When Adaro is bigger than BUMI

Adaro Energy (ADRO) closed 2009 as the biggest coal company in terms of market capitalization with Rp55.3 trillion, bigger than Bumi Resources (Rp47 trillion) even though it produced far less coal and has far smaller assets. The combined market capitalization of six major coal producers listed on IDX is US$22 billion.

BUMI was the most active stock traded on the whole exchange. The company is also the most aggressive in raising new loans. BUMI and ADRO raised over US$5 billion from the debt market in 2009. Combined with Bayan and Indika, coal producers raised lot more loans than any sector in the country.

BUMI stock price surged 166% in 2009, while Adaro skyrocketed by 257%. Third largest coal producer in terms of market cap is Bukit Asam (Rp39.7 trillion), followed by Indo Tambangraya (Rp35.9 trillion), Bayan Resources (Rp18.8 trillion), and Indika Energy (Rp11.6 trillion).  

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IDX = Coal Stock Exchange

Trading value of nine coal-related stocks at Indonesia Stock Exchange (IDX) on Thursday, November 12 reached Rp3.5 trillion or about 63% of the total trading value on the market. That's why we call IDX with new name: Coal Stock Exchange. 

BUMI was still the busiest casino with trading value of Rp1.8 trillion. But Adaro Energy (ADRO) closed the gap with trading value of Rp585 billion. The third largest was Indo Tambangraya Megah (ITMG) with Rp241 billion and the new kid on the block, Delta Dunia Makmur (DOID), with Rp127 billion.

Some traders said "coal is just too HOT to resist." The combined market capitalization of six major coal players on IDX is currently US$19.2 billion, declined 47% from their peak last year of US$36.5 billion. Interestingly, BUMI is not the largest coal stock anymore, in terms of market cap. ADRO has taken over BUMI's number one spot with market cap of US$5.23 billion, followed by BUMI with US$4.7 billion, Bukit Asam (US$3.4 billion), Indo Tambangraya (US$2.9 billion), Bayan (US$1.85 billion), and Indika (US$1.16 billion).

Other traders said "but I'm bit worried about burning down of coal stocks." Why? 

Well, with the exception of BUMI which is 73% below its peak last year, others are currently traded less than 45% below peak. ADRO is even traded 13% below its peak. Why people were so optimistic about coal while the actual prices of thermal coal may not recover to 2008 level for sometime?

Coal stocks have surged substantially this year. BUMI, for example, recorded 465% gain since January 15. Adaro has tripled (+212%) this year. United Tractors +257%. They might be dreaming of similar gains in the next few months. Nothing wrong with that. But...

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Kideco to issue USD200 million bonds

Third largest coal producer PT Kideco Jaya Agung will issue USD200 million bonds to expand its capital expenditure. But executive at Indika (majority owner of Kideco) denied that. "Bankers did propose to us," the executive said.

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Richest Indonesians, My List

Below is my list of the richest Indonesian, based on their net worth in Indonesia and other countries:

1) Eka Tjipta Widjaya (major source of wealth: APP, Asia Food & Property, and finance)
2) Rahman Halim (Gudang Garam)
3) R. Budi Hartono (Djarum Group, properties, and 10% shares in BCA---the largest private-owned bank in Indonesia, Bank Hagakita, and Bank Haga)
4) Sukanto Tanoto (RGM International, APRIL)
5) Lim Sioe Liong (First Pacific, Indofood, Bogasari, Unggul Indah Cahaya, properties etc)
6) Sjamsul Nursalim (Gajah Tunggal tire, GT Petrochem, Singapore assets, Jakarta properties)
7) Soeharto & Family (Humpuss, Citra Group, Hanurata etc)
8) Putera Sampoerna
9) Mochtar Riyadi (Lippo properties)
10) Peter Sondakh (cash in hands, Bentoel)
11) Hashim Djoyohadikoesoemo (Khazakhstan and Azerbaijan oil and gas operations)
12) Aburizal Bakrie (Bakrie & Brothers, Bumi Resources, Energi Mega Persada, etc)
13) Paulus Tumewu (Ramayana)
14) Edwin Soeryadjaja (Adaro, MGTI, etc)
15) Sudwikatmono (Indika Group)

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Indonesia finally impose 5% coal export tax

Government finally decided to implement the controversial 5% export tax on coal despite opposition from coal mining companies. The final decision was taken yesterday during a limited cabinet meeting chaired by coordinating minister for the economy Boediono and attended by trade minister Mari Pangestu, finance minister Sri Mulyani Indrawati, industry minister Fahmi Idris, and high-level officer of the energy ministry.

In October, the finance minister decided to impose a 5% export tax on coal. The decision, however, drew strong opposition from coal producers saying that would serve as a disincentive to investment in the industry.

Indonesia has targeted total coal production at 155 million tons for 2005, about 70% of which would go to the export market. High international coal prices accounts for the current rise in Indonesia’s coal output. With export volume well above last year’s 100 million tones, the country’s coal export value could reach US$4 billion this year. A 5% export tax means a potential income of US$200 million to the state budget.

With reserves at 5.9 billion tones, over the next five years, Indonesia intends to double coal production, mainly with the intent to export it. But analysts argues that government should revise onerous regulations on VAT, royalties, and autonomy rift in order to make the country’s coal mining sector more competitive in the long run.

In 2000, the Indonesian government created a regulation that changed coal to a non-taxable commodity. This means that coal producers are unable to charge the end-users VAT despite the fact that they have to pay VAT for imported capital goods and services. This has also lead to a drop in foreign investment.

Older coal companies (first generation companies) have VAT reimbursement rights, and as such have not lost out too much by this regulation. Newer coal companies do not have the same rights and as a result pay an additional 8 to 10% on their production costs.

Key Players

1) PT Bumi Resources Tbk., a company affiliated with Bakrie Family (controlled by Aburizal Bakrie, the coordinating minister for people’s welfare) is the largest producer through two main coal subsidiaries PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia. Bumi Resources committed to sell 43.7 million tones of coal this year, about 27.5 million tones from KPC and 15.7 million tones from Arutmin.

2) PT Adaro Indonesia, a company controlled by Indonesian businessman Edwin Soeryadjaya, GIC Special Investments (a Singapore government agency that manages its long-term foreign reserves), private equity units of Citigroup Inc and Goldman Sachs. The company produces 27 million tones per year.

3) Banpu, Thailand. Over the last decade, the company has developed a significant presence in Indonesia, ranking as the fourth largest Indonesian coal producer with full production capacity of 19.4 million tonnes a year from 4 concessions companies, PT Jorong Barutama Greston, PT Indominco Mandiri, PT Kitadin Coporation, and PT Trubaindo Coal Mining. The company also has another two concessions namely Barasentosa and Bharinto, which are in the exploration stage.

4) Kideco Jaya Agung, owned by Samtan Co Ltd, South Korea (49%), Indika Group (41%), PT Sumber Mitra Jaya (5%), and PT Muji Inti Utama (5%). KIDECO is the third largest coal company in Indonesia in terms of coal production with a substantial reserve base of approximately 1.25 billion tones. KIDECO produced 16.9 million tones of coal in 2004.

5) PT Tambang Batubara Bukit Asam Tbk., a listed company majority owned by Indonesia government. Combined production capacity is 10 million tones per year.

6) PT Berau Coal, owned by Indika Group (controlled by Sudwikatmono family) at 60%, PT Armadian Tritunggal 30%, and Nissho Iwai Corporaton 10%. Berau Coal might surpass Bukit Asam as the fifth largest producer with projected output of 11 million tones per year, a significant increase from 8.5 million tones last year. Indika is rumored in the process to acquire another coal mining company.

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Titan acquired Indonesian petrochemical company

Malaysia's Titan Chemicals signed the agreement to acquire 100% shares of Indonesian polyethylene producer PT Petrokimia Nusantara Interindo (Peni) from Indika Group on Thursday (December 22) at undisclosed price.
Indika bought 100% shares of Peni three years ago from Beyond Petroleum, Sumitomo Corporation, and Mitsui Inc at US$50 million.
Peni is the largest polyethylene (plastic raw material) in Indonesia with combined capacity of 450,000 tones per year. But the company always in raw material problem as the country has only one ethylene cracker PT Chandra Asri Petrochemical Center which also its main competitor with 300,000 tones per yer polyethylene plant.
With the divestment, Indika would focus on coal mining and energy business. Indika is a diversified business group owned by tycoon Sudwikatmono family.

Donald M. Condon, managing director of Titan Chemicals Corp. Bhd told me after the signing ceremony that the company is conducting a feasibility study to build olefin cracker in Indonesia to feed Peni. But he didn't disclose the timetable for the plan.

Ethylene supply is the main problem for Peni. Titan is planning to supply ethylene feedstocks to Peni from its Pasir Gudang, Malaysia facility.

Dedi H. Sudarijanto, president director of Peni, admitted out of 450,000 t/y capacity, utilization rate is well below 50%. "We're running at 200,000 t/y," he said.
Both Indika and Titan declined to comment on the price of the acquisition pending on the completion of transaction which is expected by first quarter 2006.
Arsjad Rasyid, managing director of Indika Group also denied rumors of Peni's bad debts as the main reason behind the decision to exit petrochemical business.
"We're not exiting the petrochemical business as we still hold investment in other chemical plants. Peni is also in good shape," he said.
Agus Lasmono, chairman of Indika Group, admitted the group would focus on energy business. Agus and Arsjad reluctant to disclose Indika's next move. But one investment banker disclosed the group's plan to acquire another coal mining company to strengthen its energy ventures.
Indika is involved in a huge power plant project in South Sumatra and new project in West Java.
As for Titan, the acquisition would boost its polymer production capacities to 1.4 million tones per year and make it the largest in South East Asia.

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