Why Adaro? Financial
Presentation Press

Why Invest in Adaro?

The Power of Positive Energy

Each time we ship Envirocoal, the cleanest thermal coal available on the export market, on schedule and as ordered to our loyal customers, we deliver positive energy.

In the passionate work of each of our employees, in the way we conduct ourselves, in the impact that we have on those around us and in the contributions we make to society, we deliver positive energy.

As we turn a non-renewable resource into a renewable one by building strong, healthy communities surrounding our operations, as we create maximum sustainable value from Indonesian coal, we deliver positive energy.

Here are eight core reasons to believe in us:

With a track record of uninterrupted production over 24 years and sizeable reserve bases, we are one of Indonesia’s largest coal suppliers with strong reputation in both quality and reliability. Our coal products are among the most cost-effective and environmentally-acceptable solid fuels available and our focus on mine planning, safety, quality control and exploration ensures reliable output for customers.

The extension of our supply chain to be a vertically integrated pit-to-power business gives us better control over costs and risks. This control allows for efficient production and the flexibility to respond to market volatility and weather the cyclical difficulties of the coal sector, thus ensuring business sustainability.

The continuous development of our three pillars of growth – coal mining, mining services & logistics, and power generation – makes us well-positioned to capitalize on the opportunities throughout the supply chain. Our subsidiaries are individually treated as an independent profit center while synergizing as a leading mining & energy group to create the long-term value from Indonesian coal.

The recent acquisition of a sizeable metallurgical coal deposit in a location covering a part of Central and East Kalimantan has diversified our portfolio beyond thermal coal. Being one of the few companies that have metallurgical exposure, we can take advantage of the significant growth options from this new commodity in Indonesia and other Asian countries.

Our more comprehensive coal portfolio also creates opportunities for highly attractive, competitive, and well-balanced non-coal businesses along the supply chain, which offer upside potential over the long term. We have started and will continue to develop the mining services and logistics businesses to serve our own as well as third parties’ coal operations, and the power businesses to secure a captive market for our coal products and provide a natural hedge against the volatility of the coal sector.

We are capitalizing on the opportunities offered by the Government’s 35,000 MW power generation program and becoming a major player in the power sector. As this program potentially increasing domestic coal consumption more than double when all new coal-fired power plants are operational, a business in the power sector will create a captive demand for our coal and propel the growth of our mining services and logistics arm, thus securing a stable revenue stream and favourable returns and minimizing the impact of volatility from the cyclical nature of the coal sector.

The financing close of PT Bhimasena Power Indonesia’s (BPI) 2x1,000 MW in June 2016 and PT Tanjung Power Indonesia’s (TPI) 2x100 MW in January 2017 underscore both our ability to undertake large-scale, state-of-the-art power projects and our strong commitment to contribute to the nation’s development and economic growth by getting into the power business that will help to increase electrification ratio. The projects are progressing well and will roll- out as scheduled in 2019 for TPI and in 2020 for BPI. We are also working with potential partners to explore further opportunities arising from the Government’s plans to boost Indonesia’s electricity-generating capacity.

We delivered on production guidance and posted strong results in 2016 on the back of operational excellence and cost discipline across our three pillars of growth. We produced 52.64 Mt of coal out of 52-54 Mt guidance. We generated 22% increase in operational EBITDA to US$893 million, reflecting the strength of our earnings and the resiliency of our business model. The solid operational EBITDA and prudent capital spending enabled us to maintain positive free cash flows at US$479 million. The strong free cash flows supported our commitment to pay regular cash dividend to shareholders and allowed us to secure a strong liquidity with a cash balance of US$1,077 million.

The success in generating solid operational and financial performance keeps our balance sheet in a better, stronger and thus healthier position to support the company’s growth and safeguard it during challenging times.

We take an approach of continuous improvement with regards to cost management by taking advantage of the vertical integration of our supply chain. Continued evaluation is done of existing operations and processes to achieve cost efficiencies without compromising quality.

We managed to increase cost efficiency in 2016 on the back of a lower strip ratio, continuous efforts to boost efficiency, and a lower than expected fuel prices. Our cash cost is one of the lowest, and thus our operational EBITDA stays one of the highest, among Indonesia’s coal and energy producers. Our efficiency strategy will maintain good margins going forward as we have a proven capability to adapt to difficult market conditions.

We take a prudent, careful approach to capital spending to ensure optimum balance between the money reinvested into the business to capitalize the opportunities for maximum growth rate and the returns paid out consistently to the investors.

Since our IPO in 2008, we have gone through the up and down cycles of the coal market but never have we compromised our commitment to pay dividends to the shareholders. We have paid a total of US$925 million (cumulatively from 2008) in dividends with average payout ratio of 43% and will continue doing so. This also proves our highly efficient capital allocation and ability to maintain stability in operations by applying our resilient business model and cost discipline.

We pursue the highest standard of excellence in our health and safety measures, environmental conservation efforts and community relationship initiatives. We perceive these aspects as parts that together constitute one whole attribute that keeps our business resilient over time.

Our utmost emphasis on each of the health and safety measures enforced strictly in all parts of operations (including the contractors’) has awarded us with a record of zero fatality in 2016. We take pride in this exemplary achievement and will continue to monitor the operations closely to ensure this level of safety will be maintained.

The careful approach we take when dealing with the environment has gained strong recognition from various reputable institutions, as reflected in the awards we have received over the years, such as the PROPER Gold or Green award from the Ministry of Environment and Forestry, which we have received eight years in a row.

Our mission to keep growing together with the communities living surrounding our operations has built a solid, mutually supportive relationship that will keep our existence sustainable and our business profitable.

Our controlling shareholders are a group of five families who have built the reputation for developing successful companies with high business ethics. With no single person or entity holding the absolute power of authority, AE has a natural checks-and- balances mechanism to ensure that all decisions are made for the best interest of the company and its stakeholders.

Our Boards of Commissioners and Directors consist of highly professional executives with diverse backgrounds. Combined, they make up one whole expertise in both business operations and industry specifics. This ensures that the company is run and supervised by highly qualified people capable of making the best decisions, developing the most effective strategies and taking the right directions for the company’s maximum value and optimum growth.

We strive to comply with all the applicable rules and regulations, which may change from time to time. We have a solid legal team composed of highly skilled law professionals to ensure that we stay updated with the development of the regulatory requirements and all of our operations always comply with them.

Last modified on May 16, 2017, 11:55 am | 40218