Renaissance plans 58 percent increase in coal production

PT Renaissance Capital, an investment bank that plans to buy two coal mines from PT Bumi Resources, Indonesia?s biggest coal producer, said the mines will raise output 58. percent by 2009. The Jakarta Post reported on Tuesday.

Coal production from the mines, operated by Bumi units PT Kaltim Prima Coal and PT Arutmin Indonesia, will be raised to 70 million metric tons from 44.4 million tons last year, Samin Tan, president director of Jakarta-based Renaissance, said in a telephone interview from Tokyo Monday.

Renaissance in March agreed to pay Bumi US$3.2, billion for Kaltim Prima and Arutmin, which produce thermal coal, the type used to generate power.

Indonesia, which last year overtook Australia as the world?s biggest exporter of thermal coal, has benefited from a surge in demand as China cuts exports of the fuel to meet domestic needs.

?The capital expenditures needed to raise the output will be very minimal as it?s in line with the production capacity,? Tan said.

The mines are expected to produce 51.2 million tons this year, of which 34 million will be from Kaltim Prima and the rest from Arutmin on the island of Borneo.

Price of the fuel for immediate delivery from Australia?s Newcastle port, the world?s largest coal-export harbor, has risen 30 percent this year to $52.33 a metric ton in the week ended June 30, according to the globalCoal News Index.

Bumi and Renaissance expect to complete the transaction on the mining units this week, Tan said.

?Everything?s OK, financing is OK. We are just waiting for the legal documents to be finalized,? Bumi?s Finance Director Eddi Soebari said by telephone from Jakarta Monday.

Renaissance got a $2.1 billion loan from as many as 30 banks and funds to help pay for the coal mines. The rest of the acquisition will be financed by a $700 million exchangeable bond and the company?s own cash of between $200 million to $30.0 million, Tan said.

The company plans to repay the bond with proceeds from an initial public offering in Jakarta or Singapore, which may involve selling as much as 30 percent of its shares, Tan said. He expects the IPO later this year.

Kaltim Prima and Arutmin have combined marketable coal reserves of 1.19 billion metric tons, according to data on Bumi?s Web site. (*)