The updated company profile of Adaro Energy is presented in our Indonesian Companies section. The company is one of the leading Indonesian coal mining companies and Indonesia's second-largest producer of thermal coal, operating the largest single coal mine in the country (located in South Kalimantan). Adaro Energy produces a type of sub-bituminous coal that is less environment unfriendly because of its low content of sulfur, nitrogen and ash. This coal is globally trademarked as envirocoal.

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Head of Statistics Indonesia (Badan Pusat Statistik or BPS) Suryamin said that inflation in April 2014 is estimated to be low or will turn into deflation as food stockpiles in a number of regions are sufficient amid the peak of the harvest season. Suryamin based his estimation on BPS monitoring conducted from 17 April. The monitoring indicated that prices of the main food commodities (which include rice, chili, chicken meat, cooking oil as well as beef) are stable or even declining from the previous month.

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Coal production in Indonesia stood at approximately 110 metric tons in the first quarter of 2014, thus little changed from the production volume in the same period last year. Indonesia's Ministry of Energy and Mineral Resources said that - despite the decline in coal prices - the first quarter result implies that a quarter of this year's production target, which is set at 421 million tons, has been achieved. Indonesia is one of the world's top producers and exporters of coal. This fossil fuel accounts for about 85 percent of the country's mining revenues.

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PTT Plc, a Thailand-based energy company which conducts coal mining activities in Sebuku, Jambayan and Laung (all on the island of Kalimantan), is planning to list its subsidiary, Sakari Resources, on the Indonesia Stock Exchange through an initial public offering (IPO). PTT Plc has been active in Indonesia's mining sector since 2008 when it acquired a 94 percent stake in (Singapore-listed) Sakari Resources. After the acquisition, Sakari Resources delisted from the Singapore Stock Exchange.

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On 23 February 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as the G20 meeting in Sydney, foreign confidence in Indonesia's capital markets, the Gini ratio, coal royalties, the current account deficit, infrastructure development, and more.

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Chairman of the Indonesian Coal Mining Association (APBI) Bob Kamandanu expects that Indonesia's coal production will decline about 5 percent to 400 million tons in 2014 after the government asked miners to scale back production rates in order to safeguard future domestic supplies as the country needs sufficient energy resources for its future energy supply. Amid low domestic demand, the government asked Indonesian coal mining companies to limit the country's total coal output at 397 million metric tons.

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Indonesia's Ministry of Energy and Mineral Resources stated that domestic production of coal in Southeast Asia's largest economy reached 421 million tons in 2013. This implies a 7.6 percent growth in production from the previous year (391 million tons). R. Sukhyar, General Director of Mineral and Coal within the Ministry said that Indonesia's production of coal in 2014 is likely to exceed 400 million tons again as global demand for this fossil fuel remains strong. Indonesia is one of the world's largest producers and exporters of coal.

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In 2013, domestic production of heavy equipment in Indonesia fell 30 percent to 6,127 units from the previous year as commodity prices (such as crude palm oil and coal) were still down. This made Indonesian miners reluctant to ramp up production figures, thus having less need to purchase heavy equipment. According to Pratjojo Dewo, Chairman of the Indonesian Heavy Equipment Association (Hinabi), demand for heavy equipment in Indonesia started falling at the end of 2012 and continued into 2013.

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Indonesia Investments added the preliminary company profile of Exploitasi Energi Indonesia. The company, a vertically-integrated energy company, is engaged in coal production & trading, coal logistics & transportation, and power generation. Currently, most of its revenue is derived from its coal mining activities. However, in the years ahead it intends to focus more on turning electricity generation into its main source of revenue. It has a long-term coal supply contract with state electricity company Perusahaan Listrik Negara (PLN).

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Bank Indonesia (Indonesia's central bank) has expressed that it will support slowing credit growth in the country's banking sector next year in order to foster a more stable financial environment amid a complex external and internal context. In recent years, credit growth in Indonesia has grown over 20 percent annually, while in 2013 it is expected to slow to between 18 and 20 percent amid a tighter policy regime. In 2014, Bank Indonesia targets credit growth between 15 to 17 percent. As a result banks will be more cautious in their lending approach.

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Indonesia's Ministry of Energy and Mineral Resources will soon issue a moratorium on new coal mining concessions. This moratorium will be implemented after the issuance of a planned presidential instruction regarding a five-year moratorium on new palm oil plantation concessions. Heriyanto, Head of the Legal Department Directorate General of Minerals and Coal at the Energy Ministry, emphasized that the moratorium in Indonesia's mining industry only involves coal, not the mining of minerals.

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Domestic coal consumption in Indonesia rose 34.5 percent (y/y) to 24.5 million tons in the January-April 2016 period, according to data from Indonesia's Energy and Mineral Resources Ministry. This growth is caused by higher domestic coal demand due to Indonesia's ambitious 35,000 MW program (many of the power plants constructed in this program are coal-fired). Meanwhile, Indonesia's coal exports were down 14 percent (y/y) to 68 million metric tons over the same period amid sluggish global demand.

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Last week it was announced that the Japan Bank for International Cooperation (JBIC) agreed to a USD $3.4 billion loan for the construction of the controversial Batang power plant in Central Java. This power plant project is controversial as it met fierce resistance from the local community (triggering concerns about human rights violations related to the land acquisition process) as well as criticism from environmental groups, saying this power plant - set to become Indonesia's largest coal-fired power plant - runs counter to Indonesia's earlier commitment to reduce carbon emissions.

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Adaro Energy, one of Indonesia's leading coal mining companies, is still plagued by the globe's weak coal prices. However, the company's estimated lower cash and operational costs give a positive boost to the miner's corporate earnings this year. According to Danareksa Sekuritas' estimates the cost of mining for Adaro Energy (outside royalty payments) will range between USD $26 - $28 per ton in 2016, slightly down from USD $28 per ton last year. Meanwhile, the miner's stripping ratio is expected to decline to 4.7x in 2016 (from 5.2x last year).

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One of the leading diversified conglomerates in Indonesia, Astra International, is facing challenges. Demand for cars has been on the decline in Indonesia over the past two years. This is a big challenge for the company because the automotive sector accounts for about half of Astra's total earnings. Meanwhile, its heavy equipment & mining segment and the financial services segment have been under severe pressure. Net income in the heavy equipment & mining segment plunged 55 percent (y/y) in Q1-2016, while net income in the financial services segment tumbled 46 percent (y/y) over the same period.

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State-controlled coal mining company Tambang Batubara Bukit Asam may be the only Indonesian coal producer that will post higher sales in 2016, both in terms of volume and revenue. The nation's other coal miners are expected to see further dropping coal sales due to sluggish global demand although coal prices may stabilize this year. According to Trimegah Securities Bukit Asam's coal sales volume will rise 25 percent (y/y) to 23.9 million tons in 2016, while revenue is estimated to rise 9 percent (y/y) to IDR 15 trillion (approx. USD $1.1 billion), and coal mining operational costs to fall by 3 percent (y/y) to USD $39.8 per ton.

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United Tractors, the largest distributor of heavy equipment in Indonesia, is still facing challenges due to persistently weak demand for heavy equipment amid low commodity prices. Business activity in the agribusiness, mining and infrastructure sectors have slowed This context is expected to lead to slowing net profit for the company in both 2015 and 2016. The company, a subsidiary of Astra International (Indonesia's largest diversified conglomerate), controls a market share of around 40 percent in Indonesia's heavy equipment market.

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Coal production in Indonesia fell 15.4 percent to 263 million tons in the first eight months of 2015 (from 311 million tons in the same period last year) as Indonesian coal miners cut production due to low global coal demand. Last week it was reported that Indonesia’s reference thermal coal price hit another all-time low at USD $58.21 per metric ton (FOB), down 1.6 percent from the August reference rate, and the fifth consecutive month of decline. Meanwhile, Indonesia’s coal exports fell 18 percent to 211 million tons (y/y) in the January-August period.

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In the 2000s many Indonesian companies diversified their business to include coal mining (or shifting their core business to coal mining altogether) due to lucrative opportunities amid the 2000s commodities boom. However, since 2009 mining companies have had to face tough times. Especially since 2011 commodity prices have shown a declining trend and there remains little hope of a rebound on the short term as the sluggish global economic growth trend persists, particularly led by the economic slowdown in China.

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The government of Indonesia is eager to use current low coal prices as the context to push for consolidation in the country’s coal mining sector. Sudirman Said, Minister of Energy and Mineral Resources, announced that the government may revoke over 4,000 troubled mining licenses this month and install a better licensing system. Licenses that may be revoked are Mining Business Permits (IUPs), not the long-standing Coal Contracts of Work (PKP2B) that are held by companies such as Bumi Resources and Berau Coal Energy.

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