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Coal still has a viable future

Article - April 4, 2012
Adaro Energy is tipped to be one of the world's top three thermal coal exporters by 2015, while its principal backer - the impressively resourced Saratoga Capital - is assisting the move towards gas, hydro and other energies
INDONESIA’S COAL PRODUCTION WILL REACH 380 MILLION TONS IN 2012, MOST OF IT DESTINED FOR EXPORT
Adaro Energy is Indonesia's second largest thermal coal producer, the biggest domestic supplier, and, arguably, the region’s most fully integrated coal mining company. It operates the largest single coal mine in Indonesia, is a significant supplier to the global seaborne thermal coal market, and is the only Indonesian coal company exporting coal on a regular basis to the U.S.

Established in 2004 as a limited liability company under the name PT Padang Karunia, it changed its name to PT Adaro Energy Tbk in 2008 in preparation for becoming a public company. Adaro and its subsidiaries currently deal in coal mining and trade, coal infrastructure and logistics, and mining contractor services. In addition to impressive coal reserves and a unique, environmentally friendly product, Adaro boasts numerous high quality assets which underpin its operations  – for instance,  the 46-mile haul road connecting the mine to the crushing facility in Kelanis, and the terminal in Pulau Laut.

“As the need for electricity increases, demand for coal will also increase. The availability of coal is limited therefore the price will remain high.”

Edwin Soeryadjaya, President Commissioner of Saratoga Capital

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“We do not just want to produce the coal and export it. We want to contribute more”

Boy Thohir, President Director of PT Adaro Energy Tbk

As its President Director Boy Thohir explains: “We are not just involved in coal mining, we fastidiously look after our supply chain. If you compare Adaro to other mining companies in Indonesia you’ll see that our business model is unique. This is what will enable us to be a reliable energy supplier domestically and globally. But we do not just want to produce the coal and export it. We want to contribute more.”

He elaborates: “Adaro is now building a power plant for our own use and for our people and we recently won a tender to build the biggest power plant in Southeast Asia (2 x 1,000MW in central Java). There will be a lot of demand for electricity, and with Adaro getting involved in power, and Saratoga behind us, we can contribute more to the country. The power sector has a multiplier effect on industry, education, everything in fact.”

Adaro leads the way in CSR programs: “We cannot increase our production if we cannot manage our surroundings. That is why I spend most of my time dealing with CSR and the development of the local area. If we can better develop surrounding communities, then those communities will protect Adaro because they will feel that Adaro belongs to them.”

The company is also internationally recognized as an environmentally-friendly coal mining extractor; its Envirocoal is considered as one of the lowest sulfur content coals available.

“One of our consumers is China Light Power (CLP) in Hong Kong where the strictest of emissions standards apply. Adaro showed them the benefits of using Envirocoal and now supply over 50% of CLP’s coal requirements, revealed the company boss, continuing, “Back in 1992, everyone was thinking about the heat value of coal. The power utilities were not concerned about the environment. Our team was visionary in introducing Envirocoal back then. Obviously, if you compare coal to other energies like gas or geothermal, coal is not as good. However, if you compare our product to other coal specifications, you’ll see how we can contribute a little to the world by reducing or replacing not so clean coal products.”

Mr. Thohir is confident about Adaro’s ability to attract overseas investment too, “Our track record speaks for itself. BHP Billiton – one of the biggest mining companies in the world – recently chose Adaro as their partner in Indonesia. One of the key success factors for investors is to find reputable local partners, and, in that context, we have done our homework. We know Indonesia better than anyone else, and one of our strengths is our ability to communicate and manage local issues.”

Mr. Edwin Soeryadjaya, President Commissioner of Saratoga Capital concurs. Voted Ernst & Young Entrepreneur of the Year in 2010, he says, “We try to do a lot of value added work for the benefit of the country.” His business ethos – inherited from his father, one of Indonesia’s most respected business leaders, is to ‘give back’ continuously.

Saratoga’s investments range from telecommunications (the World Bank sanctioned Aria West Project, a $1 billion joint venture with AT&T) broadband provision, Alaskan fish processing, and more.

Mr. Soeryadjaya too is confident about the long-term future of the Adaro-Saratoga fusion: “One of the reasons that demand for our coal has increased is due to the Great East Japan earthquake and the subsequent tsunami. However, in the foreseeable future, as the need for electricity increases, demand for coal will also increase. The availability of coal is limited therefore the price will remain high. Adaro will be looking to increase its reserves and Saratoga will help them explore alternative sources. So together we will continue to thrive, as will the communities we are involved with.”

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