The post-pandemic economic recovery that we experienced in 2021 improved the coal market dynamics and drove coal prices to historical highs, creating a tailwind for our profitability. We were able to deliver on our operational and exceed our financial targets; thanks to our integrated business model, which allowed us to maintain efficiency and operational excellence. We applaud the Board of Directors (BoD) for their shrewdness in executing the company’s plans and strategies, amidst the lingering risks of COVID-19. We believe that without the consistent implementation of cost discipline and operational excellence, we would not have achieved the strong performance in 2021.
On top of the operational and financial metrics, strict compliance to environmental, social, and governance (ESG) best practices also continues to be one of our focus areas. We are delighted to report to the shareholders that MSCI has upgraded the ESG rating of PT Adaro Energy Indonesia Tbk (AEI) from BB to BBB, signifying the improvement in our ESG disclosures as well as improvement in the company’s ESG performance. Our response to climate change and the decarbonization challenge is just one aspect of our broader commitment to bring value and balance into our business. We have just started, but I believe we are on the right path to diversify our business and further grow the contribution from non-coal.
Review of work plan and performance
On behalf of the entire Board, I want to take this opportunity to commend the BoD on their nimbleness and strategic decisions. We view that the BoD has an excellent vision to transform each of our business pillar into more sustainable businesses and capture the opportunities to further develop and expand the company beyond coal.
It is our assessment that the BoD has been able to capture the opportunities in green economy, synchronizing our strategy with what the world needs as well as in line with Indonesia’s strategy to increase processing and down- streaming activities. We think that the BoD’s strategy on capital allocations, business continuity as well as shareholders’ returns is the right strategy and we believe that the BoD has continued to do what is best for the company.
The BoD’s consistent effort to improve cost efficiency and strengthen our capital structure, in addition to the tailwind from high coal prices, have significantly increased our cash flow generation. Our financial position is the strongest we have ever achieved, giving us security to ride out coal cycles and formulate growth strategy. We owe our cost leadership to our integrated business model. The integration also allows us to enjoy contribution from non- coal mining businesses, which protects our profitability.
Despite ingrained high safety standard, it is with great sadness to report that we experienced three fatalities in our operations in 2021. We take safety seriously and we will rectify and mitigate all operational and safety risks going forward.
Our supervision on strategy execution
Together with the Audit Committee, we monitor the effectiveness of governance process, control function and risk management implemented by the BoD. We maintain frequent communication with the BoD through regular and impromptu meetings to ensure that we get updates on the company. This is part of our effort to ensure that the management executes business plans and strategies with full adherence to our Code of Conduct and the applicable regulatory requirements.
In doing our job, we have the support from various committees which regularly inform and report to us. This ensures that we have objective perspectives on the company’s development. We view that the Board of Directors has performed its management and executive functions very well in 2021.
Our view on AEI’s f inancial and operational performance target for 2022 We have reviewed the company’s guidance for 2022, and we fully support the decision to ramp up production and capitalize on the positive industry landscape and expectation of continuing economic recovery. We will continue to closely monitor the execution of the company’s short-term and long-term business plan including the proper execution of our business transformation strategy. Together with BoD, we will formulate strategy to ensure that our business is sustainable and brings value to our stakeholders.
The growing importance of ESG metrics for all our stakeholders also encourage us to continue implement various green initiatives to improve our ESG performance and to provide better disclosure.
Compliance and implementation of good corporate governance
It is our assessment that the management has continued to apply good corporate governance (GCG) practices as an integral part of our day-to-day operations and pursue the highest level of compliance to its principles. Our governance and compliance processes adhere to the Adaro values of integrity, meritocracy, openness, respect, and excellence; as well as our Code of Conduct. We continue to instill the Adaro Values as the guiding principles for our employees on how to behave at the workplace. Although all the Adaro Values are important, we especially emphasize on integrity as the main character that every employee should possess to ensure that we have a strong foundation to sustain the growth of our company.
Changes to the Board of Commissioners’ composition
In 2021, there were no changes to the composition of the Board of Commissioners. In the Extraordinary General Meeting of Shareholders (EGMS) held on February 9, 2022, the shareholders approved the resignation of Dr. Ir. Raden Pardede from his position as AEI’s Independent Commissioner and approved the appointment of Mr. Budi Bowoleksono as AEI’s Independent Commissioner. We would like to thank Dr. Ir. Raden Pardede for his contribution as Independent Commissioner of AEI.
We welcome Mr. Budi Bowoleksono to the Board of Commissioners of AEI and we believe that his experience and credentials will further strengthen the supervisory role of AEI’s Board of Commissioners.
Gratitude and Appreciation
We thank the BoD for the professionalism and dedication to find the right strategic route for the company, to always plan and execute what’s best for the company not only in the short-term, but also in the long-term. Our appreciation goes to all our employees for their hard work and commitment, and to our diverse stakeholders for their support to AEI.
On behalf of the Board of Commisssioners,