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  • 1. 3/12/2009INDONESIAN COAL INDUSTRYOUTLOOKPresented at Indonesian – Japan Coal PolicyDialogue and Coal SeminarTokyo, March 26th - 27th, 2009ByJeffrey MulyonoChairman of Indonesian Coal Mining Association(APBI-ICMA)
  • 2. 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 2
  • 3. INTRODUCTIONUp 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 theIndonesian 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. 3
  • 4. HOW MUCH COAL RESERVES CANBE FOUND IN INDONESIAN ? 4
  • 5. DISTRIBUTION OF INDONESIAN COAL MAP RESERVES (IN PERCENTAGES) 34 % 8% 3% 39 % 16 % Distribution of Coal Reserve Potential The biggest reserves are located in 3 provinces, in South Sumatra (39 %), East Kalimantan (34%), and South Kalimantan (16%).Source : Center for Geology, Geology Agency 2006 5
  • 6. INDONESIAN COAL MAP RESOURCES AND RESERVES (BILLION TONS) 40.47 b.t 52.53 b.t 7.15 b.t 0.23 b.t 0.002 b.t SUMATRA 11.55 b.t 0.15 b.t 0.01 b.t Resources: 93.40 billion tons b.t : billion tons Reserves : 18.70 billion tonsSource: Geological Resources Centre (+ Joint Study with NEDO) – 2007March 2009, it was reported become 104.7 Billion ton Resources 6
  • 7. COAL RESOURCES AND RESERVES DISTRIBUTION BY REGION (M.TONS) 2007NANGROE ACEH DARUSALAM CENTRAL KALIMANTAN EAST KALIMANTAN PAPUARESOURCES = 450.15 RESOURCES = 1,399.21 RESOURCES = 19,567.79 RESOURCES = 138.30MINEABLE = n.a. MINEABLE = 48.59 MINEABLE = 2,410.33 MINEABLE = n.a. RIAU WEST KALIMANTAN RESOURCES = 2,057.22 RESOURCES = 527.52 MINEABLE = 15.15 MINEABLE = n.a SOUTH SUMATRA RESOURCES = 22,240.40 MINEABLE = 2,653.98 WEST SUMATRA BENGKULU SOUTH KALIMANTAN SOUTH SULAWESIRESOURCES = 719.09 RESOURCES = 198.37 RESOURCES = 8,674.56 RESOURCES = 132.01MINEABLE = 36.07 MINEABLE = 21.12 MINEABLE = 1,787.32 MINEABLE = 0.06 7
  • 8. WHAT IS INDONESIAN COALQUALITY ? 8
  • 9. INDONESIA COAL QUALITY BASED ON THE SPECIFIC ENERGY (KCAL/KG) Very High Quality (>7100 kcal/kg) High Quality 13% 1%(6100-7100 kcal/kg) Low Quality (< 5100 kcal/kg) 24% 62% Medium Quality (5100-6100 kcal/kg) 9
  • 10. How many coal mining iN Indonesiantoday ?What is production, Export anddomestic sales levels ? 10
  • 11. COAL MINING PLAYERS GROUP (2007) Contribute 4,0% of STATED OWNED (PTBA) *) National Coal Production INDONESIA’S COAL CONTRACT OF Contribute 80,1% of COAL PLAYER WORK National Coal (CCOW HOLDER) Production GROUP **) MINING Contribute 15,9% of AUTHORIZATION National Coal (MA HOLDER) Production ***)*) 1 Company in Production**) 36 Companies in Production 44 Companies in Exploration, Feasibility Study and Construction***) 129 Companies in Production 11
  • 12. PRODUCTION, EXPORT AND DOMESTIC SALES (HISTORICAL DATA ,1996 - 2008) (Million Tons) Government Version 250 233.62 215 200 193.55 153.2 158.6 160.27 150 144.94 132.4 114.3 110.79 102.5 100 91.5 85.3 93.76 72.2 75.6 73.4 60.6 63.4 79.14 48.8 53.946.7 53.9 57.2 62.5 50 35.3 40.9 45.54 35.74 37.1 41.3 27.3 29.2 10.9 13.2 15.4 19 22.1 0 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 12
  • 13. WHAT IS GOVERNMENT OFINDONESIA PLAN FOR COAL ? 13
  • 14. EXISTING/THE CHANGING FACE OF INDONESIAN ENERGY MIX (2006 – 2025) PRESIDENTIAL DECREE NO. 5 TAHUN 2006 CONSERNING NATIONAL ENERGY POLICY Geothermal 1.4% Coal Liquefaction 2% Renewable Energy Coal 5% 33% Geothermal 5% Gas Oil 30% 20%Renewable 3.4% 2006 2025 Increased usage of low rank coals for domestic use, coal liquefaction and upgrading brown coal (‘UBC’) will be key factors in increasing domestic coal usage. 14
  • 15. WHAT IS LONG RUN PREDICTIONFOR PRODUCTION, EXPORT ANDDOMESTIC UTILIZATION OF COAL? 15
  • 16. PRODUCTION, EXPORT AND DOMESTIC SALES (FUTURE ESTIMATION, 2005 – 2025) (Million Tons) APBI-ICMA Version 450 421 400 364 350 326 300 244 260 250 233.62 236 215 193 200 169 170 184 153.4 145 158.6 160.27 153 150 150 175 180 110.8 100 50 79.14 75 90 62.5 41.4 48 0 2005 2006 2007 2008 2009 2010 2015 2020 2025 Export Domestic ProductionSource: APBI-ICMA 2009. 16
  • 17. Have you heard of Indonesian newmineral and coal law ?Is it favorable or Unfavorable forinvestment ? 17
  • 18. There are still many question marks forthe new law ?The answers are still to be waited. Thenew law will rely heavily on many stillto be issued government regulations forits implementations 18
  • 19. The Essence Of The New LawThe law replaces the mineral and coal mining law No. 11/1967. However,the mineral and coal mining law will rely heavily on many still to issuedgovernment regulation for its implementations .New Contract of Work (CoW) and Coal Contract of Work (CCoW) systemswill no longer be available. But all existing contracts will be respected.All investor (both foreign and local) will be treated equally. Both investorswill be able to apply for a form of mining license (IUP or IUPK) . An IUP is requires for exploration, development and production stage. An IUPK is applicable for State Reserves Areas (SRA)Existing Mining Companies should process raw minerals in domesticprocessing and smelting facilities within five years after the law entry intoforce. 19
  • 20. The Essence of the new law(continued)All investment (both foreign and Indonesia) must now becarried out pursuant to an “IUP” or “IUP Khusus”/IUPK”.An IUP is applicable for general mining.An IUPK is applicable for any mineral or coal in The StateResources Areas (SRA)State Reserves Areas (SRA’s) are to be determined by theCentral Government with approval from parliament.Stated Owned Companies are to be prioritized for thedevelopment of SRA’s. 20
  • 21. MINING AREASMetallic – Mineral : Maximum 100.000 Ha – Exploration Stage Maximum 25.000 Ha – Production StageNon Metallic Mineral : Maximum 25.000 Ha – Exploration Stage Maximum 5.000 Ha – Production StageSand & Stone Aggregates : Maximum 5.000 Ha – Exploration Stage Maximum 1.000 Ha – Production Stage Maximum 50.000 Ha – Exploration StageCoal : Maximum 15.000 Ha – Production Stage Individuals 1 HaIPR : Group 5 Ha Cooperation 10 Ha 21
  • 22. MINING TERMSIUP :EXPLORATION STAGE :Coal and Gemstone → 7 yearsMetallic Mineral → 8 yearsNon Metallic Mineral → 3 yearsStone Aggregate → 3 yearsEXPLOITATION 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) 22
  • 23. MINING TERMS (CONTINUED)IUPK : EXPLORATION STAGE : Coal → 7 years Metallic Minerals → 8 years PRODUCTION STAGE: Coal, Metallic Minerals → 20 years can be prolonged 2 terms @10 years 23
  • 24. WILL NEW MINING LAW BE FRIENDLY TO NEW INVESTORS ?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 someCoW’s/CCoW’s 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 anotherdisincentives factor.The obligation to invest in domestic infrastructure of mineralprocessing and smelting makes mining sector less attractive forlow and middle class investors, but give more economic Impactto the country. 24
  • 25. WHAT IS GOOD IN THE NEW MINING LAW COMPARE TO THE OLD ONE ? The new law treats both foreign and local investors equally (no more discrimination in government treatments). Both foreign and domestic investors will be able to apply for a form of mining license. Exploration Licensing (IUP) must be issued through a tender process, rather than direct appointment, so it’s means more transparent system compare to old one. Hard Sanction for : Illegal miner Government official whom did misconduct and mismanage in giving licensing. 25
  • 26. GOVERNMENT REGULATIONS Which 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 Mining Activity• Added value of mineral processing obligation 26
  • 27. DOMESTIC MARKET OBLIGATIONBy 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 ofinvestment to market the product elsewhere
  • 28. CLOSING REMARKS• Coal production growth in Indonesian will continue through the year 2009. Slowing demand from the international market may be offset by the increasing 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 transportation system) can be eradicated.• The government of Indonesian, is committed to encourage private sectors to invest in coal mining industry especially in introducing new clean coal technology such as : coal liquefaction and coal gasification.• The government of Indonesian is committed to promote the application upgrading brown coal technology by coal industry in order to utilize abundant low rank coal in Indonesia. 28
  • 29. THANK YOU Indonesian Coal Mining Association Email: apbi-icma@indo.net.idMenara Kuningan Building, 1th Floor, Suite A Jl H.R. Rasuna Said Block X-7 Kav.5 Jakarta Selatan 12940 - INDONESIA Phone/Fax : (62 21) 3001 5935, 3001 59