Company Presentation Company Presentation April 2017 1 September - - 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

September 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 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

Note:

• 1. PLN: PT Perusahaan Listrik

Negara (Persero)

Ownership Structure

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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 out 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 of 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 ~30 - 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: 117 MT - JORC Resources: 156 MT - JORC Reserve: 22 MT - JORC Resources: 37 MT - JORC Reserves : 8 MT - JORC Resources: 43 MT - JORC 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%

Strategic Mine Locations

Toba owns all infrastructures (coal processing plant, overland conveyors, and jetties) giving significant

• perating leverage vs other concessions in surrounding areas

Muara Berau Muara Jawa Makassar Strait

~55 km (total ~120 km)

Balikpapan Samarinda

~65 km Major City Jetty Transhipment Point TMU – IM Hauling Road

TMU ABN IM

Major city to north is less than 50 km Adjacent locations for all 3 mines Close proximity to jetty and transhipment point of Muara Jawa Distance from pit to

• jetty. with closest one

~5 km and furthest ~25 km ~5 km IM jetty ABN jetty 25 km

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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

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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 9M17

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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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 5.0-6.0 Mt $99 $121 $97 $85 $71 $59 $66 $65-70 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 est.

Toba Consolidated NEWC Price 30.1% 32.9% 5.7% 13.9% 13.5% 15.4% 15.2%

Stable margin

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

Quarterly Production & SR

Production in Thousand Tons

Production Summary

MT: Million Ton

3Q16 3Q17 Change Comment Sales Volume SR (x) 1.2 1.3 12.8 12.6 9.8% (1.4)% Sales volume tracked its 3Q17 production volume SR in 3Q17 was still in line with target 1.4 1.4 Production volume in 3Q17 was still in line with target (0.0)% Production Volume

Production Summary

MT: Million Tons

• Q-o-q production volume has

remained stable and in line with 2017 quarterly guidance of 1.25 - 1.50 mn tons

• 3Q17 SR stabilized at 12.6x, on

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

• Higher SR in 2Q17 impacted by wet

weather

12 12.8x 12.6x 13.7x 14.3x 12.6x 12.0x - 13.0x 3Q16 4Q16 1Q17 2Q17 3Q17 Quarterly Guidance

TMU IM ABN SR (Consolidated)

1.4 1.2 1.4 1.25 - 1.50 1.4 1.1

Realization

Consolidated 9M 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: (1) EBITDA = Gross Profit – selling expenses – G&A + depreciation and amortization

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Operational 9M16 9M17

Δ%

Production Vol 4.2 3.7 (11.9)% Sales Vol 4.3 3.5 (18.6)% Stripping Ratio 13.0 13.5 3.8 % Sales 192.1 211.3 10.0 % EBITDA 27.0 51.9 92.2 % Net Profit 9.7 29.0 199.0 % Financial 9M16 9M17 44.8 NEWC Index 85.2 51.1 % 56.4 ASP 59.2 32.1 %

mn ton mn ton x US$/ton US$/ton US$ mn US$ mn US$ mn

Δ%

EBITDA/Ton 6.3 14.7 133.3 %

US$/ton 14.1% EBITDA Margin 24.6% Gross Profit Margin 29.9% 19.2% Financial Ratios 9M16 9M17

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

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

through proper mine planning and cost management initiatives

• Although cash cost rose 17.1% from 2Q16 to 3Q17, coal price increased much higher by 83.3%
• ver same period. This reflects much higher ASP expansion than cash cost rise itself

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51 50 47 43 41 38 35 35 35 34 37 40 41 50 51 46 42 41 38 34 35 35 34 37 42 41 68.4 63.8 65.8 59.6 59.0 52.6 50.3 51.5 67.3 94.7 81.5 79.7 94.5 12.5x 13.8x 12.4x 12.5x 12.0x 12.1x 12.5x 13.8x 12.8x 12.6x 13.7x 14.3x 12.6x 0x 3x 6x 9x 12x 15x 20 40 60 80 100 120 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 FOB cash cost

• Adj. FOB cash cost

NEWC SR

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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 filters through higher gross profit margin and EBITDA margin

ASP Positively Impacts Margins

4.8 4.3 3.5 61.4 56.4 85.2 55.9 44.8 59.2 9M15 9M16 9M17

Sales Volume NEWC Index ASP

268.6 192.1 211.3

217.0 155.3 148.0

19.2% 19.2% 29.9% 9M15 9M16 9M17

Sales Cost of Goods Sold Gross Profit Margin

8.8 6.3 14.7 15.6% 14.1% 24.6%

9M15 9M16 9M17

EBITDA/ton EBITDA Margin

Balance Sheet

Consolidated Balance Sheet

In Thousand 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 syndicated loan, investment and corporate purposes where US$ 40 mn of total proceeds was used by June 2017  Citibank, amounting to US$ 4 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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23.3 13.7 10.8 11.8 21.6 38.8 39.2 45.1 45.8 64.1 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

3Q16 4Q16 1Q17 2Q17 3Q17

Net Debt (Cash) (US$ Mn) Last 12 Month EBITDA

Ratio (x) 0.6 0.4 0.2 0.3 0.3

297.1 Total Assets 261.6 13.6 % Interest Bearing Debt 64.2 51.3 25.1 % Total Liabilities 135.5 113.8 19.1 % Shareholders Equity 161.6 147.7 9.4 % Balance Sheet Dec’ 16 Change Sep’ 17 Cash and Cash Equivalent 37.6 13.3 % 42.6

NEWC - Adj. 5,600 GAR ASP HBA - Adj. 5,600 GAR 63% 71% 75% 37% 29% 25%

2015 2016 9M17

Traders End-users

Marketing Performance

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

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

• 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 9M17, spread between NEWC and ASP narrowed due to large portion of sales volume

being fixed during price uptrend in 3Q17 and not capturing the high of 4Q16

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Diversified Export Market Base

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Export Market Focus 9M15 – 9M17 9M17 Export Market - More ASEAN Driven

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

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

• Diversification towards countries ex.China remained highlight for 2017
• In 9M17 and going forward, ASEAN markets will play more important role in sourcing coal from its

proximate supplier ie. Indonesia

10% 5% 8% 34% 25% 29% 3% 13% 20% 13% 8% 12% 12% 12% 13% 9M15 9M16 9M17 China Korea Thailand Taiwan Malaysia 28.7% 19.7% 13.5% 11.7% 8.3% 4.4% 3.8% 3.0% 2.6% 2.5% 1.8% 0.0 0.2 0.4 0.6 0.8 1.0 South Korea Thailand Malaysia Taiwan China Japan India Vietnam Hong Kong Philippines Others

Million Tons

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• From 9M15 to 9M17, 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 % - 9M17 Product Composition (GAR) : 9M15 – 9M17

Product Composition by Quality

24.9% 22.9% 21.5% 15.8% 7.9% 4.4% 2.6% 0.0 0.2 0.4 0.6 0.8 1.0 5600 HS 4800 & 5000 5200 5600 RS 5800 5900 LS Others Million Tons 37% 29% 25% 36% 25% 16%

12% 24% 12% 0% 4% 22%

15% 18% 25% 9M15 9M16 9M17 5600 HS 5600 RS 5800 & 5900 LS 5200 Others

Power 32% Building, Infrastructure, Heavy Equip 56% Exploration 12%

Snapshot of 2017F

Mine Plan Execution 2017 production and SR are targeted similar to those in 2016 of 5 - 6 million tons and 12.0x – 13.0x respectively Marketing Strategy The Company continues managing 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 consolidated CAPEX for 2017 is estimated at US$ 55 - 60 million, of which 75% - 80% will be allocated for EPC phase of the power project (Sulbagut-1), with the balance for the mining business, i.e. land acquisition, and infrastructure/heavy equipment Sourcing of Other Power Projects In translating the Company’s vision, the Company will continuously seek for opportunities in sourcing new power projects (fossil fuel and non fossil fuel based such as renewables) through participation in IPP tenders as well as through acquisition of existing power assets 20

Operation

Prod Vol (mn ton) SR (x)

12.9x 5.5

2015

12.3x 6.1

NEWC Coal Price (US$/ton)

66.0 59.2 12.0x - 13.0x 5.0 - 6.0

2017 F

65 - 70

2016

Realized CAPEX 9M17

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Performance Highlights Performance Highlights

2Strategy to Venture into Power 3

Business Growth and Sustainabiity

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 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

Integrated Energy Company

Fossil Fuel and Renewables Power

Present Future Company Initiatives

Coal Mining Company

* Independent Power Producer

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Why Toba Can Realize this Goal?

 Extensive experience in executing project from greenfield to brownfield in coal mining, CFPP and gas-fired power plant development and operation  Sulbagut-1 CFPP project (2x50 MW) – Financial close was reached on 14 July 2017, the first reached on schedule this year by any IPP. Expected COD in mid 2020  Second 2x50 MW Sulut-3 CFPP project was signed on 7 April 2017 with expected COD in 2020  Our partners for the projects are well established and vastly experienced in construction and operation of power plants in many countries  Having strong partners enable us to de-risk the construction phase of the projects

Substantial Power-Related Milestones Have Been Achieved Experienced Partners with Proven Track Record

 Currently, Toba Sejahtra (Toba’s Shareholder) has one operating power plant asset: 2 x 41 MW Senipah Gas Power Plant, COD in 1Q-2015; and previously 2 x 15 MW Palu CFPP; reached COD in 2007 (already divested in 4Q16)  Possessing vast learning curve of knowing what to and not to do in planning to execution of project management. This enables Toba to mitigate and minimize project risk

Leveraging Toba Sejahtra Group’s experience

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Our Project Selection Process

Targeting 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 knowledge
• Have good networking capability with PLN and power stakeholders

Parameters for Project Selection Parameters for Partner Selection

Leveraging Toba Sejahtra Group’s Experience in Power Plant Development

Sumatra Kalimantan Java Sulawesi Malaysia

East Kalimantan

Senipah Power Plant

Central Sulawesi

Palu Power Plant

PLTG Senipah 2 x 41 MW PJPP *) 2x15 + 2x18 MW

• In operation, COD in Q1

2015

• Combined Cycle

System is under PPA finalization for additional 35 MW

• Total potential supply:

115 MW

• In operation, COD in

2007

• Expansion 2x18 MW is

COD 2016

• Total potential supply:

66 MW

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SULBAGUT-1 2 x 50 MW

Financial Close: 14 July 2017, the first reached on schedule this year by any IPP

NEW PROJECTS (Expected COD in 2020)

* Dviested to private buyer in 4Q 2016

SULUT-3 2 x 50 MW

PPA in place, in process for Commencement of Work

Sulbagut-1 Project

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General Description of Sulbagut-1 Project

Project Location : North Gorontalo Regency, Sulawesi

Sulbagut-1 Coal-Fired Power Project is part of 35 GW Program

• 2 x 50 MW

Capacity (Nett)

• Build-Own-

Operate-Transfer (BOOT)

Contract Scheme

• 25 Years

Contract Period

• MiD 2020

COD Target

• SEPC

EPC

• US$ 210-220

million

Project Value

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Financial Close of Sulbagut-1 Project

Principle License Land Acquisition Tariff Approval EPC Contract Financing Agreement

Financal Close Reception attended by BoD of PLN Achievement of Financing Date with PLN, 14 July 2017

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2017 2020

Site Preparation

2018 2019

Construction

Next after Financial Close...

Commercial Operation Date (COD) Commissioning

Sulut-3 Project

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31 Project Location : North Minahasa Regency, Sulawesi

Sulut-3 Coal-Fired Power Project is part of 35 GW Program

• 2 x 50 MW

Net Capacity

• Build-Own-

Operate-Transfer (BOOT)

Contract Scheme

• 25 Years

Contract Period

• 33 months post

Commencement

• f Work

COD Target

• US$ 205-215

million

Project Value

General Description of Sulut-3 Project

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Signing of PPA for Sulut-3 Project

Handing of Token of Appreciation to PLN, 7 April 2017 PPA signing for Sulut -3 Project 7 April 2017

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