coaltrans vietnam - 31 oct 2014

INDONESIA: MEETING VIETNAM’S FUTURE COAL REQUIREMENTS

3rd Annual Emerging Asian Coal Markets, Vietnam 5 – 6 November 2014


DISCLAIMER

These materials have been prepared by PT Adaro Energy (the “Company”) and have not been independently verified. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, fairness or completeness of the information presented or contained in these materials. The Company or any of its affiliates, advisers or representatives accepts no liability whatsoever for any loss howsoever arising from any information presented or contained in these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed.

These materials contain statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plan,” “will,” “estimates,” “projects,” “intends,” or words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. The Company has no obligation and does not undertake to revise forward-looking statements to reflect future events or circumstances.

These materials are for information purposes only and do not constitute or form part of an offer, solicitation or invitation of any offer to buy or subscribe for any securities of the Company, in any jurisdiction, nor should it or any part of it form the basis of, or be relied upon in any connection with, any contract, commitment or investment decision whatsoever. Any decision to purchase or subscribe for any securities of the Company should be made after seeking appropriate professional advice.



Presentation Outline

• VIETNAM IMPORTS: HISTORY AND PROJECTIONS• SOUTHEAST ASIAN COAL FLOWS - 2013• ENERGY MIX• SUPPLY AND DEMAND GROWTH HISTORY• IMPORTS PROJECTION• INDONESIA’S GEOGRAPHICAL ADVANTAGE• LOGISTICS COST FORECAST

• PROJECTION FOR COAL SUPPLY• SOUTHEAST ASIAN COAL RESERVES• INDONESIAN COAL RESERVES AS OF 2013• HIGH AVAILABILITY OF LIGNITE

• SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES• CHINA, INDIA, AND SOUTHEAST ASIA• INDONESIAN COAL SUPPLY AND QUALITY

• INTRODUCTION TO ADARO

• CONCLUSIONS


SOUTHEAST ASIA – COAL IN THE ENERGY PICTURECoal Flows - 2013

As of 2013, Vietnam remained a net exporter, but for how long?

2013

Net Exporter

Net Importer

44 Mt

13 M

t

18 MT

PHILIPPINES

VIETNAM

THAILAND

23 MT

21 MT 12 MT

INDONESIA

419 MT 375 MtExports outside ASEANAustralia to

ASEAN: 9 Mt

Exports to

ASEAN

MYANMAR, LAOS, CAMBODIA

3 MT

MALAYSIA

Exp

orts

to

Chi

na

Source: WoodMackenzie, 2014; China Coal Resources, 2014; Salva, 2014; Adaro Research


VIETNAM IMPORTS: HISTORY AND PROJECTIONSVietnam Energy Mix

The Mix in 2013

Growth by Fuel (compared to 2009)•Coal : 2.9 GW•Hydro : 6.7 GW•Natural Gas : 0.1 GW•Renewable : 0 GW•Oil : -0.4 GW

Total Growth : 9.4 GW (56%)

Source: WoodMackenzie, Coal Market Service, 2014


VIETNAM IMPORTS: HISTORY AND PROJECTIONSVietnam Supply and Demand Growth History

VIETNAM

• Increased coal fired generation resulted in domestic demand growth of 7 million tonnes since 2009, due to new coal fired power plants in northern Vietnam.

• Consequently, by 2013, Vietnamese coal exports declined 26% compared to 2009.

2013

Source: McCloskey, 2014; WoodMackenzie, Coal Market Service, 2014


VIETNAM IMPORTS: HISTORY AND PROJECTIONSFuture Vietnam Energy Mix


The Mix in 2030Growth by Fuel (compared to 2013)•Coal : 26.6 GW •Natural Gas : 12.0 GW•Hydro : 7.8 GW•Renewable : 6.0 GW•Nuclear : 2.0 GW•Oil : 1.1 GWTotal Growth : 65.7 GW (217%)


VIETNAM IMPORTS: HISTORY AND PROJECTIONSCoal Imports Projection

• Total Vietnamese production will likely be flat over the next decade, thereafter declining year-on-year.

• By 2018 WoodMackenzie expects Vietnam will be a net-importer of coal.

• Adaro expects that Vietnamese imports will reach 50 and 80 million tonnes by 2020 and 2030, respectively.

• Based on future Vietnamese power projects, average imported coal CV is expected to range from 4500 GAR to 5000 GAR in 2020 -2030.

Source: WoodMackenzie, Coal Market Service, 2014; Adaro Research


VIETNAM IMPORTS: HISTORY AND PROJECTIONSVietnam Coal Supply and Demand Growth History

Source: McCloskey, 2014; WoodMackenzie, Coal Market Service, 2014

VIETNAM

?

2030• Vietnamese coal fired generation is expected to increase by 15x that of 2009. Vietnam coal demand is expected to increase by 6% CAGR.

• Exports are expected to drop significantly in the next 10 years.

• Despite Vietnam limiting future exports domestic supply will not meet future demand.

CAGR=6.4%


VIETNAM IMPORTS: HISTORY AND PROJECTIONSIndonesia’s Geographical Advantage

3 days

10 days

South Kalimantan

Australia

13 days

Russia

South Africa

17 days

• Australian and South African coals need to be transported much further than Indonesian coal in order to reach southern Vietnam.

• This logistics disadvantage will remain crucial in the future, making coal imports from those origins arbitrage based.

• Indonesia, on the other hand, will remain as a base supplier in spite of price movements.

Southern Vietnam

Source: AXS Marine, 2014


VIETNAM IMPORTS: HISTORY AND PROJECTIONSLogistics Cost Forecast

Source: WoodMackenzie, Coal Market Service, 2014; AXS Marine, 2014

• Freight remains a key competitive advantage for Indonesian coals compared to other exporting countries.

• FOB cost of Indonesian coal is expected to grow at a slower rate than other major coal exporters in the next 20 years.

• The logistics advantage, coupled with low FOB cost, consolidates Indonesia’s position as the most competitive coal producing region to supply Vietnam in the next two decades.








• CONCLUSIONS


PROJECTION FOR COAL SUPPLYSoutheast Asian Coal Reserves

Source: BP, 2014; Indonesian Geological Agency, Ministry of Energy and Mineral Resources, 2013; WoodMackenzie, 2014; World Coal, 2014; Adaro Research

1.2 BT

1.0 BT

PHILIPPINES

VIETNAM

THAILAND

Southeast Asia Coal Reserves* as per 2013 (in Billion Tonnes)

* Anthracite, Bituminous, Sub-bituminous, and Lignite

INDONESIA

• Within the ASEAN region, Indonesia has been endowed with plentiful coal reserves.

• Other ASEAN countries have a much smaller reserve base.

• The region also has gas and oil resources as well as access to renewables

31.4 BT

0.3 BT

0.4 BT

MALAYSIA


PROJECTION FOR COAL SUPPLYIndonesia Coal Reserves as of 2013

1

2

3

4

Source: Indonesian Geological Agency, Ministry of Energy and Mineral Resources, 2013; ICMA, 2013

• Indonesia has a large resource coal base, in close proximity to the coast.

• However, most of the reserves are low-CV coals.

(in Billion Tonnes) TotalTotal Reserves 31.4

Low Rank 12.0 Sub-Bituminous 17.5 Bituminous 2.5


PROJECTION FOR COAL SUPPLYHigh Availability of Lignite

Source: WoodMackenzie, Coal Supply Service, 2014; Adaro Research








• CONCLUSIONS


SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES

China and India Coal Supply

China

India

• Chinese domestic production is expected to slow after reaching 4 billion tonnes, while domestic coal demand is estimated to grow at CAGR : 3% (base : 2013) by 2030.

• China to remain as net importer in the next 20 years.

• Indian domestic production to reach > 1 billion tonnes by 2030, increasing more than 600 million tonnes from 2013. However, domestic supply is not expected to cope with demand growth.

• India’s energy shortage to raise imports.

Coal Demand - Imports

Coal Demand - Domestic



SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES

Other Southeast Asian Countries Coal Supply

• Additional capacity developments are expected in Myanmar, Thailand, Malaysia, Philippines and Cambodia

• Expected growth of coal-fired power from these countries is around 88 GW by 2030 compared to 2013

Thailand

Philippines

Source: WoodMackenzie, Coal Market Service, 2014; Salva, 2014; Adaro Research

Myanmar and Cambodia

Imports

Domestic

Malaysia

(in Million Tonnes)

Indonesia

Southeast Asia(excluding Vietnam)


PROJECTION FOR COAL SUPPLYProjection of Indonesian Coal Availability

Expected Increase of Indonesian Domestic Coal Demand by 2020

Source: WoodMackenzie, Coal Supply Service, 2014; Adaro Research

• Over the next 10 years Indonesian domestic demand to grow by approximately 64 million tonnes, only for PLN’s Crash Program.

• Its expected that the majority of new bituminous and sub-bituminous coal project developed in Indonesia will be consumed domestically.

• Based on current reserve base the majority of likely, probable and possible projects will be low rank coal : < 4500 GAR

• Average Indonesian export Calorific Value to decline due to increasing amount of low-rank supply

Current Coal Production Rate: Domestic + Export

Expected Increase of Indonesian Domestic Coal Demand by 2030








• CONCLUSIONS

Adaro Energy Mining Assets

21

Sumatra: Resources 75.03 Bt Reserves 13.22 Bt

Kalimantan: Resources: 85.25 Bt Reserves: 14.80 Bt

Indonesian Coal: Resources 160.65 Bt Reserves 28.02 Bt

Source: Ministry of Energy and Mineral Resources

12 billion tonnes of coal resources are attributable to Adaro across 6 locations and 20 mining concessions, eight of which are CCA and CCoWs and the remaining IUPs.

Adaro Indonesia:Existing, South Kalimantan sub-bituminousResources 4.9 Bt, Reserves 900 Mt

MIP: 75% stakeSouth Sumatrasub-bituminousResources 288 Mt,Reserves 254 Mt

BEE: 61.04% stake South Sumatrasub-bituminousGeological study phase

IMC: 25% joint venture with BHP Central KalimantanMetallurgical coalResources 1.27 Bt*

33 44

55

66

11 33 44 66BEP: 10.22% stake with option to acquire 90%East Kalimantan sub-bituminous Resources 7.9 Bt

55Balangan:South Kalimantan sub-bituminousResources 172 Mt

22

2211

Due to additional drilling and updated model, IMC increased resources to 1.27 Bt from 774 Mt.Source: BHP Billiton Annual Report 2013, page 76-77

Note: Reserves and Resources numbers stated above are before taking into account AE’s equity ownership


OUR MODEL – INTRODUCTION TO ADAROFocus on Four Product Ranges

COAL SPECIFICATIONS

Basis UnitTUTUPAN WARA BALANGAN MIP

Typical Typical Typical Typical

Calorific Value GAR kcal/kg 4,900 – 5,050 4,000 4,400 4,300

Total Moisture ARB % 26 - 28 40 32.5 34

Ash ARB % 2.5 – 3.0 3 2.5 6 - 7

Sulphur ARB % 0.1 – 0.15 0.2 0.09 0.48

Volatile Matter ADB % 42 - 43 41 34 37

HGI - - 46 – 47 61 42 - 44 NA

Ash Fusion Temperature (reducing atmosphere)

Initial deformation

deg. C

0C 1,140 - 1,150 1,150 1,100 NA








• CONCLUSIONS


CONCLUSIONS

1) Increased demand in coal fired power generation, as a percentage of the total

Vietnamese fuel mix, will consume growing amounts of domestic production,

consequently reducing Vietnamese coal exports.

2) Due to proximity, reserves and cost of production, Indonesia remains the most

competitive fuel supplier to meet Vietnamese demand growth.

3) Indonesian demand to consume much of the higher-rank domestic bituminous and

sub-bituminous coals : leaving low-rank lignite for export.

4) Vietnamese growth in the ASEAN region will compete for coal supply with Thailand,

Philippines and Malaysia.

5) Adaro is well position to bring on new coal developments suitable for consumption in

super critical and ultra-super critical designed power plants.

coaltrans vietnam - 31 oct 2014

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