Bukit Asam Targets 33 pct Rise in 2015 Coal Sales

State-owned coal miner PT Bukit Asam Tbk targets a 33 percent increase in coal sales in 2015 to 24 million tonnes from 18 million tonnes last year, despite low global coal prices, Bisnis Indonesia reported, quoting CEO Milawarma.

The firm plans to export 13.7 million tonnes this year, while 10.3 million tonnes would be sold in the domestic market.


Coal Miners Remain Under Pressure as Glut Continues

Indonesia’s major coal miners reported a significant drop in their earnings last year as the sharp drop in the global demand, mainly from China, continued to undermine their sales performances during the year.

Major coal producer Adaro Energy, for instance, announced a full-year financial result for 2014 that showed a nearly 24 percent decline in its net profit to US$178.16 million, compared with $233.96 million.

“The macro situation was difficult last year as coal prices continued to be under pressure due to oversupply and overcapacity in the market. We anticipate the challenging conditions to remain in 2015,” Adaro Energy president director Garibaldi Thohir said in a written statement.

“Our focus will be on operational excellence, preserving cash and on business development, including strengthening our logistics business and moving downstream into power.”

The global coal market has been constrained in the past year as demands from China declined 22 million tons in 2014 due to an oversupply condition in the Chinese market as well as several policies to limit imports, such as the new 6 percent import tax on thermal coal and new quality controls.

Further, the Chinese economy, which buys almost half the world’s coal and ore cargoes, will grow in 2015 at the slowest pace in 25 years, economists’ forecasts compiled by Bloomberg show.

Adaro saw its average selling price (ASP) for the year plunge by 5 percent year-on-year (yoy). It said that China’s lower demands and import restrictions have little impact on the company given its high quality coal and its ability to take advantage of a free trade agreement between ASEAN and the East Asian country.

The company’s annual revenue was up by one percent to $3.32 billion, despite a higher sales volume up to 7 percent to 57 million tons.

Indonesia’s coal price reference (HBA) dropped by 27 percent last year and continued to decline to hover at around $63 per ton last month. The international coal prices benchmark Newcastle declined 17 percent in 2014, averaging $70.95 per ton due to the persistent oversupply.

Coal miner Indo Tambangraya Megah also ended 2014 with net sales down by 11 percent to $1.94 billion in 2014 from $2.18 billion the previous year.

Its average selling price slid 10 percent yoy, from $74.9 a ton to $67.1 per ton last year, while its sales volume stagnated at around 29 million tons.

The company saw its net profit slightly down to $200.22 million — compared with $204.98 million generated in 2013 — largely because of cost reductions.

Ariyanto Kurniawan from Mandiri Sekuritas said that 2015 would be yet another difficult year for the country’s coal producers. With such an unfavorable market situation, the securities firm decided to lower coal miner’s net profit forecast for 2015 and 2016 by around 45 percent in average, with coal price assumption set in between $65 and $70 per ton.

“Plunging trends in coal prices, now in its fourth year, have entered the longest cycle since 2007. We see that declining coal prices will hit its lowest level […] and there will be no sharp improvement given weak demands and lack of supply discipline from market players,” he said in a written statement.

“We see there are risks if coal prices remain low, which include lower consensus net profit estimation, production cuts, declining coal supply and further lower asset value.”

Ariyanto said that the cost reduction initiative — including negotiating with the mining contractor — as well as a drop in oil prices that is expected to deflate energy spending, will be the main factors in maintaining the companies’ profitability.

Indonesia Coal Mining Company Set to Build Mine-Mouth Power Plants

Publicly listed coal miner PT Bukit Asam (PTBA) is set to build new mine-mouth power plants in a move to support the government’s ambitious plan of developing huge electricity projects.

PTBA corporate secretary Joko Pramono said his company would develop up to 4,400 megawatts (MW) mine-mouth power plants near its mining site in Sumatra.

“It will be the company’s participation in the government’s plan to develop 35,000 MW of power capacity,” Joko said.

The government is targeting to have an additional electricity capacity of 35,000 MW within five years, a programme that is expected to support growing energy demand along with economic growth in the country.

Joko added that the project gave the opportunity for his company to develop its power plant portfolio.

“Moreover, the issuance of the Energy and Mineral Resources Ministerial Regulation which allows direct purchase of electricity produced from mine-mouth plants will ease the process,” Joko said.

As part of its support for the realisation of the 35,000 MW programme, the Energy and Mineral Resources Ministry recently issued a regulation stating that state electricity firm PLN can directly purchase electricity produced by other players without having to seek approval from the energy and mineral resources minister as long as the price agreed to is within the range of prices stipulated in the regulation.

Out of the total 35,000 MW plan, as much as 10,000 MW will be developed by PLN and the remainder will be developed by private players.

Mine-mouth developments are also expected to support the ambitious electricity programme.

Moreover, mine-mouth power plants are also seen to give more advantages as they are developed near mining sites, meaning lower transportation costs to transfer the coal to buyers and that the electricity generated can directly be transmitted through a transmission line.

In the country, electricity transmission lines are currently managed by PLN.

The ministry’s mineral and coal development programme director, Sujatmiko, said that PLN was considering an option in which power plant developers could also develop transmission lines. When the transmission is finished, PLN would acquire it and connect it to its network.

“PLN will be happier if the developer also develops the transmission because the company is having difficulty developing the lines massively in a short period as the company has been burdened by its lending,” Sujatmiko said.

So far, PTBA has developed a number of mine-mouth power plants from which power is bought by PLN.

It finished the development of the 2×110 MW Banjarsari mine-mouth last year and is currently working on an interconnection line to connect the plant to PLN’s transmission station.

Japan’s IHI Starts Operation of RI Plant

Japan’s engineering giant IHI Corporation kicked off Thursday the trial operation of its gasification prototype plant that, when it succeeds, will pave the way for the firm to build a similar facility for commercial purposes.

The plant, located in the area of state-owned fertilizer producer PT Pupuk Kujang, will convert 50 tons per day (TPD) of low-grade coal into chemical feedstock, such as hydrogen and nitrogen, to make ammonia fertilizer.

Speaking during the opening ceremony on Thursday, IHI Corporation vice president Toshinori Sekido said the firm would carry out a series of tests at the plant within a year.

“We want to ensure the sustainability of the operation and its reliability […]. We expect it can progress into a commercial phase,” he said.

Indonesia has enormous reserves of low-grade coal, but they are still underutilized as a result of high moisture and lower heating value content.

The coal gasification technology, which transforms the lignite coal into to gas and other feedstock, will help push up its utilization and provide a cheaper source of manufacturing input.

Began in early 2013, the gasification project is funded by Japan’s Ministry of Economy, Trade and Industry (METI) and runs under cooperation with some Indonesian ministries with IHI as the executor and PT Pupuk Kujang as the local host. The coal for the operation is now supplied by PT Pesona Khatulistiwa Nusantara from its East Kalimantan mine.

Business development and sales manager at IHI energy and plant operations division Daizo Takayanagi said apart from having huge reserves of low-grade coal, Indonesia also had high demand for ammonia.

“We may start accept orders in 2016 and go into commercial operation in 2017 depending on the demand of Indonesian users,” he said, adding that IHI would build a facility to process 3,000 TPD of coal, to be equal to 1,000 TPD of ammonia.

At present IHI also runs another non-commercial plant with capacity to process 6 TPD in Yokohama, Japan.

In Indonesia, IHI, with local subsidiary PT Cilegon Fabricators, currently makes boilers for export to several destinations, including Australia, Malaysia, Thailand, Japan, Chile and the US. It has yet to sell its products in Indonesian markets.

President director of state-owned fertilizer PT Pupuk Indonesia Holding Company (PIHC) Arifin Tasrif said the total gas needs for all its plants nationwide totaled to 700 or 800 million cubic feet per day (mmcfd) and a part of this figure would gradually be fed by coal.

One of its subsidiaries, PT Pupuk Sriwijaya Palembang (Pusri), is carrying out a feasibility study jointly with state-owned coal miner PT Bukit Asam to build a coal gasification plant in South Sumatra.

Arifin anticipated that the study would conclude by the end of this year and after that it could begin the project.

Another study would also be conducted in East Kalimantan where coal reserves were abundant, he added.

“We aim to set up the gasification facility near the coal mine so that we will transport only the output,” said Arifin.