Joko WinarnoPT KRAKATAU STEEL

2012 SEAISI Environmental & Safety SeminarNov 27- 28, 2012 • Bangkok, thailand

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OVERVIEW1. Economy

• GDP growth exceeded 5% started in 2004 continually and is forecasted to increase.

• Inflation started in 2005 trend decreased, 2009 was lowest.

Source, BPS – Statistics Indonesia- * = 1st Semester

3.664.10

5.13

5.70 5.50

6.306.00

4.60

6.206.50 6.50

10.03

5.06

6.40

17.11

6.60 6.59

11.10

2.80

7.00

3.804.50

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

INFL

ATIO

N

GD

P

GDP Growth (%)Inflation

2. Rapid growth of steel consumption

o Steel consumption has increased rapidly after the economic crisis with an average CAGR 03-14 of 9.4%.

o However, consumption in 2006 slowed down due to a decline in the consumption of bar, wire rod and flat products.

o The figure show a recovery trend in 2007, which was due to the increase of production activities in automotive sectors, electronics, and shipping yards.

o Consumption in 2012 slightly increased compare to 2012 due to economic crisis in europe. It is expected that the consumption in 2014 will increase to become 12,563 thousands tons, mainly driven by the growth of infrastructure, construction and shipbuilding sectors.

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OVERVIEW

Historical and projected of Indonesia steel consumption

4,6895,718

7,2356,245

7,2458,823 8,382 9,048 9,835

10,69111,573

12,563

-2,000

4,000

6,0008,000

10,000

12,000

14,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F

x 10

00 T

on

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A. Government Regulation1. Legal Aspects• Environmental Management Law No 32/2009 • Air Pollution Control Law No 41/1997• Marine Pollution Government Regulation No 19/1999• Management of Water Quality & Water Pollution

Government Regulation No 82/2002• Water Resources Law No 7/2004• Government Regulation of the RI No. 18 /1999 Jo. PP No.

85 / 1999 regarding “Hazardous waste management” is being revised to accomodate the developement of bussines, industries and people/environment interest.

There are also numbers of government regulation and decision of State Minister of Environment.

EXTERNAL INFLUENCES

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2. Policies (Commitment to Climate Change)• Indonesia’s government commits to cut emissions by 26

percent in 2020 from “business as usual” (BAU) levels.• With international support could cut emissions by as much as

41 percent.• The policy would be a mix of stepping up investment in

renewable energy, such as geothermal power, and will change the status the forest from that of a net emitter sector to a net sink sector by 2030.

• Implementation of REDD Plus.

“This target is entirely achievable because most of emissions come from forest-related issues, such as forest fires and deforestation”.

EXTERNAL INFLUENCES

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3. National Priority in Environmental Programa. Control of Pollution and Environment Damage :

1. Maintain environmental sustainability and improve the quality of environmental carrying capacity

2. Clean River Program (PROKASIH), Corporate Performance Rating Program (PROPER), Blue Sky Program, Adipura etc..

3. Maintaining coastal and marine ecosystems in order to maintain the sustainability of fish resources and other biota, in the year 2010 has made the rehabilitation and conservation of coastal resources, marine and small islands.

b. Disaster management: preparedness for disasters and forest fire control. c. Early Warning System: maintain of Weather Early Warning System (MEWS) and

Climate Early Warning System (CEWS); Improved quality of human resources and delivery of information related to climate and weather (agriculture)

d. Climate Change: National Action Plan has been prepared Decrease Greenhouse Gas Emissions (GHG-RAN) in 2020 .1. In the regulation. 2. In developing management mechanisms funding for climate change programs,

Indonesia have been established the Climate Change Trust Fund (ICCTF) 3. Improvement in conservation and rehabilitation of forest resources as well as

increased functionality and carrying Watershed (DAS)

EXTERNAL INFLUENCES

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EXTERNAL INFLUENCES

Improvement of Company Performance in Control of Pollution and Environmental Damage

1000

8585.00

251.00

466.00519.00

627.00690.00

995.00

69.00

49.00

56.00

76.0070.00 71.00

66.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

2005 2006 2007 2008 2009 2010 2011

CO

MPL

IAN

CE

LEVE

L (%

)

NU

MB

ER O

F C

OM

PAN

Y

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EXTERNAL INFLUENCES

REDD Plus REDD plus Program is one of the implementation of the Indonesia-

Norway partnership in forestry. The main goal will provide a grant of US $ 1 (one) billion to reduce

deforestation and forest degradation, with stage payments based on the ability of Indonesia to reduce emissions.

South Kalimantan (Kalimantan) is selected to be pilot provinces early stages of Reducing Emissions from Deforestation and Forest Degradation (REDD plus) in Indonesia.

Implementation Phase I, is the preparation and establishment of REDD plus Task Force

in September 2010, pursuant to Presidential Decree No. 19/2010, with the task of preparing a national REDD plus strategy and design agency REDD plus.

Phase 2, is the establishment of the agency of REDD plus Indonesia, reporting, monitoring and verification (MRV), the implementation of the pilot provinces, and implementation of the moratorium for two years.

President's commitment at the G-20 and COP 15 PittsburgTo reduce greenhouse gas emissions by 2020

26% 41%

Forestry 14%

Energy 6%Garbage 6%

Own Efforts

Own efforts and international support

Through the development of new

renewable energy and implementing energy conservation by all

sectors

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EXTERNAL INFLUENCES : Commitment to Climate Change

Source: EBTKE KEESDM 2010

10

RE4%

Coal31%

Natural

Gas21%

Fuel Oil

44%

2010 2015 2020 2025

BAU Gov.Dec. 5/2006 VISSION 25/25

113,1 Mio SBM

5100MioSBM

3200MioSBM

3200MioSBM

Energy Conservation

(37,5%)

RE3%

Coal34%

NaturalGas 21%

Fuel Oil42%

RE17%

Coal33%

NaturalGas30%

Fuel Oil20%

RE25%

Coal32%

NaturalGas23%

Fuel Oil20%

EXTERNAL INFLUENCES : Energy Policy Direction

Source: EBTKE KEESDM 2010

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B. Local During contstruction of joint venture Krakatau

Posco project, local governments and poeple surrounding area has been involved in relation to implement of community social responsibility, environmental regulations and occupational health and safety.

Initiatives, involvements and supports local government programs for greenery/reforestation of coastal area and urban area near the project.

EXTERNAL INFLUENCES

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C. Public, Non-Government Organizations (NGOs), Pressure Groups.International & national programs : CO2 reduction Clean Development Mechanism (CDM) Stockholm convention Community & Social Responsibility (CSR)

EXTERNAL INFLUENCES

1. Safety initiativesSafety initiatives Implementation

Internal safety induction course Required for project and new recruits

Annual safety training programs Conducted internally every year

Routine certification for operators and internal safety auditors

Required for relevant personnel, conducted regularly

Safety inspections Conducted internally regularly involved contractors and third party

Sertification In 2011 has been sertified OHSAS18001

Random inspections Conducted at random time table

Job safety analysis Identification and verification to ensure proper job safety implementation

Emergency response teamsEmergency response teams are established at company and business unit levels

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IN THE STEELWORKS

2. LT IFR performance

• Lost Time Injury Frequency Rate (LT IFR) is the number of lost-time

per million hours worked, within 2 x 24 work hours, due to injuries

• Certified OHSAS18001 in year 2011

• Golden Flag Certificate of EHS management system from The Ministry of Manpower and Transmigration since 2000

Awards in safety performance

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IN THE STEELWORKS

0.56

0.34

0.45

0.270.23

0.27 0.29

0.080.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

2005 2006 2007 2008 2009 2010 2011 2012

LT IFR KS

UPPER LIMIT

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a. Overview. PT Krakatau Steel (PTKS) is continuing to increase the production capacity

up to 3.5 million tons by developing a new plant and joint venture with strategic partner.

PT Indoferro (Iron & Steel Mill), a manufacturer of steel which is a joint venture between the Singapore company, Lee Metal Group Ltd, and national companies Growth Steel Group, has build steel mills 'pig iron' first phase capacity of 500 thousand tons in Ciwandan, Banten. Steel mill blast furnaces has started in this year.

b. Process stages. The ground breaking of PT Krakatau Steel's blast furnaces has been

started in September 2012 with design capacity of 1.2million tons per year and will be completed in first or the second quarter of 2014.

Construction progess of Krakatau Posco project is on schedule at 40%. The PTKS partnership with PT Antam Tbk, named PT Meratus Jaya Iron &

Steel (MJIS). The project has finished and will start producing direct reduced iron (DRI) at the end of 2012.

IN THE STEELWORKS

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Will be operated at the end of this year

Project Name : PT Meratus Jaya Iron & SteelCapacity Output : + 300.000 Ton/year of DRIProduct Off taker : PT. Krakatau Steel (Persero)

Location : South Kalimantan ProvinceProgress : Finish

OVERVIEW PROJECT

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Project Name : PT. KRAKATAU POSCO

Capacity Output : - 3 Million Ton per year (at 2014)- 6 Million Ton per year (at phase 2)

Product :- Slab- Plate- Hot Rolled Coil (HRC)

Location : Cilegon, Banten, Indonesia

Progress : 40%

Start Up : Year 2014

Investment Cost : USD 2.66 Billion until year 2014

OVERVIEW PROJECT

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Indonesia’s GDP growth exceeded 5% started in 2004 continually and is forecasted to increase every year. In the other side the inflation is under control. This condition is good for investation.

Indonesia’s steel demand is also continually increase rapidly after the economic crisis with an average CAGR 03-14 of 9.4% (in year 2003 – 2012). For anticipation, some of steel plant has built a new plant and increase the capacity and will be operated in year 2014.

Indonesia has done consistently to improve environmental management through some programs i.e. adaptation to climate change, renewable energy policy and the implementation of REDD Plus.

PT Krakatau Steel has started to build a new plant to increase capacity, and the contraction progress of JV company -KRAKATAU POSCO reach 40%.

SUMMARY