Adaro Energy update: Business Development
Tuesday, April 30 2013 - 06:06 AM WIB
BUSINESS DEVELOPMENT
Development on South Sumatra Assets
In 2011, we acquired two greenfield coal concessions and a logistics company in South Sumatra. The two coal concessions are PT Mustika Indah Permai (MIP), which we own 75% and PT Bukit Enim Energi (BEE) which we own 61.04%. We own 35% of PT Servo Meda Sejahtera (SMS), a logistic company which has a dedicated coal hauling road and barge loading port.
The current development plan is to concentrate on mining readiness for our South Sumatra?s coal concessions and to start production when the time is right. At MIP, in 1Q13, we continued with purchasing land and evaluated development and marketing options for Ultima, the brand name of MIP?s coal. During the same period, we continued to obtain the necessary permits for BEE. Additional exploration work on BEE will be carried out in 2013 by our subsidiary, PT Adaro Eksplorasi Indonesia (AEI), to provide supplementary data for the preparation of a JORC report on the area?s resources and reserves.
Due to the heavy rainfall at South Sumatra at the beginning of the year, we experienced flooding in several parts of the SMS? hauling road. There was minor damage along the SMS?s hauling road and all activities were halted. Since the latter part of 1Q13, we have been focused on repairing and resurfacing the road.
IndoMet Coal Project with BHP Billiton
During the quarter, the IndoMet Coal Project (IMC), a joint venture between BHP Billiton and Adaro Energy, continued the development of its seven Coal Contracts of Work (CCoW) in Kalimantan. The IndoMet Coal Project is on track to begin mining from the Haju mine in the third quarter of 2013. The Haju mine is within the concession area held by PT Lahai Coal in Central Kalimantan. Construction of minesite accommodations, port-site accommodations, administrative offices and an industrial area, is underway.
PT Bhakti Energi Persada (BEP)
Throughout 1Q13, we continued with getting required permits, acquiring land, securing social and community support, and completing engineering and geological studies. The current development plan is to concentrate on mining readiness for BEP, such as preparing the land, permits, engineering and to start production when the time is right. Adaro Energy has full control of the management, operations and funding of BEP.
BEP carries on purchasing necessary land for infrastructure and for preparing the mine for further development. BEP has reached agreements to compensate 1,770 ha of land from the plantation area of PT Dharma Satya Nusantara (DSN) and its subsidiaries, located adjacent to BEP?s concession. DSN currently owns and manages its operating subsidiaries in the palm oil and wood products industries.
Power Generation
Moving further downstream into power is a strategic decision we made to approach growth without taking unnecessary risk. In addition, power generation will be able to provide good returns, reliable cash flows, and create a substantial base demand for our coal.
PT Bhimasena Power Indonesia, a joint venture formed in 2011 by a consortium comprising our subsidiary, PT Adaro Power (34%), Japan?s Electric Power Development Co (J-Power) (34%) and Itochu Corporation (32%), will be the first project in Indonesia to use the public-private partnership (PPP) model when it develops a US$4 billion coal-fired power plant in Batang district, Central Java. In October 2011, Bhimasena signed a power purchase agreement with PLN with a 25-year term from the start of commercial operations, targeted for early 2017. Bhimasena is on track to reach financial closure by the end of 2013. During the first quarter of 2013, Bhimasena continued to purchase land and processing necessary permits.
In March 2012, a consortium of Adaro Power and Korea East West Power received letter of intent to undertake an independent power producer (IPP) project to construct a 2x100MW coal-fired power plant in South Kalimantan. The consortium had previously been announced as the sole qualified bidder for the project. We hope to sign the power purchase agreement with PLN in 1H13, and do financial closure within one year following the signing. (end of excerpt)