Adaro to Up Capex to Improve Port, Roads

The Jakarta Globe, Mita Valina Liem, March 2, 2009 

Despite slowing global demand, PT Adaro Energy Tbk, the country’s second-largest coal producer, plans to increase capital expenditure by more than 30 percent to about $100 million this year to help increase output. Some of the funds will go to support expansion at one of its river ports and to improve road access to its mine in Tanjung, South Kalimantan Province, a senior company official said. 

Adaro, which spent between $50 million and $75 million last year on capex, plans to ramp up coal production to 45 million tons this year from 38.5 million tons in 2008, said Boy Garibaldi Thohir, Adaro president director, on Friday. “It’s crucial for our operations to be cost efficient. Most of our capex this year will support port and road construction,” Thohir said. 

Adaro also plans to turn its port near Banjarmasin on the Barito River — open only six hours a day now — into a 24-hour facility  to expand coal-transport links from its mine in Tanjung, South Kalimantan. The Tanjung mine, which Adaro holds the rights to until 2022, has an estimated 2.8 billion tons of coal reserves. 

The company is also talking to state utility PT Perusahaan Listrik Negara, or PLN, about a five-year deal to supply 1 million tons of coal per year to the Suralaya coal-fired power plant in Cilegon, Banten Province, Thohir said. 

On Tuesday, Adaro said it expected rising output to push revenue from $1.5 billion in 2008 to $2.1 billion this year. 

In December, Adaro declared force majeure on coal deliveries to three overseas customers after it failed to renegotiate new prices. The government had asked coal producers to renegotiate contracts with buyers so it could increase its revenue from its 13.5 percent cut on the value of coal sales. 

Analysts criticized Adaro, which exports coals to 50 companies in 18 countries, for declaring force majeure after it was unable to draw up new prices. Thohir said that one unidentified customer eventually agreed to renegotiate, but he declined to reveal specific figures, or when this occurred. “We maintain good relations with our buyers, so they understand why we needed to renegotiate,” Thohir said.