PT Alamtri Resources Indonesia Tbk · IDX:ADRO
PT Alamtri Resources Indonesia Tbk — PT Adaro Energy — 19th CLSA Investors' Forum 2012
59 slides from PT Alamtri Resources Indonesia Tbk's conference presentation, September 2012
Slide 1: Building a Bigger and Better Adaro Energy
Building a Bigger and Better Adaro Energy ------------------------------------------------------------- 19th CLSA Investors‘ Forum September 10 - 12, 2012
Slide 2: Disclaimer
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
Slide 3: Recent Developments
Recent Developments HIGHLIGHTS ■ For first half 2012, our net income decreased 3% to US$260.1 million. EBITDA increased 4.4% to US$667.5 million and we maintained a robust EBITDA margin of 34.6%. ■ Despite the challenging market conditions, we remained on track to deliver on our long term strategies
Slide 4: Latest Operational and Financial Highlights
Adaro Energy‘s Latest Operational and Financial Highlights OPERATIONAL 1H 2012 1H 2011 % Change Production (Mt) 23.01 22.81 0.9% Sales (Mt) 23.69 24.02 -1.4% OB removal (Mbcm) 156.83 140.68 11.5% FINANCIAL (US$ millions, unless 1H 2012 1H 2011 % Change otherwise indicated) Net revenue 1,931 1,771 9.
Slide 5: Agenda
Agenda Adaro‘s Strategy Corporate Information Current Industry Overview and What Adaro Should Do Long Term Industry Outlook “We are pleased with our first half results amid the difficult market conditions. We are not immune to cyclical downturns; however, we will not lose focus on our core b
Slide 6: Strategy – Creating Maximum, Sustainable Value
Strategy – Creating Maximum, Sustainable Value Strategy Action Plan Organic growth from Production ramp up and mine Majority of organic growth will come current reserve base planning from Wara mine Chip sealing of hauling road, Focus on improving Implementation of OPCC, Mine- dredging of channel etc
Slide 7: Strategy – Organic Growth
Strategy – Organic Growth Units 2012 2011 2010 Guidance Actual Actual Production volume Mt 48-51 47.7 42.2 E 5000 Tutupan Mt 40-41 41.3 39.2 E 5000 Paringin Mt 1-2 1.0 0.5 E 4000 Wara Mt 8-10 5.4 2.5 Strip ratio bcm/tonne 6.4 5.9 5.5 6
Slide 8: Strategy – Improving efficiency and cost control
Strategy – Improving efficiency and cost control Adaro has consistently initiated cost reduction projects over the years such as sealing the haul road, dredging the river channel, and using the Taboneo anchorage Project Reason Project Spend Completion Cost through 1H12 Date Overburden Crusher Transp
Slide 9: Strategy – OPCC and Mine Mouth Power Plant
Strategy – OPCC and Mine Mouth Power Plant OPCC (Overburden Crushing and Conveying) ■ OPCC is to improve operational efficiency, reduce the use of diesel, lower overburden hauling costs via trucks, and allow overburden to be placed further distances from the mine. ■ The first unit will be installed
Slide 10: Strategy – Acquisition
Strategy – Acquisition Increase reserves, diversify location, maturity of licenses and product type Acquisition Price/ Date Location Asset License / Expected Ownership Expiry Operation IndoMet Coal (IMC) US$335m March Central Greenfield - CCoW TBA JV with BHP 25% 2010 Kalimantan coking coal NA Musti
Slide 11: Strategy – Bhakti Energi Persada
Strategy – Bhakti Energi Persada Bhakti Energi Persada (“BEP”) is owned by two of Adaro’s key shareholders; Persada Capital Investama and Triputra Investindo Arya. BEP has undeveloped, low grade (average 3,400 kcal/kg GAR) and large deposit (JORC certified coal resources of approximately 9 billi
Slide 12: Strategy – South Sumatra
Strategy – South Sumatra MIP JORC Compliant Coal Resources and Reserves (Millions of ROM Tonnes) Total Total Ash Sulfur Calorific Total Moisture % % Value (kcal/kg) Mt % (GAR) (GAR) (GAR) Resources 286.4 33.9 5.5 0.4 4,345 Reserves 272.6 34.1 6.0 0.4 4,281 The key advantages of our investments in So
Slide 13: Strategy – IndoMet Coal Project
Strategy – IndoMet Coal Project ■ IndoMet Coal Project (“IMC”) is an unique opportunity for Adaro to partner with a world class mining company in BHP Billiton to develop a metallurgical and energy coal deposit in seven Coal Contracts of Work (“CCoWs”) located in Central Kalimantan. ■ A phased approa
Slide 14: Group Operations and Coal Acquisitions
Group Operations and Coal Acquisitions Up to 90% stake in BEP 25% JV with BHP, (E. Kalimantan IndoMet Coal project Sub-bituminous Coal) (Central Kalimantan Coking coal) Adaro Indonesia Resources – (Existing , S. Kalimantan 774 million tonnes Sub-bituminous Coal) Resources – 4.4 billion tonnes Resour
Slide 15: Abundant Resources and Scale
Abundant Resources and Scale 2011 Largest Producing Site Concession in Southern Reserves and Resources Comparison Hemisphere (Mt) 8000 47.7 7000 40.7 7,782 Resources Reserves 6000 32.0 31.6 7,290 21.4 19.8 17.4 5000 14.6 4000 4,661 3000 Kideco KPC Berau Indonesia Cerrejon Arutmin New Vaal American I
Slide 16: Strategy – Downstream into Power
Strategy – Downstream into Power Diversify and provide predictable revenue stream Bhimasena Power Indonesia – Joint venture between Adaro (34%), J-Power (34%), Itochu (32%): – IPP project for a 2 x 1000MW power plant in Central Java – Project cost estimated at US$4 billion using ultra supercritica
Slide 17: Agenda
Agenda Adaro‘s Strategy Corporate Information Current Industry Overview and What Adaro Should Do Industry Outlook 16
Slide 18: Creating Sustainable Value from Indonesian Coal
Creating Sustainable Value from Indonesian Coal Listed on IDX in July 2008 PIT TO POWER INTEGRATION Adaro Energy FY11: Revenue: US$3,987million PT Adaro Energy Tbk EBITDA: US$1,472million Adaro Adaro Alam Tri Abadi Logistics Marketing Simplified structure Adaro Mining Adaro Power Services 100% 2
Slide 19: PT Adaro Indonesia
Balikpapan East Kalimantan Central Kalimantan Tanjung Kelanis Barge River Terminal PT Adaro Indonesia Banjarmasin South Kalimantan Taboneo Anchorage Domestic and Direct Barging South Pulau Laut Coal Terminal Coal and Fuel Storage Handling Port 18 18
Slide 20: PT Adaro Indonesia - Mining
PT Adaro Indonesia - Mining Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Resources Measured Indicated Inferred Total (Mt) Wara Deposit (Mt) (Mt) (Mt) Tutupan 729 814 865 2,408 North 116 96 85 297 Paringin Wara 1 486 366 449 1,301 Wara 2 133 134 100 367 Tot
Slide 21: Dedicated Coal Hauling Road
Dedicated Coal Hauling Road Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Hauling Equipment Capacity: 60 million tonnes Hauling Road Capacity: 80 million tonnes Hauling Road Distance: 80 km Hauling Road Vehicles: 200 road trains Balikpapan East Kalimantan C
Slide 22: Kelanis: One of the World's Largest Inland Bulk Terminals
Kelanis: One of the World‘s Largest Inland Bulk Terminals Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Crushing Capacity: - 7 crushers with total capacity of 7,500 tph - Annual capacity of 55 Mt Stockpiling Capacity: 2 stockpiles with capacity of 250,000t
Slide 23: PT Maritim Barito Perkasa – Barging
PT Maritim Barito Perkasa (“MBP”) – Barging Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Balikpapan East Kalimantan Central Kalimantan Tanjung Kelanis Barge River Terminal Banjarmasin South Kalimantan Taboneo Anchorage Domestic and Direct Barging South Pul
Slide 24: PT Sarana Daya Mandiri – Dredging/Water Tolling
PT Sarana Daya Mandiri (―SDM‖) – Dredging/Water Tolling Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Adaro’s Innovative Solution to Dredging was completed was started commercial operation on River Bottleneck: January 1, 2009. Subsequently, capacity of the
Slide 25: PT Maritim Barito Perkasa – Ship Loading
PT Maritim Barito Perkasa (“MBP”) – Ship Loading Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Vessels with their own gear and grabs at the Taboneo anchorage MBP’s floating cranes Balikpapan East Kalimantan [FY11: Central Kalimantan Total Coal Loaded: Tanju
Slide 26: PT Indonesia Bulk Terminal – Coal Terminal Services
PT Indonesia Bulk Terminal (―IBT‖) – Coal Terminal Services Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Shell’s fuel terminal recently constructed at IBT’s facility Balikpapan East Kalimantan Central Kalimantan Tanjung Kelanis Barge River Terminal Banjarm
Slide 27: Benefit from the Fully Integrated Operations of AE
Benefit from the Fully Integrated Operations of AE Strategy is centred on improving control and efficiency of the supply chain Kelanis Strong control Crushing Plant, 55 Mt Hauling Road 80 km, 80 Mt Medium control Controlling stake held by the Group PT Adaro Indonesia Coal Concession Owner PT Maritim
Slide 28: Value Creation at the Subsidiary Level
Value Creation at the Subsidiary Level ■ Our very large scale means adding significant volume is more challenging than for smaller mines. As we grow, the vertical integration of our subsidiaries allows for better control of our coal supply chain and so we can continue to guarantee reliable supply fo
Slide 29: Operating Subsidiary – SIS
Operating Subsidiary – SIS Highlights ■ SIS started its commercial operation in April 2002 and is the 4th largest contractor in Indonesia. SIS provides a broad range of coal mining services including exploration, drilling, transportation and logistical support, overburden removal and coal mining ser
Slide 30: Operating Subsidiary – MBP
Operating Subsidiary – MBP Highlights ■ An Indonesian barging and ship loading company that used to be one of Adaro’s principal barging contractors and the largest of its three ship loading contractors. Following its purchase, Adaro is able to better control demurrage costs and more efficiently util
Slide 31: Exceptional Access to Capital
Exceptional Access to Capital US$800 million 10 year, non call 5, Reg S/144A, Guaranteed Senior Notes • Currently rated at Ba1 and BB+ • Received total commitments of US$6bn US$500 million 5 year, Amortizing Revolving Credit Facility • Received total commitments of US$1.83bn with one banks commi
Slide 32: Consistently Improving Financial Profile
Consistently Improving Financial Profile Superior Access to Bank Loan and Bond Markets Adaro has a track record of no default, rescheduling of debts nor breaching its financial covenants LBO: Jun‘05 Dec‘05 Mar‘07 Dec‘07 Dec‗08 Dec‘09 Dec‘10 Dec‘11 DSCR DSCR DSCR DSCR DSCR DSCR DSCR ~
Slide 33: Strong Operational Performance Versus Peers
Strong Operational Performance Versus Domestic and International Peers Adaro is a leading player across key operational and financial metrics and achieves one of the highest EBITDA margins despite lower CV and significant financial flexibility 2011 Production Volumes (million tonne) Cash Cost(US$/to
Slide 34: Adaro Energy – Historical Cost Analysis
Adaro Energy – Historical Cost Analysis Coal Cash Cost and Strip Ratio¹ (US$/tonne) 36 39-42 31 27 27 5.5 5.9 6.4 4.5 5.0 ■ While costs have increased due to higher strip ratios, overburden hauling distances 2008A 2009A 2010A 2011A 2012F and fuel prices, Adaro has maintained Strip Ratio Cash Cost No
Slide 35: Adaro Energy: 2012 Guidance
Adaro Energy: 2012 Guidance Production Volumes (mt) Consolidated Strip Ratio 47.7 48-51 6.4 42.2 5.5 5.9 38.5 40.6 5.0 4.3 2008A 2009A 2010A 2011A 2012F 2008A 2009A 2010A 2011A 2012F Coal Cash Cost (US$/t) 39-42 31 36 27 27 2008A 2009A 2010A 2011A 2012F EBITDA (US$b) Capex 1.5 625 1.1 1.0-1.3 400 -
Slide 36: Diversified and Loyal Customer Base with Earnings Visibility
Diversified and Loyal Customer Base with Earnings Visibility Customer type by % volume (FY11) Geographical breakdown of customers (FY11) 100 Others 10 Malaysia 8% Indonesia 4 5% 23% 80 America 6% 60 Others Taiwan Cement 6% 40 86 Power Korea Japan 5% 11% 20 Hongkong 6% 0 Spain 1 China India 11% 9% 10
Slide 37: CSR Commitment has been Recognised
CSR Commitment has been Recognised PROPER Green Award for the year 2006, 2008, 2010 and 2011 Adaro Indonesia received the green level PROPER award for environmental rehabilitation excellence. The only Indonesian mining company to receive this award for fourth consecutive year. Presented by Minster o
Slide 38: Reputable Shareholders and Strong Corporate Governance
Reputable Shareholders and Strong Corporate Governance Reputable and Supportive Shareholders Wide Recognition Across the Board Platts Top 250 Global Energy Awards in 2011 Edwin Soeryadjaya Teddy Rachmat Two Platinum Category in Indonesia CSR Awards 2011 Boy Garibaldi Thohir together hold
Slide 39: Safety and Environment
Safety and Environment ■ During 4Q11, there were 6 Lost Time Injuries (LTI’s) with a resultant Lost Time Injury Frequency Rate (LTIFR) of 0.42. ■ We strive to create a safe working environment for everyone to go home safe and healthy at the end each day. ■ Initiatives include the implementation of A
Slide 40: Experienced Management Team with Proven Track Record
Experienced Management Team with Proven Track Record Management Team with Proven Track Record Benefits from experience and active participation of key shareholders’ representatives More than 135 High operating and safety standards years of combined Combined 75 years Average 12 years industry wit
Slide 41: Agenda
Agenda Adaro‘s Strategy Corporate Information Current Industry Overview and What Adaro Should Do Long Term Industry Outlook 40
Slide 42: Current Industry Overview – Historical Newcastle Thermal Coal Price
Current Industry Overview and What Adaro Should Do Historical Newcastle Thermal Coal Price McCloskey Newcastle 192.5 200 180 160 140 120 100 80 60 87.9 40 20 0 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 CLSPAUNE Index Source: Bloomberg 41
Slide 43: Current Industry Overview – Supply Growth
Current Industry Overview and What Adaro Should Do Supply Growth Total supply in the market during the first five months this year is higher than last year with both Australia and Indonesia started to recover from the rain impact providing additional supply to the market. Indonesia coal export i
Slide 44: Supply Glut from the US and Low Freight Rate
Current Industry Overview and What Adaro Should Do Supply Glut from the US and Low Freight Rate that caused Oversupply With surge in shale gas output, the gas prices have come down significantly in US. Shale Gas production costs could vary between US$4–6/mmbtu (after including development costs).
Slide 45: How Sustainable is the Supply Growth?
Current Industry Overview and What Adaro Should Do How Sustainable is the Supply Growth? US$/t A$/US$ 200 1.2 1 150 0.8 100 0.6 0.4 50 0.2 0 0 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 May-08 May-09 May-10 May-11 May-12 CLSPAUNE Index AUDUSD Curncy Source: Bloomberg Aus
Slide 46: How Sustainable is the Supply Growth? (Deutsche Bank)
Current Industry Overview and What Adaro Should Do How Sustainable is the Supply Growth? Source: Deutsche Bank At the current price levels, around 20% (30Mt) of Australian export thermal coal production is operating at a loss & expect some production curtailments & deferrals. 45
Slide 47: Cost Structures
Current Industry Overview and What Adaro Should Do Cost Structures The biggest advantage Indonesia has had to date has been its low costs. Average Indonesian coal production costs are put at US$50/ton with some producers having costs in the range of US$60-70/ton – the higher costs are attributed t
Slide 48: Cost Structures (Cont'd)
Current Industry Overview and What Adaro Should Do Cost Structures (Cont’d) FOB = US$40 – US$42 Panamax= US$25 Rail = US$32 PRB ROM = US$ 8 – US$ 10 To Korea/ North Asia @ 5000 GAR = US$65 – US$67 Illinois CAPP ROM = US$ 30 ROM = US$60 – US$70 @ 6300 GAR @ 6500 GAR FOB = US$70- Rail = US$10 US$80 Ba
Slide 49: Talks of Production Cuts
Current Industry Overview and What Adaro Should Do Talks of Production Cuts Patriot Coal has filed for bankruptcy, citing a coal industry “transformation” that made its financial position untenable. Patriot sold 31.3mt of coal in 2011, of which 22mt were consumed locally. The US coal industry fa
Slide 50: Electricity Demand in India and Indonesia
Current Industry Overview and What Adaro Should Do Electricity Demand in India and Indonesia still have long way to catch up…. Potential Growth in Electricity Consumption Canada Electricity Consumption (Kwh/Capita) US Asia Korea Asia Indonesia Japan France Russia Germany China Brazil WORLD Thailand
Slide 51: Demand in China, India and Indonesia are Still Strong
Current Industry Overview and What Adaro Should Do Demand in China, India and Indonesia are still strong China coal import is the highest historically at 140mt of coal in the first half of 2012, up 65.9% year on year. India’s thermal coal imports are expected to break the 100mt barrier for the f
Slide 52: What Adaro Should Do
Current Industry Overview and What Adaro Should Do What Adaro Should Do Price will continue to be challenging for the next 12 months Focus on preserving cash flow: 1. Reduce capex and cost. 2012 capex guidance revised to US$400m-US$500m from the original guidance of US$650m-US$700m. Put on-hol
Slide 53: What Adaro Should Do (Cont'd)
Current Industry Overview and What Adaro Should Do What Adaro Should Do (Cont’d) Medium term outlook remain intact with strong fundamental. Demand: Population growth New market growth from Indochina China, India and Indonesia remains strong Hoping European and US economy begin to pick up
Slide 54: Agenda
Agenda Adaro‘s Strategy Corporate Information Current Industry Overview and What Adaro Should Do Long Term Industry Outlook 53
Slide 55: Robust Industry Fundamentals and Outlook
Robust Industry Fundamentals and Outlook Strong Demand for Low CV Coal Demand for Adaro Indonesia‘s Coal Specifications is Expected to Grow Strongly Million tonnes 140 Asia is expected to make up 76% of 120 total global sea-borne trade in 2021 100 and contribute 82% of the growth from 80 2010 to 2
Slide 56: Coal – Key source of generating electricity in Target Markets
Coal – Key source of generating electricity in Target Markets China India Indonesia Domestic Coal Consumption for Electricity Generation (Million Tons) Coal is forecasted to continue to be the key source of electricity production in China and India. China, India and the domestic markets are the
Slide 57: China's Production to Lag Demand
China‘s Production to Lag Demand Power consumption key driver for demand ■ The China Electricity Council forecasts 2015 electricity consumption to climb to 6.4 trillion kwh per year, an increase of ~8.8% per annum from 2011 levels. ■ By 2020, total capacity is expected to be 1,935GW, of which 1,170G
Slide 58: China and India Dominate Increase in Coal Demand for Electricity
China and India continue to dominate increase in demand for coal for electricity generation Global Energy Demand by Fuel Global Electricity Output by Fuel Electricity Demand (Indexed to 2009) Coal is overtaking oil as the key contributor of Global Energy with the highest CAGR (except renewables, whi
Slide 59: Thank you
Thank you 58