indonesian coal exports to the philippines

Indonesian Coal Exports to the Philippines

Neil LittleINTERNATIONAL MARKETING DIVISION HEAD

PT ADARO INDONESIA

4th Coaltrans Emerging Asian Coal Markets

Disclaimer

These materials have been prepared by PT Adaro Energy (the “Company”) and have not been independently verified. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, fairness or completeness of the information presented or contained in these materials. The Company or any of its affiliates, advisers or representatives accepts no liability whatsoever for any loss howsoever arising from any information presented or contained in these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed.

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These materials are for information purposes only and do not constitute or form part of an offer, solicitation or invitation of any offer to buy or subscribe for any securities of the Company, in any jurisdiction, nor should it or any part of it form the basis of, or be relied upon in any connection with, any contract, commitment or investment decision whatsoever. Any decision to purchase or subscribe for any securities of the Company should be made after seeking appropriate professional advice.

2

OutlineSOUTHEAST ASIA ECONOMIC GROWTH• GDP Growth• Industrial Production• Power Capacity Growth

PHILIPPINES DEMAND AND ITS NATURAL SUPPLIER• Philippines Demand • Competitiveness Analysis• Indonesia Coal Availability• A Natural Source of Supply and Long Term Challenges• Pricing Method

OUR BUSINESS MODEL – INTRODUCTION TO ADARO• Pit-To-Port Integration• Pit-to-Port – The Supply Chain• Focus On Different Product Ranges

3

SOUTHEAST ASIAN ECONOMIC GROWTHGDP Growth

Singapore

Thailand

MalaysiaPhilippines

Indonesia

Myanmar Laos Cambodia

Source: WoodMackenzie Coal Market Service (2015), World Bank (2015)

Vietnam

GDP in real terms4

5

SOUTHEAST ASIAN ECONOMIC GROWTHIndustrial Production as % of GDP

Malaysia

ThailandVietnam

Philippines

Indonesia

Singapore

CambodiaLaos

Source: WoodMackenzie Coal Market Service (2015), World Bank (2015)

SOUTHEAST ASIAN ECONOMIC GROWTHPower Capacity Growth (1)

Installed Capacity

2013 2020Coal 72%

2025Coal 99%

Source: WoodMackenzie (2015), Adaro Analysis (2013 and 2015), Indonesian Electrical Supply Business Plan (RUPTL)

167 GW

287 GW

332 GW

6

SOUTHEAST ASIAN ECONOMIC GROWTHPower Capacity Growth (2)

2013 vs 2025Installed Capacity (in GW)

Combined Gas and CoalOther Solid FuelsRenewablesHydroNuclearNatural GasOilCoal

Total 2013 = 167 GW Total 2025 = 332 GW

Source: WoodMackenzie (2015), Adaro Analysis (2013 and 2015), RUPTL 7




8

New Projects in the Pipeline

PHILIPPINES DEMAND AND ITS NATURAL SUPPLIERPhilippines Demand

Source: Adaro Analysis (2015)

COD CV Grand Total (MW)

<4200 GAR

1,560

FDC Misamis 2016 - 2017

4,600

405

GNPower Lanao Kauswagan 2017

4,200

405

Limay Phase 1 & 2 2017 - 2018

4,200

300

GN Power Expansion 2019

4,221

1200

4200 - 5800 GAR

2,310

Calaca Phase 1 Expansion 2017

4,300

300

Subic Redondo 2018

4,600

600

Therma Visayas Energy Project 2017-2018

4,400

300

TSI Expansion 2017

4,400

150

Quezon Power Expansion 2018

4,500

500

SMC Davao 2 2018

4,500

150

SMC Davao 3 2020

4,500

300

5800 GAR

300

AES Expansion 2016

5,960

300

Other Power Plants 2016-2020

4,458

Grand Total by 2016 - 2020 8,628

9

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

0.00

10.00

20.00

30.00

40.00

50.00

60.00

4840

4860

4880

4900

4920

4940

4960

4980

Forecast Import - Adaro vs WoodMac

Coal Demand (50% of Plan Realized) (LHS)Coal Demand (100% of Plan Realized) (LHS)CV Average by Adaro (RHS)

Mill

ion

tonn

es

Mill

ion

Tonn

es

10

75.03

Source : Geological of Indonesia (2013), Minerba (2013), Badan Geologi (2014)

13.22

85.25

14.80

KalimantanSumatra

0.23

Sulawesi Maluku

Papua

Java

Resources = 124.8

Reserves = 32.38

In Billion Tonnes

PHILIPPINES DEMAND AND ITS NATURAL SUPPLIER Indonesian Coal Availability

By Coal Type

Philippines

Resource CV (GAD)Low Rank < 5,100 kcal/kgMedium Rank 5,100 - 6,100 kcal/kgHigh Rank > 6,100 - 7,100 kcal/kgVery High Rank > 7,100 kal/gr

21 days

5 Day

s

Colombia

South Africa

Indonesia

Australia

Russia

32 days

13 days

9 days

Source: Argus (2015), IHS (2015), McCloskey (2015), GlobalCoal (2015), Adaro Analysis (2015)

PHILIPPINES DEMAND AND ITS NATURAL SUPPLIER Competitiveness Analysis (2015)

11

Origin CV FOB Price *) Freight Import Tax VAT Landed Price at

original CVLanded Price at

4700 GAR

Colombia 6000 NAR 47.87 21.13 7% 12% 82.11 61.65Indonesia 5000 GAR 39.32 5.98 0% 12% 50.74 47.69

Australia5500 NAR 41.24 9.71 7% 12% 60.63 49.136000 NAR 52.97 9.71 7% 12% 74.59 56.00

South Africa5500 NAR 38.43 11.98 7% 12% 59.99 48.616000 NAR 49.82 11.98 7% 12% 73.54 55.22

Russia 6000 NAR 57.05 6.06 7% 12% 75.10 56.39*) average of October 2015

Price and freight based on annual average

PHILIPPINES DEMAND AND ITS NATURAL SUPPLIER Competitiveness Analysis (2011 & 2013)

Source: Argus (2015), IHS (2015), McCloskey (2015), GlobalCoal (2015), Adaro Analysis (2015) 12

PHILIPPINES DEMAND AND ITS NATURAL SUPPLIERA Natural Source of Supply and Long Term Challenges

Indonesia has

1) Proximity / freight advantage 2) A large reserve and resource base 3) Reserve and resource in-line with project specification4) Flexible shipping arrangements to meet a diverse range of discharge port

requirements

However

5) Based on an historical discount for Indonesian sub-bituminous material, current and future gCNEWC prices are now either close or below cost. This will inhibit ongoing investment into new capacity to meet growing export demand in South-east Asia

6) Indonesian supply requires increased price flexibility to meet regulatory requirements i.e. the HPB minimum selling price and DMO

7) As IPP’s typically rely on a gCNEWC linked index for project financing, it may be difficult for Indonesian suppliers to comply on a long term basis as gCNEWC may no longer accurately reflect Indonesian future coal price.

13

14

PHILIPPINES DEMAND AND ITS NATURAL SUPPLIERPricing Method

Source : Global Coal (2015), Argus/Coalindo (2015), Adaro Analysis (2015)

Jan-

11M

ar-1

1M

ay-1

1Ju

l-11

Sep-

11No

v-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep-

12No

v-12

Jan-

13M

ar-1

3Ju

n-13

Aug-

13O

ct-1

3De

c-13

Feb-

14Ap

r-14

Jun-

14Au

g-14

Oct

-14

Dec-

14Fe

b-15

Apr-

15Ju

n-15

Aug-

15

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

gCN-linked Price VS HPB Marker 5000 GAR

gCN less 0% gCN less 5%gCN less 10% HPB Marker

US$

/ton

ne

Jan-

09Ap

r-09

Jul-0

9O

ct-0

9Ja

n-10

May

-10

Aug-

10No

v-10

Feb-

11Ju

n-11

Sep-

11De

c-11

Mar

-12

Jun-

12O

ct-1

2Ja

n-13

Apr-

13Ju

l-13

Oct

-13

Feb-

14M

ay-1

4Au

g-14

Nov-

14M

ar-1

5Ju

n-15

Sep-

15

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

ICI3 vs gCN

ICI 3 - 5000 GAR (LHS) gCN (LHS)

US$/

Tonn

e

% D

iscou

nt

15




16

OUR MODEL – INTRODUCTION TO ADAROPit-to-Power Integration

Adaro Indonesia (AI)Coal mining, S Kalimantan BalanganCoal mining, S Kalimantan

Mustika Indah Permai (MIP)Coal mining, S Sumatra Bukit Enim Energi (BEE)Coal resource, S Sumatra IndoMet Coal Project (IMC), BHP JV Coal mining, C Kalimantan

Bhakti Energi Persada (BEP)Coal resource, E Kalimantan

100%

75%

75%

61%

25%

10.2%

Saptaindra Sejati (SIS) Coal mining and hauling contractor

Jasapower Indonesia (JPI)Overburden crusher and conveyor operator

100%

100%

100%

100%

51.2%

100%

Makmur Sejahtera Wisesa (MSW)2 x 30MW mine-mouth power plant operation in S Kalimantan

Bhimasena Power2 x 1000MW power plant operator in Central Java

South Kalimantan Power Project2 x 100MW power plant operator in S Kalimantan

100%

34%

65%

Maritim Barito Perkasa (MBP)Coal barging and shiploading operator

Harapan Bahtera Internusa (HBI)Third-party barging and shiploading

Sarana Daya Mandiri (SDM)Channel dredging contractor

Indonesia Bulk Terminal (IBT)Coal and fuel terminal

Adaro Mining Assets (ATA)

Adaro Mining Services

AdaroLogistics Adaro Power

*Simplified Corporate Structure

PT Adaro Energy

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OUR MODEL – INTRODUCTION TO ADAROPIT-TO-PORT – THE SUPPLY CHAIN

80 Km haul road

230 Km barging

Domestic supply

Taboneo Anchorage: International sales

anchorage for the ship loading

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OUR MODEL – INTRODUCTION TO ADAROFocus on Different Product Ranges

COAL SPECIFICATIONS

Basis UnitTUTUPAN E4100

Typical Typical

Calorific Value GAR kcal/kg 4,700 - 5,000 4,000 - 4200

Total Moisture ARB % 26 - 28 38 - 40

Ash ARB % 2.5 - 3.0 3 - 4

Sulphur ARB % 0.1 - 0.15 0.2 - 0.3

Volatile Matter ADB % 42 - 43 41 - 42

HGI - - 46 - 47 55 - 61

Ash Fusion Temperature (reducing atmosphere)

Initial deformation

deg. C 0C 1,140 - 1,150 1,150 – 1,160

indonesian coal exports to the philippines

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