Interview: PTBA outlines IPO and growth strategies
Monday, August 26 2002 - 04:16 AM WIB
The company is one of the country?s top coal producers with mining operations in Tanjung Enim, South Sumatra, where 90 percent of PTBA?s coal production come from, an in Ombilin, West Sumatra, where mineable reserve for open pit mining is almost depleted, and heavy investment is needed to develop underground mining.
PTBA president director Ismet Harnaeni in an interview with Petromindo.Com Sunday night in Singapore outlines the company?s strategy to prepare for IPO and beyond.
Question: How do you prepare for IPO?
Answer: PTBA had been restructuring itself for quite sometime now. We are now streamlining the company?s working forces. We have been successful in persuading some few hundreds employees, especially in Ombilin operation to take early retirement. We will continue to gradually cut our worforce as we go along.
In preparation for the IPO in November, PTBA has appointed Danareksa Sekuritas and BNP Paribas as underwriters. They will act, as PTBA?s lead underwriters will full commitment. Government will take 50 percent from IPO proceed, and 50 percent will be used to strengthened the company?s capital structure. (Ismet declined to say the amount of fund it expected to get from the IPO, but industry sources said the amount expected was at around Rp.800 billion (US$=8,400)).
Q: Are you going to spin off Ombilin mine prior to IPO?
A: That was the initial plan. But we cancelled the plan, because that will create problems for PTBA and for the government. Formation of the new company to operate Ombilin will create tax burden of Rp. 85 billion for PTBA. Another problem if we spin off Ombilin operations is; will the government be willing to subsidize the operation, as the unit is still operating at loss.
Q: How is the company shaped financially?
A: We have an asset of RP.1.9 trillion. We have Rp. 25 billion debts in Bank Mandiri that we will be paying this year. Last year?s revenue is Rp. 2.1 trillion with net profit after tax of Rp. 278 million.
Q: Are you expecting to be able to complete acquisition of 20 percent shares of East Kalimantan based coal mining PT. Kaltim Prima Coal before offering shares to public to sweeten the IPO?
A: No. The time frame set by the government indicated that the divestment process of KPC would not be completed by the end of this year, while we are scheduled to start the IPO early November. (Government had allocated 20 percent of KPC shares, which is in the process of divesting 51 percent shares, to PTBA, while the remaining 31 percent is allocated to East Kalimantan governments)
Q. For years, the most acute constrain for PTBA to increase production is the condition of the railway operated by State Railway Company KAI. What is the strategy to overcome this problem?
A: Currently, KAI is only able to transport coal from our mines in Tanjung Enim in South Sumatra to Tarahan coalport in Lampung at the rate of around 7 million tonnes per annum. This year, KAI is only expected to transport 6.7 million tones. That is because the railway is old and locomotives and trains badly need maintenance. In the absence of transportation problem, PTBA could easily ramp up production to 15 million tones annually.
We have employed a consultant, International Mining Corporation from England, to evaluate the problems. The result of their study shows that PT KAI will need an investment of around US$ 90 million to increase transportation capacity to 12.5 million tones annually. KAI itself has planned upgrade its transportation capacity. But the problem is, will they be able to raise money. PTBA will continue to support KAI in that respect, including investment cooperation with KAI.
Q: How is transportation price negotiation with KAI going?
A: KAI is demanding to increase transportation fee from Rp.25, 000 to Rp.45, 000 per tonne, which is more than 70 percent increase. PTBA will go on the red if we have to pay that high a fee. The maximum fee we could afford is Rp.32, 000. We are confident that such fee will give healthy margin to KAI and acceptable for us. We hope we would be able to settle the difference soon.
Q: What is your production projection?
A: Because of transportation constrain, we are projecting to produce 9.8 million tones this year, and 10.2 million tones next year and an increase of some 500,000 tonnes annually the following years. We still have mineable reserves in excess of 400 million tones in our S. Sumatra Operation.
Q: Your top costumer which consumes more than 60 percent of your current production is Indonesia Power. In the past you have been selling to IP below market price. Have you renegotiate your contract with IP?
A: In anticipation of going public, we have just sealed new 10-year contract with Indonesia Power with the shipment of 6.1 million tones annually with price negotiable every year depending on market prices. For this year, the average price this year is Rp. 220,000 per tonne CIF.
Q: What is your marketing strategy for export?
A: We will be focusing more to get long-term contracts for our coal. We export most of our coal under 5-year contract to Japan, Taiwan and Spain. Some 1 million are sold in the spot market. We have won one-year contract with Tenaga Nasional Berhad of Malaysia at the volume of 365,000 tonnes this year, and next year it would be increased to 500,000 tonnes.TNB s one of our potential long-term potential costumer, because from 2004, they are projecting to consume more than 10 million tones annually. (alex)