PTBA says coal hike poses challenge for acquisition plan

Petromindo|Lucky

IDX-listed coal giant PT Bukit Asam Tbk (PTBA) said that the current rise in coal price has created a challenge for the company in realizing its coal mine acquisition plan as valuation of coal assets also increases.

PTBA Corporate Secretary Adib Ubaidillah was quoted by Kontan as saying Tuesday that some miners have also cancelled initial plan to sell their coal assets in the wake of the recovery in the price of the commodity.

?With the improving coal price, valuation becomes more expensive. So it?s quite difficult (to make acquisition) with the rising coal price,? he told the paper.

He, however, said that PTBA will proceed with its acquisition plan as the company seeks to expand its reserves. He said that the company has already conducted due diligence on a number of target assets, but the acquisition is unlikely to be completed this year. ?I think there will be no deal this year. One of the factors is the coal price? We must also be careful,? he said.

Coal price has been on the rising trend since the past few months, reaching around US$92 per ton this month, and is expected to exceed $100 at the end of this year amid rising demand from China and India.

PTBA has been planning to acquire new coal mines since last year in a bid to expand coal reserves amid the country?s massive development of new coal-fired power plants to increase electricity supply. The company is also planning to build new coal-fired power plants as part of diversification strategy.

Last month, PTBA President Director Arviyan Arifin said that getting desirable coal mines was not easy.

Arviyan said that the company is looking for coal mines with large reserves preferably located in Kalimantan. He said that while Sumatra holds huge coal potential, logistics wise it is quite challenging. He added that the mines must be brownfield mines, or already in operation. ?We don?t want greenfield mines because the risk is huge. We want mines with large reserves, not small ones,? he said.

Arviyan said that the company was looking for mines having coal with specific calorific value of 4,200 kcal/kg because many power plants operated by state-owned electricity firm PT PLN requires such coal type. PLN is the largest coal consumer in the country. (*)