Coal news and updates

Adaro expects flat growth amid coal price uncertainty

Adaro Indonesia, one of Indonesia’s major coal producers, expects no significant improvement in the company’s financial results this year as low coal prices continue to undermine its revenues.

Adaro president director Garibaldi Thohir said the company was still in a difficult situation as low coal prices in the international market continued to affect the company’s business.

“We are thankful that in 2013 we still booked a profit [US$231 million], although lower than the previous year. In 2014, we will try to survive,” he said after his company shareholders’ general meeting on Friday.

Coal mining companies remain under pressure due to declining prices with the global market in oversupply as miners pump up production given the better economic outlook and binding contracts.

Global thermal coal demand is expected to increase by 3 percent to 987 million tons this year, UBS said in a report as quoted by Bloomberg. Meanwhile, the supply will rise higher by 4 percent to 999 million tons, creating a surplus of 12 million, the report said.

Thermal coal’s spot price at Newcastle Port, Australia, was at $72.98 per ton last March, which was the lowest since October 2009, according to figures from London-based globalCOAL as quoted by Bloomberg.

The Indonesian coal price reference (HBA) was set at $74.81 per ton this April, already 4 percent lower compared to an $81.9 per ton tag set in January.

Adaro sold 53.47 million tons of coal last year, a 10 percent increase compared to a year earlier. The company is expecting to produce between 54 million and 56 million tons of coal this year, up 7 percent from the 52.3 million output in 2013, according to the company’s document.

The production figure is subject to approval from the government, which expects the country’s total coal production to reach 421 million tons this year, a similar number compared to a year earlier. The government may consider limiting coal output for energy security reasons.

As part of its expansion plan and business survival, Adaro is planning to strengthen its power business and become an integrated energy company, including running the electricity generation business.

Adaro, through its 100 percent subsidiary, is running a 2x30 megawatt (MW) mine-mouth power plant in South Kalimantan.

It is has a 65 percent stake in another 2x100 MW power plant project in South Kalimantan. A South Korean company holds the remaining 35 percent stake of the project.

Mohammad Effendi, the president director of Adaro’s subsidiary PT Adaro Power, said the company expected to soon sign a power purchase agreement (PPA) for the 2x100 MW plant project with the state electricity company PLN.

“The PPA is expected next month with PLN,” Effendi said, referring to state-owned electricity firm PT Perusahaan Listrik Negara.

Through 34 percent owned PT Bhimasena Power Indonesia, Adaro is also involved in the development of the mega project 2x1000 MW power plant in Central Java.

Shares in Adaro, which are traded on the Indonesia Stock Exchange (IDX) under the code ADRO, were closed at Rp 1,090 apiece on Friday, increasing by 0.46 percent from a day earlier.

In the meeting on Friday, shareholders approved that Adaro pay 32.51 percent of its net profit, equal to $75.17 million, as dividends.

Source: Jakarta Post