indonesia coal indutry outlook english

8/8/2019 Indonesia Coal Indutry Outlook English

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ByJeffrey MulyonoChairman of Indonesian Coal Mining Association(APBI-ICMA)

INDONESIAN COAL INDUSTRY

OUTLOOK

Presented at Indonesian Japan Coal PolicyDialogue and Coal SeminarTokyo, March 26 th - 27 th, 2009

3/12/2009


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PRESENTATION OUTLINE

INTRODUCTION How much Coal Reserves can be found in Indonesian ?

What is Indonesian Coal Quality ? What is production, export and domestic sales levels ? What is Government of Indonesian plan for coal ? What is long run prediction for production, export and domestic

utilization of coal ? Indonesian new mineral and coal low, is it favorable or

unfavorable for investment ? Closing Remarks


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INTRODUCTION

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Up to mid 2008, the mining industry both in Indonesia and globallyexperienced significantly high performance.For Indonesia, PricewaterhouseCoopers reported that in the lastthere year EBITDA Margin, Net Profit Margin, Return on CapitalEmployed, Return on Shareholders fund, and Net Debt to EquityRatio were above the sector global average.The mining industry continues to be an important contributorto the Indonesian economic.The industry also continue to make significant contributions to the

Indonesian GDP and Export, as well as to Regional and CommunityDevelopment.Since September 2008, the price of all mining products has beendecreasing significantly and reduced the profitability of miningcompanies for the year 2008.The year of 2009, will be very hard for mining companies.


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HOW MUCH COAL RESERVES CAN BE FOUND IN INDONESIAN ?

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DISTRIBUTION OF INDONESIAN COAL MAP RESERVES (IN PERCENTAGES)

5

8 %

39 %

3 %

34 %

16 %

Distribution of Coal Reserve Potential

The biggest reserves are located in 3 provinces, in South Sum atra (3 9 % ), East K alim antan (3 4% ), andSouth Kalimantan (16% ) .

Source : Center for Geology, Geology Agency 2006


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INDONESIAN COAL MAP RESOURCES AND RESERVES (BILLION TONS)

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Reserves : 18.70 billion tons

11 .55 b .tSUMATRA

Resources: 93.40 billion tons

52.53 b .t

b.t : billi on ton s

0.01 b .t

40 .47 b.t

0.23 b.t 0.002 b.t 0.15 b .t

7.15 b.t

Source: Geological Resources Centre (+ Joint Study with NEDO) 2007 March 2009, it was reported become 104.7 Billion ton Resources


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RIAURESOURCES = 2,057.22MINEABLE = 15.15

NANGROE ACEH DARUSALAMRESOURCES = 450.15MINEABLE = n.a.

WEST KALIMANTANRESOURCES = 527.52MINEABLE = n.a

CENTRAL KALIMANTANRESOURCES = 1,399.21MINEABLE = 48.59

EAST KALIMANTANRESOURCES = 19,567.79MINEABLE = 2,410.33

PAPUARESOURCES = 138.30MINEABLE = n.a.

WEST SUMATRA

RESOURCES = 719.09MINEABLE = 36.07

BENGKULU


SOUTH KALIMANTAN

RESOURCES = 8,674.56MINEABLE = 1,787.32

SOUTH SULAWESI


SOUTH SUMATRARESOURCES = 22,240.40MINEABLE = 2,653.98

COAL RESOURCES AND RESERVES DISTRIBUTIONBY REGION (M.TONS) 2007

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WHAT IS INDONESIAN COAL

QUALITY ?

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INDONESIA COAL QUALITY BASED ONTHE SPECIFIC ENERGY (KCAL/KG)

62%

13%

24%

1%

Medium Quality

Low QualityHigh Quality

Very High Quality

(6100-7100 kcal/kg)

(>7100 kcal/kg)

(< 5100 kcal/kg)

(5100-6100 kcal/kg)

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How many coal mining iN Indonesian today ?

What is production, Export and

domestic sales levels ?

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COAL MI NING PLAYERS GROUP (2007)

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INDONESIASCOAL PLAYER

GROUP

COAL CONTRACT OFWORK

(CCOW HOLDER)**)

MINING AUTHORIZATION(MA HOLDER)

***)

STATED OWNED (PTBA)*)

Contribute 4,0% of National Coal

Production

Contribute 80,1% of National Coal

Production

Contribute 15,9% of National CoalProduction

*) 1 Company in Production**) 36 Companies in Production

44 Companies in Exploration, Feasibility Study and Construction***) 129 Companies in Production


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PRODUCTION, EXPORT AND DOMESTIC SALES(HISTORICAL DATA ,1996 - 2008) (Million Tons)

Government Version

12

35.3

10.9

48.840.9

13.2

53.946.7

15.4

60.653.9

19

72.2

57.2

22.1

75.663.4

27.3

91.5

73.4

29.2

102.585.3

35.74

114.3

93.76

37.1

132.4

110.79

41.3

153.2144.94

45.54

193.55

158.6

62.5

215

160.27

79.14

233.62

0

50

100

150

200

250

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Export Domestic ProductionSource : - Directorate of Mineral and Coal Enterprise Indonesia Mineral and Coal Statistic 2005

- APBI-ICMA


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WHAT IS GOVERNMENT OF

INDONESIA PLAN FOR COAL ?

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EXISTING/THE CHANGING FACE OFINDONESIAN ENERGY MIX (2006 2025)

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Geothermal 1.4%

Renewable 3.4%

2025

Coal33%

Gas30%

Oil20%

Coal Liquefaction2%

Renewable Energy5%

Geothermal5%

2006

PRESIDENTIAL DECREE NO. 5 TAHUN 2006CONSERNING NATIONAL ENERGY POLICY

Increased usage of low rank coals for domestic use, coalliquefaction and upgrading brow n coal (UBC) w ill be keyfactors in increasing domestic coal usage.


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WHAT IS LONG RUN PREDICTION FOR PRODUCTION, EXPORT AND

DOMESTIC UTILIZATION OF COAL?

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PRODUCTION, EXPORT AND DOMESTIC SALES (FUTURE ESTIMATION, 2005 2025) (Million Tons)

APBI-ICMA Version

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110.8

41.4

153.4 145

48

193158.6

62.5

215

160.27

79.14

233.62

169

75

244

170

90

260

153

175

326

184

180

364

150

236

421

0

50

100

150

200

250

300

350

400

450

2005 2006 2007 2008 2009 2010 2015 2020 2025

Export Domestic ProductionSource: APBI-ICMA 2009.


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Have you heard of Indonesian new

mineral and coal law ?

Is it favorable or Unfavorable forinvestment ?


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There are still many question marks for the new law ?

The answers are still to be waited. The new law will rely heavily on many still to be issued government regulations for

its implementations


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The Essence of the new law (continued)

All investment (both foreign and Indonesia) must now be

carried out pursuant to an IUP or IUP Khusus/ IUP K. An IUP is applicable for general mining.

An I UPK is applicable for any mineral or coal in The StateResources Areas (SRA)

State Reserves Areas (SRAs) are to be determined by theCentral Government w ith approval from parliament.

Stated Owned Companies are to be prioritized for thedevelopment of SRAs.


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MINING AREAS

Metallic Mineral :

Non Metallic Mineral :

Sand & Stone Aggregates :

Coal :

IPR :

Maximum 100.000 Ha Exploration Stage

Maximum 25.000 Ha Production Stage

Maximum 25.000 Ha Exploration StageMaximum 5.000 Ha Production Stage



Individuals 1 Ha

Group 5 HaCooperation 10 Ha


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MINING TERMS

IUP :

EXPLORATION STAGE :Coal and Gemstone 7 years

Metallic Mineral 8 years

Non Metallic Mineral

3 yearsStone Aggregate 3 years

EXPLOITATION STAGE:

Coal, Metallic Minerals 20 years (can be prolonged 2 x @10 years)

Non Metallic Minerals 10 years (can be prolonged 2 x @ 5 years)

Stone Aggregate 5 years (can be prolonged 2 x @ 5 years)


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MINING TERMS (CONTINUED)

EXPLORATION STAGE :

Coal 7 yearsMetallic Minerals 8 years

PRODUCTION STAGE:Coal, Metallic Minerals 20 years

can be prolonged2 terms @10 years

IUPK :


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WILL NEW MINING LAW BE FRIENDLY TO NEWINVESTORS ?

The answer will be left to the implementing DerivativesRegulations (Government Regulation).

No more of CoW/CCoW in the future will be the main factor indeclining of grass root investment.

Well regarded Lex specialist concept embedded in someCoWs/CCoWs will be no more used in the IUP Concept,accordingly the new law may provide only low level of certainty.

The idea to re-sizing of the mining become another disincentives factor.

The obligation to invest in domestic infrastructure of mineral processing and smelting makes mining sector less attractive for low and middle class investors, but give more economic Impact

to the country.


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WHAT IS GOOD IN THE NEW MINING LAW COMPARE TOTHE OLD ONE ?

The new law treats both foreign and local investors equally(no more discrimination in government treatments). Bothforeign and domestic investors will be able to apply for aform of mining license.

Exploration Licensing (IUP) must be issued through a

tender process, rather than direct appointment, so itsmeans more transparent system compare to old one.

Hard Sanction for :

Illegal miner Government official whom did misconduct andmismanage in giving licensing.


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GOVERNMENT REGULATIONSWhich are still in the kitchen

Domestic market obligation Coal pricing index ( basset indexes ) Mining zone Mineral and coal enterprises activity Supervising and controlling mining activity

Mining Reclamation, mine closing and Post MiningActivity Added value of mineral processing obligation


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DOMESTIC MARKET OBLIGATION

By having DMO on place, How Foreign Country can rely onIndonesian Coal for their Full Supply.We are now discussing with Government to treat upgrading entityas Industrial entity, so it means Raw Coal Supply to this entity iscalculate as DMO and consequently the output is free to be tradedBy then it is attractive enough for Investor to invest . This kind of investment to market the product elsewhere


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CLOSING REMARKS

Coal production growth in Indonesian will continue through the year 2009.

Slowing demand from the international market may be offset by theincreasing demand from the domestic market.

The natural production level could be much more greater. Only if the bottle neck in the infrastructure (specially in land transportationsystem) can be eradicated.

The government of Indonesian, is committed to encourage privatesectors to invest in coal mining industry especially in introducing newclean coal technology such as : coal liquefaction and coal gasification.

The government of Indonesian is committed to promote theapplication upgrading brown coal technology by coal industry inorder to utilize abundant low rank coal in Indonesia.


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Indonesian Coal Mining AssociationEmail: [email protected] Kuningan Building, 1 th Floor, Suite A

Jl H.R. Rasuna Said Block X-7 Kav.5Jakarta Selatan 12940 - INDONESIA

Phone/Fax : (62 21) 3001 5935, 3001 59

THANK YOU

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