Adaro Energy creates maximum sustainable value along our pit-to-power value chains to provide reliable energy and help build Indonesia. This is what drives us and is why we are so passionate about building a great company.
Adaro Energy enhanced it’s position in 2016 as a strong,integrated coal mining and energy company supporting the Government of Indonesia in energy supply,infrastructure and electrification program.
The year 2016 turned out to be an exciting year for the coal industry. Supply side reform in China has changed the dynamics of the coal market, reducing the oversupply from the past years. Although we welcome the improvement in the coal market, we encourage the Board of Directors to continue to promote operational excellence and focus on efficiency and productivity as coal demand growth is slower than expected.
Against the backdrop of a volatile and uncertain global condition, a healthy balance sheet is key for Adaro.Adaro’s objectives to preserve cash, strengthen the capital structure and maintain solid free cash flow have supported the company and helped Adaro to ride out a difficult period and become stronger in the process
Adaro’s strong results in 2016 shows the resiliency of our vertically integrated business model. We were able to lower costs, manage our capital spending and continue to deliver operational excellence. We delivered on our guidance.
Despite the market downturn in the first half of the year, we distributed US$75 million of cash dividend to our shareholders in 2016. For the year 2016,we have distributed a interim dividend of US$61 million in January 2017 This shows commitment
from management to provide significant returns to shareholders while continuing to create value.
The Board of Commissioners fully supports the direction of the Board of Directors in sustaining Adaro’s strong financial and operational performance.
We applaud the Board of Directors for their success in achieving the milestone of financial closure of two important power plant projects, the 2x1,000 MW coalfired power plant in Batang, Central Java in mid-2016;and the 2x100 MW coal-fired power plant in Tanjung,South Kalimantan in early 2017.
In addition, the acquisition of metallurgical coal deposits in Central and East Kalimantan deepened our coal assets portfolio even further.
Good corporate governance to attain the company’s objectives
We recognize the importance of practices, rules and process in controlling and governing a company. It is essential to balance the interests of the company’s many stakeholders. Thus we take very seriously action plans, internal controls, performance measurement and corporate disclosures.
Adaro’s majority owners are a group of five families.Their involvement in decision-making, with no single controlling shareholder, naturally results in a strong mechanism to ensure decisions are made in the best interests of Adaro and its diverse stakeholders.
We continue to honor and implement Adaro’s core values of integrity, meritocracy, openness, respect and excellence in day-to-day activities. Despite industry headwinds, we continue to reflect these values in all our activities.
The Board of Commissioners undertook its supervisory role in 2016 with the assistance of an Audit Committee and through regular meetings and communication with the Board of Directors. The Board of Commissioners functions as a nomination and remuneration committee. We believe that these functions and committees have appropriately performed their tasks.
Changes to the Board of Commissioners’ composition
There were no changes to the composition of the Board of Commissioners in 2016.
We are deeply saddened by the passing of one of our beloved founding fathers, Mr Subianto, in early 2017. This was a great loss for Adaro.
We wish to put on record the quality of his guidance, and the outstanding service of Mr. Subianto to the Board of Directors and to Adaro over many years.
To date, the company has not filled the position that was left.
We have reviewed the Board of Directors’ strategic plans for 2017 and support its operational and financial guidance. We believe that Adaro’s management has good initiatives in place with regards to cost efficiency, development of Adaro Group’s non-coal businesses and value creation.
The Board of Commissioners is supportive of the Board of Directors’ strategy to develop and strengthen the company’s three engines of growth - coal mining,mining services and logistics, and power generation.
We remain cautiously optimistic with the positive developments in the coal market. Board of Commissioners supports the Board of Directors’ strategy to diversify our business and balance the volatility of coal. We understand that coal is a cyclical business which takes time to develop and thus maintaining stability, conserving our coal reserves and being efficient are very important.
The management’s achievements of achieving financial closures of our power plant projects completed our vertically integrated business model and allow us to support the government’s future vision for energy sufficiency. The Board of Commissioners is confident in the outlook for Adaro Group.
In closing, on behalf of the Board of Commissioners, I would like to congratulate the management and all employees for their conscientious efforts to build Adaro Group into such a strong and solid energy group.
We wholeheartedly thank our shareholders and stakeholders for their continued support of the Adaro Group.