Adaro to reduce coal exports in next three years

Petromindo|Khalsa

IDX-listed coal giant PT Adaro Energy Tbk plans to drastically slash its coal exports starting in 2020 to preserve the supply for its domestic power plants, especially for the Batang coal-fired power plant project in Central Java that will need about 7 million tons of coal a year, The Jakarta Post reported on Thursday.

The coal-fired Batang plant is currently being developed by PT Bhimasena Power Indonesia (BPI) ? a joint venture involving Adaro and Japanese power companies Itochu Corporation and Electric Power Development (J-Power) ? at a cost of US$4.2 billion.

The project is expected to start commercial operations in May 2020 with a production capacity of 2 x 1,000 megawatts (MW) of electricity, which will be sold to state-owned electricity firm PLN over a period of.25 years.

?When the development of the Batang plant has been completed, we will need to allocate our coal production to it,? Adaro president director Garibaldi ?Boy? Thohir said recently. ?At present, about 70 percent our coal production is exported, while the remaining 30 percent is allocated for the domestic market. One day, the composition will be balanced.?

Adaro, which has 13.7 billion tons of coal resources and 1.2 billion tons of coal reserves, aims to produce 52 to 54 million tons of coal in 2017, about the same as last year.

In 2016, Adaro sold 54.09 million tons of coal, up slightly from 53.11 million tons in 2015. It shipped its coal to more than 50 buyers in 12 countries, with China as its biggest buyer, followed by India, South Korea and Japan.

However, in order to maintain sustainability Adaro wants to shift its core business from coal mining to power procurement, with a target of generating 5,000 MW of electricity by 2020. Subsidiary PT Adaro Power will be the backbone of this long-term plan.

It has operated a mine-mouth coal-fired power plant with a capacity of 2 x 30 MW in Tanjung, South Kalimantan province, since June 2013.

Currently, it is also developing the coal-fired Tabalong power plant in the same province. The facility is expected to produce 2 x 100 MW of electricity with a completion deadline of the first half of 2019 and an investment value of $545 million.

?We are also in discussion with PLN [to join a tender] for two to three mine-mouth power-plant projects,? Adaro Power deputy CEO Dharma Djojonegoro said.

PLN has announced its plan to call for tenders and settle all power purchases agreements (PPAs) for 16 mine-mouth coal-fired power plants in Sumatra and Kalimantan this year to ensure an electricity supply in those regions in the long run.

Through this tendering, PLN will choose private companies to team up with its subsidiaries to develop 12 mine-mouth plants, which will have a combined generating capacity of 4,650 MW of electricity for a total investment of $7.2 billion. They are slated to begin commercial operations sometime between 2020 and 2024.

Moreover, Adaro is also preparing to bid for five out of six solar power plant projects in Sumatra offered by PLN with a combined capacity of 168 MW. The tendering started at the end of May to meet the government?s goal of making 23 percent of the national energy mix from renewable sources by 2025.

This year, Adaro has allocated $200 million to $250 million in capital expenditure for regular maintenance, heavy equipment replacement and the development of its coking coal project in Kalimantan.

Coking coal, also known as metallurgic coal, is an essential ingredient in steel production. ?We aim to produce from 1 million to 1.5 million tons of semisoft coking coal this year,? Boy said.

In the first quarter of this year, Adaro Energy booked $97.13 million in net profits, up 62.74 percent year-on-year. The upward trend was in line with a 23.9 percent increase of its revenues to $726.5 million, thanks to a recent surge in global coal prices. (*)