Company Presentation Company Presentation April 2017 1 Full Year - - PowerPoint PPT Presentation

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PT Toba Bara Sejahtra Tbk (“Toba”)

Company Presentation

April 2017 PT Toba Bara Sejahtra Tbk (TOBA)

Company Presentation

Full Year 2017

Disclaimer

These materials have been prepared by PT Toba Bara Sejahtra Tbk (the “Company”). These materials may contain statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plan,” “will,” “estimates,” “projects,” “intends,” or words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and

• assumptions. The Company has no obligation and does not undertake to revise forward-looking statements to

reflect future events or circumstances. These materials are for information purposes only and do not constitute or form part of an offer, solicitation or invitation of any offer to buy or subscribe for any securities of the Company, in any jurisdiction, nor should it or any part of it form the basis of, or be relied upon in any connection with, any contract, commitment or investment decision whatsoever. Any decision to purchase or subscribe for any securities of the Company should be made after seeking appropriate professional advice.

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Table of Contents

2 Company Profile 2017 Performance Highlights 3 1 Strategy to Venture into Power

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i Sulbagut-1 Project ii Sulut-3 Project

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Performance Highlights Performance Highlights

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Company Profile

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Kalimanta n

East Kalimantan

PT Toba Bara Sejahtra Tbk in Brief

• Location: Kutai Kartanegara,

Kalimantan Timur

• Total Concession : 7,087 ha

Coal Mining

• Location:

Kutai Kartanegara, Kalimantan Timur

• Hak Guna Usaha (HGU) covers

8,633 ha. where 2,701 ha has been planted

Palm Oil Plantation & Mill

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Power Generation

• GLP and MCL established in February 2016 and

March 2017 respectively for development of steam (coal) fired power plant project (CFPP) with capacity of 2x50 MW each

• 25 year Power Purchase Agreement (PPA) through

Independent Power Producer (IPP) scheme with PLN as single offtaker

Gorontalo North Sulawesi

Ownership Structure

6 License Area 20-year Production Operation Mining Permit (IUP-OP) expiring in December 2029 2,990 ha IUP-OP extension was completed in March 2013 (First

• ut of 2

extensions: in 2023 with tenor of 10 years each) 683 ha 13-year IUP-OP expires in December 2023 3,414 ha Plantation permit

• f PT Perkebunan

Kaltim Utama I (PKU) expires in 2036 IUP-P for downstream processing 8,633 ha (Right to Use Land) GLP’s PPA with PLN(1) for 25- year contract ~60 ha MCL’s PPA with PLN(1 for 25- year contract ~40 ha Off-take (take or pay) by PLN for 25 years Planted Area: 2,701 ha Off-take (take or pay) by PLN for 25 years Reserve Reserves: 45 MT – JORC (2018) Resources: 78 MT – JORC (2018) Reserve: 13.1 MT – JORC (2018) Resources: 54.6 MT – JORC (2018) Reserves : 5.8 MT – JORC (2018) Resources: 20.3 MT – JORC (2018)

Davit Togar Pandjaitan PT Bara Makmur Abadi PT Toba Sejahtra Roby Budi Prakoso PT Sinergi Sukses Utama 61.91% 10.00% 6.25% 5.10% PT Toba Bumi Energi (“TBE”) 99.99% 99.99% 3.64% 51.00% 99.99% Public *) 12.35% 90.00% 60.00% Highland Strategic Holdings Pte. Ltd. 0.75% *) Incl. Baring Private Equity as anchor investor 90.00% 99.60% Note: On 4th February, 2016, the Company has entered into sales and purchase agreement with Toba Sejahtera to acquire Toba Sejahtera’s 20% ownership in GLP (Subject to approval from PLN) )

Strategic Mine Locations

Toba owns all infrastructures (coal processing plant, overland conveyors, and jetties) giving significant operating leverage vs other concessions in surrounding areas

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Overland & Barge Loading Jetty: Speed

• f 1.800 TPH

High Built CPP Cap up to 10 Mn TPA Short Coal Hauling Distance < 5km Hauling Road to Connect with ABN CPP Capacity : 6 Mn Tons/Annum (TPA) Conveyor to Jetty Short Coal Hauling Distance ~4km

Infrastructure & Operational Capabilities

TOBA’s Concessions ROM Stockpile 8

Note: PT Adimitra Baratama Nusantara (ABN) PT Indomining (IM) PT Trisensa Mineral Utama (TMU)

PPA signing with PLN for Sulut-3 Power Project Engineering Procurement Contract (EPC) signing with SEPC* for Sulbagut-1 Power Project

Contracts and Awards Earned in 2017

7 April 2 May 7 July 11 July 14 July

Project Financing Signing with Bank Mandiri worth US$ 171.8 mn for Sulbagut-1 Power Project

Material Information

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Financing Date with PLN for Sulbagut-1 Power Project Special Transaction Loan Facility and Non-Cash Loan of US$ 50 mn with Bank Mandiri

* Shanghai Electric Power Construction Co. Ltd.

• ABN received Gold PROPER Enviromental

Award from Provincial Govt for 3 consecutive years

• IM and TMU received Green PROPER

Enviromental Award for 2 consecutive years

• IM received certificates for ISO 14001. OHSAS

18001 and ISO 9001

• ABN received Award from Customs

Office of East Kalimantan as “Ideal” Company

• TMU received Pratama Award from

Ministry of Energy. Mines. & Resoucres (MEMR)

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2017 Performance Highlights

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4.1 Mt 5.2 Mt 5.6 Mt 6.5 Mt 8.1 Mt 6.1 Mt 5.5 Mt 5.0 Mt $99 $121 $97 $85 $71 $59 $66 $89 20 40 60 80 100 120 140 1 2 3 4 5 6 7 8 9 10 2010 2011 2012 2013 2014 2015 2016 2017 Toba Consolidated Production NEWC Price 30.1% 32.9% 5.7% 13.9% 13.5% 15.4% 15.2% 24.1% EBITDA Margin

Production Profile

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Source: Coal price from GlobalCoal

Amidst coal price volatility over the past several years and to sustain the Company’s survival mode, Toba has undergone cost efficiency initiatives as shown by stable EBITDA margin

Operational Performance

Yearly Production & SR

Production in Million Tons

2016 2017 Change Comment Sales Volume 5.7 4.8 (15.8)% Sales volume tracked its 2017 production volume SR (x) 12.9 13.1 1.6% SR edged up due to wet weather in 2Q17, but in line with mine plan 5.5 5.0 Production volume in 2016 stabilized at 5.0 mn tons in line with mine plan (9.1)% Production Volume

Production Summary

MT: Million Tons 12

• Q-o-q

production volume has remained stable and in line with 2017 quarterly guidance of 1.25 1.50 mn tons

• 4Q17 SR stabilized at 12.0x, on

track of achieving annual SR guidance of 12x - 13x

• Higher SR in 2Q17 impacted by

wet weather

12.6x 13.7x 14.3x 12.6x 12.0x 12.0x - 13.0x 4Q16 1Q17 2Q17 3Q17 4Q17 Quarterly Guidance TMU IM ABN SR (Consolidated) 1.1 1.2 1.25 - 1.50 1.4

1.4

1.3

Realization

Consolidated Full Year 2017

“Sustainability & Resilience” Focused on profitable production output through optimization of :

• Infrastructure and connectivity sharing

(hauling road and coal processing plant)

• Joint mine plan
• Coal sale pricing driven by relationship.

consistency in scheduled delivery and product quality

• Well-diversified

market destinations and customer base

Note: (a) FOB Cash Cost = COGS including royalty and selling expense – depreciation and amortization (b) Includes profit from construction of Sulbagut-1 power project (based on accounting treatment PSAK 34 and ISAK 16) (c) EBITDA = Gross profit – selling expenses G&A + depreciation and amortization (d) EBITDA/ton = Coal mining business only

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Operational FY16 FY17 Δ% Production Vol 5.5 5.0 (9.1) % Sales Vol 5.7 4.8 (15.8) % Stripping Ratio 12.9 13.1 1.6 % Sales(b) 258.3 310.7 20.3 % EBITDA(c) 39.2 74.8 90.8 % Net Profit 14.6 41.4 183.6 % Financial FY16 FY17 45.4 NEWC Index 88.5 34.1 % 66.0 ASP 61.1 34.6 % mn ton mn ton x US$/ton US$/ton US$ mn US$ mn US$ mn Δ% EBITDA/Ton(d) 7.1 15.3 115.5% US$/ton 15.2% EBITDA Margin 24.1% Gross Profit Margin 30.3% 20.6% Financial Ratios FY16 FY17 FOB Cash Cost(a) 34.5 40.0 15.9 % US$/ton

Evolution of FOB Cash Cost

Quarterly FOB Cash Cost In US$/ton

Notes: (1) FOB Cash Cost = COGS including royalty and selling & marketing expense – depreciation and amortization (2) Adj. FOB cash costs = COGS. including selling & marketing expense and royalty – depreciation & amortization of exploration & development and excluding deferred stripping cost

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50 47 43 41 38 35 35 35 34 37 40 41 42 51 46 42 41 38 34 35 35 34 37 41 41 41

63.8 65.8 59.6 59.0 52.6 50.3 51.5 67.3 94.7 81.5 79.7 94.5 98.2 13.8x 12.4x 12.5x 12.0x 12.1x 12.4x 13.8x 12.8x 12.6x 13.7x 14.3x 12.6x 12.0x

0x 3x 6x 9x 12x 15x

20 40 60 80 100 120 140 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

FOB cash cost

• Adj. FOB cash cost

NEWC SR

• Despite fluctuation in NEWC price, TOBA has maintained relatively stable SR and cash cost

through proper mine planning and cost management initiative

• Although cash cost rose 18.8% from 2Q16 to 4Q17, coal price increased much higher by 90.5%
• ver same period, hence reflecting the still higher ASP expansion over cash cost rise itself

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Sales Volume, NEWC Index & ASP

(million tons and US$/ton)

Sales, Cost of Goods Sold and Gross Profit Margin (US$ million and %) EBITDA/ton and EBITDA Margin

(US$/ton and %)

Increase in ASP per ton directly flows through higher gross profit margin and EBITDA margin

ASP Positively Impacts Margins

6.4 5.7 4.8 59.2 66.0 88.5 54.8 45.4 61.1 2015 2016 2017 Sales Volume NEWC Index ASP 348.7 258.3 310.7 278 205 217 20.2% 20.6% 30.3%

2015 2016 2017

Sales Cost of Goods Sold Gross Profit Margin 8.4 7.1 15.3 15.4% 15.2% 24.1% 2015 2016 2017 EBITDA/ton EBITDA Margin

Balance Sheet

Consolidated Balance Sheet

In Million US$

Net Debt to EBITDA

In Million US$

• Total assets and total liabilities rose similarly mostly due to rise in interest bearing debt from :

 Bank Mandiri, for refinancing of Toba’s syndicated loan and investment in construction of Sulbagut-1 power plant where US$ 50.0 mn and 28.1 mn of total proceeds respectively were used during 2017  Citibank, amounting to US$ 4.0 mn, used for ABN’s working capital and general corporate purposes

• Total equity value improved due to current earnings over the period
• Net Debt to EBITDA ratio has constantly recorded stability from quarter to quarter at < 0.5x

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348.4 Total Assets 261.6 33.2 % Interest Bearing Debt 98.8 51.3 25.1 % Total Liabilities 173.6 113.8 52.5 % Shareholders Equity 174.8 147.7 18.3 % Balance Sheet Dec’ 16 Change Dec’ 17 Cash and Cash Equivalents 1) 37.6 98.7 % 74.7

13.7 10.8 11.8 8.2 24.1 39.2 45.1 45.8 64.1 74.8 4Q16 1Q17 2Q17 3Q17 4Q17 Net Debt (Cash) (US$ Mn) Last 12 Month EBITDA Ratio (x) 0.4 0.2 0.3 0.1 0.3

Note: (1) Cash and cash equivalents include restricted cash in bank

63% 71% 73% 37% 29% 27% 2015 2016 2017

Traders End-users NEWC - Adj. 5,600 GAR ASP HBA - Adj. 5,600 GAR

Marketing Performance

• Prior to 2016, spread between NEWC and ASP narrowed due to optimizing marketing initiative to

premium customers in Japan, Korea, Taiwan, and Malaysia at mainly fixed price

• Majority of 2016 sales volume was fixed at price during 1H16 period. Sudden coal price surge in 2H16

beyond market prediction was not reflected in the 2016 ASP, causing widened spread between NEWC and ASP

• Throughout 4Q17, spread between NEWC and ASP narrowed due to large portion of sales volume

being fixed during price uptrend in 4Q16, but still not capturing the high prices of November and December 2016

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Diversified Export Market Base

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Export Market Focus FY15 – FY17 2017 Export Market – More ASEAN Driven

• Given China’s economic situation in 2015, focus shifted towards export markets whose economies

showed stable demand prospects such as Korea, Taiwan, India. ASEAN markets ie. Thailand, Malaysia, Philippines, and Vietnam have shown positive traction

• Diversification towards countries ex.China remained the highlight for 2017
• In 2017 and going forward, ASEAN markets will play more important role in sourcing coal from its

proximate supplier such as Indonesia

25.9% 18.4% 12.4% 12.0% 9.1% 6.5% 4.4% 2.9% 2.5% 1.9% 4.0% 0.0 0.2 0.4 0.6 0.8 1.0 South Korea

Thailand Malaysia Taiwan China Japan India Philippines Vietnam Hong Kong Others

Million Tons

9% 5% 9% 32% 25% 26% 4% 11% 18% 14% 9% 12% 13% 15% 12% FY 2015 FY 2016 FY 2017 China Korea Thailand Taiwan Malaysia

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• From 2015 to 2017, sales constribution consistently derived from mainly 5600 GAR products
• A mixture of mid-upper quality of 5600 - 5900 GAR still account for TOBA’s largest product

composition Product Composition (GAR) by % – FY17 Product Composition (GAR) : FY15 – FY17

Product Composition by Quality

23.6% 22.9% 20.7% 15.4% 7.5% 6.5% 3.4% 0.0 0.5 1.0 1.5 5600 HS 4800 & 5000 5200 5600 RS 5800 5900 LS Others Million Tons 36% 30% 24% 30% 24% 15% 18% 22% 14% 0% 7% 21% 16% 17% 26% 2015 2016 2017 5600 HS 5600 RS 5800 & 5900 LS 5200 Others

Sulbagut-1 & Sulut-3 power projects 90% Mining Business 10%

Snapshot of 2018

Mine Plan Execution 2018 production and SR are projected at similar numbers as in 2017 of 5 - 6 million tons and 12x - 13x respectively. The Company will also maintain its cash cost at stable level Marketing Strategy The Company plans to continue building well-diversified market destinations and customer base, maintaining product quality and timely delivery, as well as optimizing the current favorable coal price into the Company’s ASP Capital Expenditure Total Capex for 2018 is estimated at US$ 90 - 100 million, of which 80% - 90% will be allocated for the Sulbagut-1 and Sulut-3 power projects, with the balance for the mining business, i.e. land acquisition, and infrastructure/heavy equipment Sourcing of Other Power and Coal Mining Asset In translating the Company’s vision, the Company will continuously seek for

• pportunities in sourcing potential projects and brownfield assets both for power and

coal mining

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Operation Prod Vol (mn ton) SR (x) 13.1x 5.0

2016

12.9x 5.5 NEWC Coal Price (US$/ton) 88.5 66.0 12x – 13x 5.0 – 6.0

2018 F

80.0

2017

Forecast CAPEX 2018

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Performance Highlights Performance Highlights

2Strategy to Venture into Power 3

Integrated Energy Company

Business Growth and Sustainability

Transformation

• Acquisition of mine(s)

around existing mining concessions

• Acquisition of mine(s) to

support coal-related power projects

• Active participation as

IPP* in PLN tenders

• Assessment of

developing renewables

• Identification of strategic

partner(s) with vast track record

• Expansion of power

project capacity (MW) Coal Mine

• Optimization of existing mine plan
• Optimization of infrastructure sharing
• Cost management
• Diversification of markets and

customer base

• Active participation in CSR

Company Strategy

Fossil Fuel and Renewables Power

Present Future Company Initiatives

Coal Mining Company

* Independent Power Producer

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Downstream Integration Provides Transformational Balance

 Successfully built TMU from greenfield stage in 2011 to fully operating coal mine at run-rate of > 1mmtpa  Sulbagut-1 CFPP project (2x50 MW) – successfully achieved financial close on schedule, one of very few companies able to do so. Expected COD in mid 2020  Second 2x50 MW Sulut-3 CFPP project was signed on 7 April 2017 with expected COD in 2021  Experienced partners and EPC in both projects, who are one of the largest power equipment manufacturing and construction conglomerates in China: (1) Shanghai Electric Power Construction in Sulbagut-1; (2) Sinohydro in Sulut-3  Measures in place to ensure on-budget project cost and on-time delivery

In-house Management Experience Strong Partnership

 Toba Sejahtra (one of Toba’s shareholders) have successfully built and operated 2 power plants: (1) 117 MW Senipah, gas-fired power plant, COD in 2015; (2) PJPP Palu, 66 MW CFPP, COD in 2007  Some members of Toba’s Management were involved in above power plant development and operation, allowing Toba to leverage on their strong experience in development of existing and potential power projects

Shareholder Experience Toba is diversifying into power generation sector. Given its extensive experience in project execution and key shareholder’s familiarity with power business, it is geared to completing the transformation

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Project Selection Process

 Targeting attractive return of equity IRR and Project IRR  Ability to identify, assess, and manage completion risk, technical and non-technical risk such as social assessment for land acquisition to ensure the project can be completed within specified time schedule  Financial capability to participate in targeted tender projects where PLN sets specific requirements to meet  Majority control for certain size of IPP projects  Appetite to have minority portion with good and credible partner in larger size projects  Credible partner with vast experience and proven technology  Can bring long-term value-add to organization and local people including transfer of knowledge  Have good networking capability with PLN and power stakeholders

Parameters for Project Selection Parameters for Partner Selection

Toba Group IPP Experiences

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Sumatra Kalimantan Java Sulawesi Malaysia

East Kalimantan

Senipah Power Plant

Central Sulawesi

Palu Power Plant

PLTG Senipah 2x41 MW PJPP *) 2x15 + 2x18 MW

• In operation, COD in 1Q

2015

• Combined Cycle System

is under PPA finalization for additional 35 MW

• Total potential supply:

115 MW

• 2x15 MW, COD in 2007
• Expansion of 2x18 MW

reached COD in 2016

• Total supply: 66 MW

SULBAGUT-1 2x50 MW

• Financial Close: 14

July 2017

• Expected COD: mid

2020 *) Divested to private buyer in 4Q 2016

SULUT-3 2x50 MW

• In process for

Commencement of Work

• Expected COD: 2021

Sulbagut-1 Project

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Project Location North Gorontalo Regency, Province of Gorontalo, Sulawesi Developer PT Gorontalo Listrik Perdana (80% Toba Group, 20% Shanghai Electric Power Construction Co. Ltd) Capacity 2 x 50 MW (Net); 2 x 60 MW (Gross) EPC Shanghai Electric Power Construction Co. Ltd Total Investment US$ 220-225 mn Total Required Land 60 Ha (100% secured) Estimated COD Mid 2020 PPA Contract PPA was signed on 14 July 2016 for the period of 25 years Project Financing Financing agreement was secured on 11 July 2017

Sulbagut-1 Project Summary

Sulbagut-1 has achieved financial close in July 2017 and is currently under construction

Kalimantan Sulawesi

TBS Concessions Sulbagut-1

Project Overview

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2017 Snapshot of Sulbagut-1 Project (1 of 2)

Financal Close Reception with BOD of PT PLN (Persero) Achievement of Financing Date with PT PLN (Persero), 14 July 2017 Signing EPC Contract with Shanghai Electric Power Construction Signing Financing Agreement with PT Bank Mandiri (Persero) Tbk Kick Off Meeting with Shanghai Electric Power Construction

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2017 Snapshot of Sulbagut-1 Project (2 of 2)

Soil Investigation Activity Land Clearing Activity Main Plant Area Landscape Project Signboard Land Clearing of Access Road

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Site Preparation Construction

Next after Financial Close...

Commercial Operation Date (COD) Commissioning 2017 2018 2019 2020

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Performance Highlights Performance Highlights

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Sulut-3 Project

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Project Location North Minahasa Regency, Province of North Sulawesi, Sulawesi Developer PT Minahasa Cahaya Lestari (90% Toba Group, 10% Sinohydro Corporation Limited) Capacity 2 x 50 MW (Net); 2 x 60 MW (Gross) EPC Sinohydro Corporation Limited Total Investment US$ 205-210 mn Total Required Land 40 Ha (100% secured) Estimated COD Early 2021 PPA Contract PPA was signed on 7 April 2017 for the period of 25 years Project Financing Financing agreement expected to be secured by 1Q2019

Sulut-3 Project Summary

Sulut-3 is expected to complete EPC contract by early 2H18 and achieve financial close by 1Q2019

Project Overview

Kalimantan Sulawesi

TBS Concessions Sulut-3

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2017 Snapshot of Sulut-3 Project

Land Survey and Topography Investigation for Main Plant Area Secured Land Signing of PPA on 7 April 2017

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THANK YOU