We have come a long way since then. What started out as a company producing 1 million tonnes of coal two decades ago is now one of the top five exporters in the global seaborne thermal coal market and the largest supplier to the domestic market. At the end of 2015, with a market capitalization of US$1.27 billion, we were one of the largest mining companies listed on the Indonesia Stock Exchange.
In 2015, we produced 51.5 million tonnes of coal, bringing our total production to date from our three pits at the site in South Kalimantan to 560 million tonnes. With 873 million tonnes of reserves and 4.9 billion tonnes of resources in this concession (as reported according to the JORC Code 2012), we are well positioned to capitalize on Indonesia’s coal demand growth and realize our vision of becoming a leading Indonesian mining and energy group.
Our strategy is to create maximum value from Indonesian coal by focusing on organic growth of coal production, to improve efficiency and cost control to develop the mining services and logistics business and to develop and further integrate our power generation division.
We focus on developing our business in Indonesia. Our strategy is premised on growth — of Indonesia, Southeast Asia, China and India. We believe that as these countries see their electricity demand increase as a result of population and economic growth, the fuel of choice will remain affordable, abundant coal.
We are one of a few coal producers in the world capable of providing reliable, long-term coal supply to blue-chip power utilities as they build coal-fired power plants throughout Asia. Having a long-term supply agreement with these power utilities will allow us to achieve our medium-term production target. We will focus on expanding our current customer base and work with them to develop power plants that will use our coal.
We are strategically positioned to meet the growing energy needs of a developing region and participate in the economic growth of Indonesia and others emerging in Asia. We have a multi-pronged approach to growth:
1) We continue to grow our business organically.
We take a disciplined approach to growth and prioritize our customers’ demands as well as our operating margins.
2) We continue to improve efficiency along the coal supply chain and focus on cost control.
Having a vertically integrated business model benefits us by improving control and reliability, lowering costs and becoming more efficient.
Past initiatives such as dredging the Barito River channel and chip-sealing the hauling road have been effective in reducing coal handling equipment cycle times and improving capacity.
We managed to lower our coal cash cost and maintained among the highest Operational EBITDA margins in Indonesian coal in 2015.
3) We continue to further develop our mining services and logistics business.
At Adaro, one of our aspirations is to have power and other non-coal mining businesses provide considerable contributions towards earnings. Although coal mining remains the foundation of our business, the share of our non-coal mining businesses continued to rise, offsetting the declining coal prices.
We have seen the results in 2015, as the non-coal mining aspects of our business contributed 42% of Adaro’s Operational EBITDA. As Adaro develops its three engines of growth — coal mining, mining services and logistics, power — we will be less reliant on coal mining. In the future, we may publicly list the strong performing subsidiaries to support further growth and development.
4) We are moving downstream into power generation.
We made a strategic decision to move into power five years ago as part of our vision to be a leading Indonesian mining and energy group. Since then, we have been working to develop our power division and have learned important lessons along the way.
Adaro is now ready to ride the momentum of the Indonesian government’s power generation development plan and participate in building coal-fired power plants in the country. This is a good time to be in Indonesian power sector. With the rise of the middle class and the country’s industrialization and economic growth, Indonesia’s power generation sector has huge potential.
We are committed to supporting the government’s program to add 35GW of power generating capacity in five years, and we have formed partnerships with blue-chip power utilities to build power plants that use ultra-supercritical technology, which are more efficient and more environment-friendly.
The power generation business will provide us with good returns and generate stable and predictable cash flows. In addition, it strategically positions us for further growth by supporting the country’s increasing power needs while creating a captive demand for our coal. It also gives us a better bargaining position with boiler manufacturers regarding coal sales. We are on track to develop our power division and to support national development efforts.