Adaro
Mining
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Power
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Water
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Land
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Capital

Adaro Energy Pillar

The Adaro Energy pillar, with operations in South Kalimantan, Central Kalimantan, and Australia, comprises subsidiaries operating in the business segments of mining, mining services, logistics, power, water, land, and capital. This pillar represents the company’s pit-to-power supply chain, with coal pits as the first point of the vertically integrated operations, to power plants as the last point that produces energy, and other supporting businesses in between to make up a complete line of supply chain. 

Each subsidiary along the pit-to-power supply chain has the captive market from the Adaro Group’s extensive operations. Although they prioritize to serve other companies within the group, they act as an independent profit center and can allocate excess capacity to serve the third parties.

Adaro Mining

PT Adaro Energy Indonesia Tbk (AEI)’s main mining subsidiaries are PT Adaro Indonesia (AI), which represented 78% of AEI’s total coal production, Balangan Coal Companies (Balangan), PT Mustika Indah Permai (MIP), and PT Adaro Minerals Indonesia Tbk (AMI). AI, Balangan and MIP produce medium calorific value thermal coal with low pollutant content widely used by coal-fired power plants. AMI produces hard coking coal product used as raw material in the production of steel. In 2022, the coal mining and trading segment contributed approximately 98% of AEI’s total revenue and achieved excellent performance by taking advantage of strong coal prices and higher volumes.

PT ADARO INDONESIA (AI)

AI is Adaro’s largest coal mining operations, which produces Envirocoal, its flagship sub-bituminous thermal coal product of medium calorific value (CV) and ultra-low pollutant content. The Envirocoal CV ranges from 4,000kcal/kg to 5,000kcal/kg and it is one of the cleanest coal available in the global seaborne thermal coal market. AI has 731 Mt of coal reserves and 3.3 Bt of coal resources.

In 2022, AI operated from three pits: Tutupan, Paringin and Wara. As of September 13, 2022, AI operates under a Special Mining Business License as the Continuation of Contract/Agreement of Work Operation (“IUPK-KOP”) valid until October 1, 2032, which can be extended in accordance with the prevailing regulations. Previously, AI operated under the first-generation Coal Contract Agreement (CCA) with the Government of Indonesia. The IUPK-KOP has increased AI’s royalty rate progressively based on coal selling prices to range from 14% to 28%, from the previous 13.5%. However, the corporate income tax rate also decreased from 45% to 22%. The IUPK-KOP will also bring about other changes to the AI’s business, such as in terms of profit sharing with the government, regulatory references, size of concession area, and non-tax state revenue ("PNBP"). The changes to tax and PNBP provisions will take effect from January 1, 2023.

AI’s operations in 2022

AI employs two mining services contractors: PT Bukit Makmur Mandiri Utama (BUMA) and AEI’s subsidiary PT Saptaindra Sejati (SIS). Each contractor provides equipment, supplies and labor to operate and achieve production targets in the area allocated to them.

The weak La Niña in 2022 had resulted in higher rainfalls at AI’s three mine sites. As a result, AI achieved lower total overburden removal of 191.83 million bcm (Mbcm) and recorded a strip ratio of 3.91x, or lower than 4.5x of 2021 and the 4.41x strip ratio target for 2022. Despite this, the company managed to respond to the higher coal demand in 2022 and achieved slightly above production target by mining the areas with lower strip ratio. In 2022, AI recorded total coal production and hauling volumes of 49.1 million tonnes (Mt) and 56.1 Mt, respectively, in 2022, from its three mines of Tutupan, Wara and Paringin, which respectively produced 39.8 Mt, 4.3 Mt, and 4.9 Mt of coal. AI’s total coal production volume of 49.1 Mt in 2022 was 13.7% higher than the 43.2 Mt total production volume recorded in 2021 and 2% higher than the 2022 plan.

Proper hauling is a prerequisite for delivering reliable supply to customers. AI’s coal hauling operations are carried out by its mining contractors with a fleet of than 300 double-trailer trucks with capacity of 130 tonnes per truck, along the 80 km of dedicated hauling road that connects AI’s mine and Kelanis port on the Barito River, a dedicated terminal where coal is processed and loaded onto barges. In normal operating condition, Kelanis has an annual capacity of 60 Mt. From Kelanis, AI’s coal is barged either to the transshipment facilities at the Taboneo offshore anchorage for the export market or directly to the locations of its domestic customers. AI’s hauling activities in 2022 were not much impacted by the weather condition because the company had considerably invested in physical road maintenance and tracking system with GPS to detect and quickly respond to holdups along the hauling road.

Safety is a priority within AI’s operational excellence. The company’s large scale and complex coal mining operations must be supported with effective occupational safety programs. The Adaro Group has a safety guideline called “Adaro Zero Accident Mindset” (AZAM), which is campaigned and applied group-wide. AZAM emphasizes on continuous improvements in standard operating procedures and inspections for mobile equipment operations and workshops, safety competency development for the supervisor level for them to enhance monitoring on subordinates, and rule enforcement and strict sanctions to improve workers’ behavior.

In 2022, AI recorded LTIFR and SR of 0.073 and 5.15, respectively, out of 68,334,250 manhours without fatality in its operations. However, regretfully there were 5 (five) occurrences of mining accidents that caused serious injuries. As the preventive and corrective action to prevent the recurrence of such incident in the future, AI has implemented the Mine Inspector’s recommendations as well as other actions considered necessary. The company is working to improve its safety aspect and has implemented various mining safety programs based on the good mining practices guideline to build safety culture, ensure compliance with rules and regulations, strengthen the workers’ safety commitment, and to improve the learning and communication accesses to achieve “zero accident” going forward.

BALANGAN COAL COMPANIES

Balangan Coal Companies (BCC) or Balangan comprises PT Semesta Centramas (SCM), PT Laskar Semesta Alam (LSA), and PT Paramitha Cipta Sarana (PCS). Adaro has 75% equity stake in each company, which separately holds an IUP over a total area of 7,500 ha that covers the Balangan Coal Companies’ deposits. The three coal licenses are an important part of the Adaro Group’s coal mine portfolio due to the additional sources of thermal coal they provide. The coal from these concessions is of a calorific value from 4,200kcal/kg to 4,400kcal/kg (GAR) and similar characteristics to AI’s Envirocoal, with low ash and very low sulfur content of less than 0.1%. Balangan has total estimated coal reserves of 125 Mt and coal resources of 265 Mt. Balangan is an important part of the Adaro Group’s coal asset portfolio, thus the quality and capacity of its its infrastructure from hauling road, stockpile, office, and warehouse, to its mine water management facilities, must be continuously improved.

BCC concessions produced a total of 7.11 Mt of coal in 2022, or increased 36% from the previous year. Total overburden removal in 2022 was 26.69 Mbcm, or 57% higher than 16.97 Mbcm in 2021, resulting in a strip ratio of 3.75x, compared to 3.24x strip ratio in 2021. Balangan’s operations in 2022 was affected by the prolonged rainy season in Indonesia. To overcome the challenges from weather condition, Balangan is in the process of upgrading its hauling road to become usable in all-weather condition to improve the productivity of its operation. Balangan has also developed various mine planning scenarios to ensure that it can achieve its long-term production target.

PT MUSTIKA INDAH PERMAI (MIP)

MIP is a coal mining subsidiary established in 2011 on which Adaro holds 75% equity interest. Its mining license (IUP) consists of a 2,000-hectare coal concession in the Lahat district of South Sumatra, which contains medium energy and ultra-low pollutant subbituminous coal with relatively low sulfur and ash content suited for power generation. MIP’s commercial production began in 2019 and it has developed market presence in both domestic and export market.

In 2022, MIP produced 3.28 Mt of coal, a 65% increase from 1.99 Mt in 2021, and sold 2.67 Mt of coal, a 47% increase from 1.81 Mt in 2021. MIP’s total overburden removal in 2022 was 8.84 Mbcm, 267% higher than 2.41 Mbcm in 2021, resulting in strip ratio of 3.15x, or significantly higher than 1.20x in the previous year.

MIP has total estimated coal resources of 305 Mt and coal reserves of 210 Mt of a 4,269 kcal/kg (GAR) coal. MIP supplies its coal to the domestic market and continues to gain market share in the region, with China as its largest export destination in the period, followed by The Philippines.

PT BUKIT ENIM ENERGI (BEE)

BEE is AEI’s second mining asset in South Sumatra. AEI holds a 61.04% equity interest in BEE which owns an IUP that covers an area of approximately 11,130 hectares that contains the coal-bearing Muara Enim formation about 150 kilometers southwest of the provincial capital of Palembang and 50 kilometers east of the MIP concession.

PT BHAKTI ENERGI PERSADA (BEP)

AEI owns 10.22% stake in PT Bhakti Energi Persada (BEP). BEP owns seven subsidiaries which each own mining license (IUP) that in total cover around 34,000 hectares greenfield mining areas in Muara Wahau district, Kutai Timur, East Kalimantan. Based on JORC the resources of the concession are estimated to be 3.3 Bt, making it one of the largest undeveloped deposits of low CV, low-pollutant thermal coal in the province. BEP’s resources are shallow and amenable to surface mining at extremely low stripping ratios.

In 2022, BEP continued the evaluation of its development options.

KESTREL COAL MINE (KESTREL)

Kestrel is an underground metallurgical coal mine that we acquired in 2018. AEI – through our subsidiary Adaro Capital Pte., Ltd. (48%) – and EMR Capital Ltd. (52%) own 80% of Kestrel. Kestrel is in Queensland, Australia, and the acquisition of Kestrel marked our first venture outside of Indonesia.

Kestrel’s acquisition is a significant milestone in our strategic expansion of metallurgical coal portfolio and will strengthen our position in the metallurgical coal market and sustain AEI’s growth over the longer term. Kestrel’s product is an established premium hard coking coal which has low ash and phosphorus content and high fluidity properties, making it a valued component in coke oven feed blends.

In 2022, Kestrel saleable coal production volume was 5.67 Mt, flat y-o-y compared with 2021. Meanwhile its coal sales in 2022 was 5.76 Mt, which was 4% higher than 5.56 Mt in 2021. This result is below Kestrel’s production guidance due to a period of soft floor conditions in the longwall panel and associated high clay content material impacting throughput at the CHPP.

Kestrel mainly sells its hard coking coal on a contract basis to major customers in the Asian markets. India was Kestrel’s largest sales destination in 2022 followed by Japan and South Korea. Kestrel is a world-class asset with marketable coal reserves of 184 Mt and resources of 421 Mt as of December 31, 2022. In 2023, Kestrel expects its saleable coal production to grow to 6 Mt.

With high quality metallurgical coal assets in Australia and Indonesia through Kestrel and PT Adaro Minerals Indonesia’s (AMI), Adaro can capture metallurgical coal business opportunities and enhance value creation.

Last modified on February 15, 2024, 4:44 pm | 607308