A$472 million ($462 million). Straits Asia, unchanged at S$2.39 at 1:39 p.m. in Singapore, has climbed 20 percent since June 30, taking its market value to S$2.7 billion. Increasing Output Straits Resources s plans to split its coal and metal assets in 2008 were stalled by the global financial crisis, Jerkovic said. Instead, the company sold the majority of its share in Straits Asia to PTT Pcl, Thailand s biggest energy company. It now holds a 40 percent stake in PTT Asia Pacific Mining Pty, which owns 45.6 percent of Straits Asia. Coal output at Straits Asia may rise to 18 million tons on an annualized basis from June 2011, Jerkovic said. The Sebuku mine in Indonesia, which produced 1.49 million tons in the year to June 2010, may increase to 8 million tons of capacity, he said, expecting a mine permit to be granted by December this year and a six month ramp up period. The Australian company owns the Tritton copper operations in Australia and the Mount Muro gold mine in Indonesia. Copper output at Tritton in New South Wales state is expected to increase to 27,000 tons from 21,000 tons for fiscal after a A$50 million recapitalization program due to conclude in March next year. The company also owns 67 percent of Vancouver-based copper explorer Goldminco Corp. that is exploring for copper in Australia s Lachlan Ford Belt in New South Wales with a view to building a 100,000-ton annual output copper operation in the next five years, he said. (Bloomberg, October 2010) Berau Coal Energy to Sell Up to 20 Pct Stake PT Berau Coal Energy (BRAU.JK: Quote),Indonesia's No. 5 coal miner by output, plans to sell a 10 to 20 percent stake in a private placement this year, a deal potentially worth $375 million, three sources with direct knowledge of the matter said on Tuesday. Berau is in talks with Chinese, Indian, and Japanese investors, one of the sources said, declining to name the bidders. The sources declined to be identified because the plan was not public. "The plan by doing the placement is to reduce debt, but it depends on market appetite," said another of the three sources.

11 Global miners, financial investors and Asian utilities are keen to secure access to Indonesian thermal coal, which is used in power plants. Indonesia is the world's top exporter of thermal coal. Berau Coal Energy was not immediately available for comment. The firm is controlled by Recapital Advisors, an Indonesian investment firm runs by Rosan Roslani. Big coal miners listed in Jakarta include Bumi Resources (BUMI.JK: Quote) -- controlled by the influential and politically connected Bakrie family -- and Adaro Energy (ADRO.JK: Quote). Last year, China's $300 billion sovereign wealth fund CIC lent Bumi Resources,Indonesia's biggest coal miner by output, $1.9 billion via debt instruments. In August, Berau raised more than $150 million by selling shares equivalent to 8.8 percent of the enlarged share capital in a heavilysubscribed initial public offering. Its shares rose as much as 38 percent on its debut in August, and closed 19 percent up on Tuesday from its IPO price. The miner scaled back the size of the IPO after it obtained other sources of financing. Investors have snapped up Indonesian stocks.jkse and bonds over the past 18 months, attracted by strong economic growth fuelled by domestic demand and commodities exports. (Reuters, October 2010) Ancora Plans Rights Issue for Funding Coal Mine Acquisition PT Ancora Indonesia Resources (OKAS) Tbk, parent company of an explosive raw material producer, said it plans to launch rights issue in the first quarter of 2011, with the proceeds to be used for funding the acquisition of smallscale coal mines, Investor Daily reported this morning. Aulia Oemar, Ancora's finance director, said the value of acquisition of coal mines is expected to be below Rp1 trillion as the company will only acquire coal mines with reserve of around 20 million tons. Dharma Djojonegoro, Ancora's president director, said in a public presentation in April 2010 that the company was also planning to acquire one coal mine with reserve of million tons. He said the acquisition is expected to complete by this year end and will contribute to its earning by the first quarter of Dharma said the company was also targeting to acquire some coal mines located in Sumatera and Kalimantan. Demand of coal in domestic market totaled 250 million tons in 2009 and is expected to increase to 270 million tons this year, and 345 tons in (Investor Daily, October 2010) Indonesia Coal Output Seen Up 10 Pct in 2011 Indonesia's coal output is expected to increase by 9.7 percent next year as miners boost output to meet strong Indian demand, said the chairman of the Indonesian Coal Mining Association on Thursday. Indonesia, the world's top thermal coal exporter, may produce 340 million tonnes of coal next year, from an estimated 310 million tonnes this year, Bob Kamandanu told reporters on the sideline of 9th Asia-Pacific Mining Conference. "All miners will revamp their production next year because demand will always be increasing and India will be the dominant buyer for Indonesia coal," Kamandanu said. Top coal miners in the country include Bumi Resources and Adaro Energy. Kamandanu said in September that India will take over Japan as the top buyer of Indonesia's coal by 2012.

12 India will import 40 million tonnes in 2010, versus Japan's roughly 60 million tonnes a year, according to the association. (Reuters, October 2010) Adaro Delays US $ 260 Million Conveyor Coal miner PT Adaro Energy Tbk (ADRO) delays development of overland conveyor belt worth US$260 million due to prioritize another project of 5 km long out pit and crushing conveyor (OPCC). Devindra Ratzarwin, Adaro Corporate Secretary, said the company estimated to start developing the OPCC project next year and expected to be operated in 2012 or "We don't have any constraint to build overland conveyor belt. But, we see that the OPCC project could benefit us," he said as reported by Bisnis Indonesia today. Adaro has mandated PT Tripatra Engineers & Constructors to build overland conveyor belt. Adaro is planning to spend US$200 million capital expenditure in It also plans to spend US$140 million to set power plant and US$260 million for conveyor system. (Insider Stories, October 2010) PTBA Revenue Reach Rp 8.2 Trillion PT Bukit Asam (Persero) Tbk (PTBA) is projected to record Rp8.2 trillion in revenue until the end of September The amount is based on sales of approximately 13.7 million tons coal until the end of September on average selling price of about Rp 603,000 per ton. PTBA President Director Sukrisno said the company s sales until the end of the third quarter of 2010 was up by about 10% compared with the same period last year. "We recorded an increase in production and sales, which could potentially increase revenue. The end result is pending on results of financial audits," he said yesterday. In the third quarter of 2009, PTBA recorded sales of Rp6.55 trillion. Based on the figure, the state-owned coal producer s revenue rose by 25.19% at the end of September this year. By the end of 2010, the company targeted production growth of 5% and 10% increase in sales from last year. To boost production and sales, the company is accelerating completion of infrastructure development, namely rail and ports. In terms of port development, the company has provide up to Rp 1 trillion in funding. Development of infrastructure is currently in the preparatory stage. Construction is expected to begin early next year and in operation by With the completion of the pier, coal loading capacity could double from the current 12 million tonnes per year to around 25 million tonnes per year in According to Sukrisno, the company will use funds from internal sources which is still sufficient. So far PTBA does not intend to seek external funding sources. Head of PT BNI Securities Research Norico Gaman recently said that the company is predicted to generate sales worth Rp trillion by the end of the year and operating profit of Rp 5.8 trillion, from last year's net revenue position at Rp3.55 trillion. "The calculation is based on coal revenue assumption of 15 million tons of coal at a stable price of US$80 per ton. Our target price until the end of the year was set at Rp25,000," he said. Norico also observed that PTBA should focus on coal mining and acquire more coal mines. He

13 added that PTBA should focus on the acquisition of coal mines and infrastructures such as rail lines to increase the coal company earnings and potentially increase dividends contribution to investors. (Bisnis Indonesia, October 2010) Permit of 3,000 KP Converted Into IUP The Ministry of Energy and Mineral Resources (EMR) has changed the permit of about 3,000 of the 10,000 holders of mining rights of mining companies (KP) into a Mining Permit (IUP) in the last year. According to the Director General of Mineral and Coal, Ministry of Energy and Mineral Resources, Bambang Setiawan, it was conducted to implement the Law No. 4/2009 on Mineral and Coal. "We expect the remaining 7,000 KPs to be completed as soon as possible in 2011," said Bambang in Jakarta, Thursday (10/14). Bambang also warned that the registration can not be processed if the KP had violated any rules, such as not carrying out exploration activities and does not have the certificate of environmental impact assessment (EIA). Should there be more than one mining operations in one area, then we will have to pick one. We will not hesitate to revoke their mining permit if they continue violations. He added that not all application by KP holders could automatically be converted into IUPs. Concessions with overlapping areas would not qualify for IUPs. Based on Government regulation no 55/2010, coal miners have been requested to report their monthly productions and activities, including environmental management, for monitoring and audit by the state revenue optimization and the Financial Review Board (BPK). Despite the regulation in Kotabaru, South Kalimantan, the Head of the Mining and Energy Office, Akhmad Rivai, said that up to now many have yet to submit their monthly report. It makes it difficult for officers to do monitoring and evaluation of the mining activities, he said. To facilitate reporting, Rivai said that his office has provided formatted reporting template. Out of the 143 IUPs in Kotabaru, there are 7 coal companies and one iron ore company in active operation. The rest are in the process of conversion from Exploration IUP to Production IUP or in an inactive state. (Investor Daily, October 2011) Heavy Rains No Dampener for 2010 Coal Output Target, Ministry Says The Jakarta Globe reported that, National coal production would likely meet the target set by the Energy Ministry despite unusually heavy rain this year, a senior ministry official said on Friday. Bambang Setiawan, director general of mineral, coal and geothermal energy, said he did not believe the wet weather would cause coal companies to miss the target of 275 million tons. I am still optimistic that by the end of the year we can reach 290 million tons of coal production, he said. Bambang said total coal production was million tons during the first three quarters of the year or 75 percent of the target of 275 million tons. The short, wet dry season caused by the La Nina weather phenomenon has hampered production of a range of commodities, from tin and coffee to coal and rubber. Bob Kamandanu, chairman of the Indonesian Coal Mining Association, said in August that the Natio may miss the association s 2010

14 production target of 320 million tons, and that output may be flat from last year at 300 million tons. He said some producers had declared force majeure, a legal clause allowing companies to abandon contractual obligations because of circumstances beyond their control, Bambang said that as of September, the government had received Rp 13 trillion ($1.45 billion in tax revenue from the coal sector, 85 percent of the target. (Jakarta Globe, October 2010) Leony Hartono Tanu Ben Line Agencies (Indonesia) As Agent Only Jakarta - Surabaya - Medan - Belawan - Merak - Semarang - Tuban - Bali - Banjarmasin - Balikpapan - Kota Baru - Adang Bay - Belitung - Tarakan - Bunyu - Bandung - Pomalaa - Kendari - Samarinda - Benete - Batam - Sangata - Samarinda Petrosea, Kideco, US $ 200 Million Contract Engineering and coal mining contractor PT Petrosea Tbk (PTRO) has secured 1 st contract with coal miner PT Kideco Jaya Agung, a 46% owned by PT Indika Energy Tbk (INDY). Petrosea has signed a 5 year mining coal contract with Kideco at Samarangau, East Kalimantan, with an estimated value of US 200 million. Indika Energy owns both Petrosea (98.55%) and Kideco (46%). We are pleased with this progress. This is a concrete development for Indika Energy as these two companies begin to derive synergy from each other s capabilities and resources to tap the growth potential of the energy industry said Arsjad Rasjid, Indika President Director, in a press statement. By securing the contract, Petrosea has sealed US $ million contracts. Petrosea has also bagged supply base contract worth US $ 18.5 million from Total E&P Indonesia. (Insider Stories, October 2010)

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