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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.
These materials contain statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plan,” “will,” “estimates,” “projects,” “intends,” or words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. The Company has no obligation and does not undertake to revise forward-looking statements to reflect future events or circumstances.
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
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
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
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
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
17
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
18
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