Delivering Positive Energy November 2014 Disclaimer These - - PowerPoint PPT Presentation

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Delivering Positive Energy November 2014 Disclaimer These - - PowerPoint PPT Presentation

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Delivering Positive Energy November 2014 Disclaimer These materials have been prepared by PT Adaro Energy (the Company) and have not been independently verified. No representation or warranty, expressed or implied, is made and no reliance

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SLIDE 1

Delivering Positive Energy

November 2014

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SLIDE 2

Disclaimer

2

These materials have been prepared by PT Adaro Energy (the “Company”) and have not been independently verified. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, fairness or completeness of the information presented or contained in these materials. The Company or any of its affiliates, advisers or representatives accepts no liability whatsoever for any loss howsoever arising from any information presented or contained in these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed. These materials 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

  • f 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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SLIDE 3

Agenda

I. Corporate Information II. Adaro’s Strategy III. Industry Outlook IV. Appendix

3

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SLIDE 4

I. Corporate Information

4

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SLIDE 5

5

Adaro Energy Snapshot

  • Among the largest single-

concession coal producers in southern hemisphere

  • Top 5 thermal coal exporter globally
  • Major supplier to domestic market
  • One of the world’s lowest cost coal

producers

  • Envirocoal among the most

environmentally friendly coal

  • Vertically integrated business model
  • Strong credit profile
  • High visibility of future earnings
  • Reputable and experienced

management and controlling shareholders

Production

 2011A: 47.7 Mt  2012A: 47.2 Mt  2013A: 52.3 Mt

Envirocoal

 Sub-bituminous, medium calorific

value, ultra-low pollutants

 Trademark registered in many

jurisdictions Customers

 More than 50 customers in 12

countries

 Blue-chip power generation utilities

Pricing

 Fixed price and about 1/3 index-linked  Adjustment for heat content

JORC reserves / resources

 Reserves: 1.1 Bt as of YE2013  Resources: 12.8 Bt (includes option to

control 7.9 Bt) as of YE2013 Location

 South, East, Central Kalimantan,

South Sumatra License

 First generation Coal Cooperation

Agreement valid until 2022 (AI)

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SLIDE 6

Key Messages

  • Current market conditions are challenging, however we are doing relatively well and are
  • n track to deliver on our long-term strategy to create sustainable value from

Indonesian coal.

  • Resilient business focused on core assets, operational excellence, risk reduction and

customers.

  • Maintain strong capital structure and margins.
  • Monitor and reduce expenses and capital expenditures to preserve cash.
  • Continue to improve efficiency and create reliable, safe, long-term growth.
  • Diversified customer base with long-term contracts mostly with sovereign backed power

companies.

6

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SLIDE 7

Adaro Indonesia (AI) Coal mining, S Kalimantan Balangan Coal Coal mining, S Kalimantan Mustika Indah Permai (MIP) Coal mining, S Sumatra Bukit Enim Energi (BEE) Coal mining, S Sumatra IndoMet Coal Project (IMC), BHP JV Coal mining, C Kalimantan Bhakti Energi Persada (BEP) Coal mining, E Kalimantan 100% 75% 75% 61% 25% 10.2% Saptaindra Sejati (SIS) Coal mining and hauling contractor Jasapower Indonesia (JPI) Operator of overburden crusher and conveyor Adaro Eksplorasi Indonesia (AEI) Mining exploration Adaro Mining Technologies (AMT) Coal research & development 100% 100% 100% 100% 100% 51.2% 100% 100% Makmur Sejahtera Wisesa (MSW) Operator of 2x30MW mine-mouth power plant in S.Kalimantan Bhimasena Power (BPI) Partner in 2x1000MW power generation project in Central Java Tanjung Power Indonesia (TPI) Partner in 2x100MW power plant project in

  • S. Kalimantan

100% 34% 65% Maritim Barito Perkasa (MBP) Barging & shiploading Sarana Daya Mandiri (SDM) Dredging & maintenance in Barito River mouth Indonesia Multi Purpose Terminal (IMPT) Port management & terminal operator Indonesia Bulk Terminal (IBT) Coal terminal & fuel storage

Resilient Business Model Creating Sustainable Value

Pit to Power Integration

7

Adaro Energy (AE)

Mining Assets (ATA) Mining Services Logistics Power

*Simplified Corporate Structure

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SLIDE 8

8

Barging to Indonesia Bulk Terminal Indonesia Bulk Terminal, Pulau Laut AI mining area, with coal extracted from the Tutupan, Wara & Paringin pits Shiploading at Taboneo

  • ffshore

anchorage Barging to domestic customers AE's coal all come from the deposits in South Kalimantan mined by AI. The physical mining and transporting of coal to customers is done by contractors appointed by AI. We tightly control this coal supply chain by using a subsidiary company at each stage as one of the dominant contractors. AI performs mining activities supported by its contractors (SIS, PAMA, BUMA, RA and RMI). Coal is trucked along haul road owned by AI to a port on the Barito River. AI crushes the coal, stores it when necessary and loads it to barges at Kelanis river terminal Coal is barged to the sea by our subsidiary MBP and third-party contractors. At the river mouth, our subsidiary, SDM, dredges and maintains a shipping channel. Shiploading and sea barging by MBP Coal terminal and fuel storage by IBT

Our Reliable Coal Supply Chain

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SLIDE 9

9

Recent Performance: On Track

  • Liquidity and our Balance Sheet remain

strong with access to cash of US$1.6 billion.

  • Our EBITDA increased 11% to US$701

million, on track to achieve our annual guidance of US$750 million to US$1 billion.

  • We decreased our 9M14 coal cash cost to

US$32.65 per tonne, on target to reach our annual guidance of US$35 to US$38 per tonne.

  • We achieved production volume of 41.9Mt

in 9M14, 8% higher y-o-y. We are on track to hit our annual production target of 54Mt to 56Mt.

  • Overburden removal was 241.67 million

bank cubic meters (Mbcm) in 9M14, 8% higher y-o-y.

  • AI obtained BBB- rating from Japan Credit

Rating Agency, Ltd. Fitch affirmed rating

  • n Adaro Indonesia at BB+.
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SLIDE 10

2014 Guidance

10

Production Volumes (Mt)

40.6 42.2 47.7 47.2 52.3 54-56 2009A 2010A 2011A 2012A 2013A 2014F 5.0 5.5 5.9 6.4 5.75 5.78 2009A 2010A 2011A 2012A 2013A 2014F

Consolidated Planned Strip Ratio (bcm/t) Coal Cash Cost (ex-royalty, US$/t) Capital Expenditure (US$ millions) EBITDA (US$ billions)

1.1 0.9 1.5 1.1 0.82 .75 - 1.0 2009A 2010A 2011A 2012A 2013A 2014 F 27 32 36 39 34.86 35-38 2009A 2010A 2011A 2012A 2013A 2014F 135 287 625 490 165 200-250 2009A 2010A 2011A 2012A 2013A 2014 F

Operational EBITDA (US$ billions)

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SLIDE 11

Diversified Customer Base with Long-term Contracts

11

Mostly sovereign backed power companies, over 50% have relationship more than 10 years

Customer type by % volume (FY13) Geographical breakdown of customers in Mt (9M14)

87% 2% 11%

Power Cement Others * Others include America, Thailand, Taiwan

Indonesia, 21% India, 16% China, 12% Japan, 10% Korea, 10% Spain, 8% Hong Kong, 8% Malaysia, 6% Others, 9%

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SLIDE 12

25.3% 25.0% 24.5% 22.6% 20.3% 18.4% 14.9% 13.1% Xstrata Thermal ADARO Anglo Thermal PTBA BHP Thermal ITMG Peabody BUMI 1,092 2,904 1,990 579 476 417 7,782 7,290 1,140 1,008 1,650 Adaro Bumi PTBA Indika Bayan ITMG Resources Reserves 12,756

Significant Scale and Profitability

12

2013 Thermal Coal Production (Mt)

220.0 95.7 83.1 72.0 67.6 52.3 29.4 15.1

Peabody Glencore Xstrata-e Bumi BHP Anglo Adaro ITM PTBA

Source: Company Filings, Presentations

2013 EBITDA Margin Reserves and Resources Comparison 2013 Largest Producing Concessions in Southern Hemisphere (Mt)

Source: Bloomberg, Company Filings Source: Company Filings, Presentations. Source: Company Filings, *Adaro Energy’s YE2013 consolidated equity adjusted resources and reserves includes option to control 7 billion tonnes

53.5 52.3 33.7 30.0 29.6 23.4 15.1

KPC Adaro Indonesia Kideco Loy Yang Arutmin Berau Indominco

* Include 7.9 Bt option

*

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SLIDE 13

208 194 231 301 264 50 100 150 200 250 300 350 2015 2016 2017 2018 2019

Adaro Energy Debt Repayment

Exceptional Access to Capital

Borrower Loan Type Year Secured Tenor Nominal (in million USD) Net Outstanding 9M14 (in million USD)

AI and CTI Term & Revolver November 2007 8 years 750 112.5 AI Term October 2009 7 years 800 800 SIS Term & Revolver February 2011 7 years 400 329.5 MBP Term & Revolver May 2012 7 years 160 160 MBP Revolver July 2012 7 years 40 40 AI Term May 2013 7 years 380 335.5 AI Term August 2014 7 years 1000 1,000

Manageable average debt repayment schedule of $240million We have more than $1.6 billion in cash

Key Lenders to the Group

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SLIDE 14

II. Adaro’s Strategy

14

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SLIDE 15

Our Strategy to Create Long-term Value

15

IMPROVE EFFICIENCY

  • f our coal supply

chain and focus

  • n cost control
  • Our overburden

crusher and conveyor (OPCC) and 2x30MW mine- mouth power plant are in a testing phase.

  • Focus on improving

the cycle time in coal hauling, similar to how we reduced barging cycle time by more than one day.

DEEPEN INTEGRATION

by moving downstream into power generation

  • Full integration of
  • ur coal supply

chain from pit to port to power.

  • Partnered with blue

chip power utilities

  • n projects,

including a 2x1000MW in Central Java and a 2x100MW in South Kalimantan.

  • Evaluating
  • pportunities in

South Sumatra.

ORGANIC GROWTH

from our current reserve base

  • Organic growth in

South Kalimantan from our three pits of

  • peration.
  • Focus on long-term,

reliable production.

INCREASE RESERVES AND DIVERSIFY

products, locations and licenses

  • Focus on mine

readiness for new coal concessions in Kalimantan and Sumatra.

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SLIDE 16

1.0 1.4 2.4 5.5 8.6 9.4 10.9 13.6 15.5 17.7 20.8 22.5 24.4 26.7 34.4 36.1 38.5 40.6 42.2 47.7 47.2 52.3 54 - 56 1.0 1.0 2.1 5.4 12.9 30.1 26.8 22.7 24.6 40.4 48.2 56.1 66.0 85.6 122.8 119.9 159.3 208.5 225.9 299.3 331.5 294.9 325.5

  • 50

100 150 200 250 300 350 400 450 10 20 30 40 50 60 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Tutupan (Mt) Wara (Mt) Paringin (Mt) Overburden Removal (Mbcm)

Proven Track Record of Production Growth

16

Units 2014 Guidance 2013 Actual 2012 Actual

Production volume Mt 54 – 56 52.3 47.2 E5000 Mt 18.0 36.0 39.5 E4900 Mt 29.0 – 31.0 *8.4 NA E4000 Mt 7.0 7.9 7.6 Planned strip ratio bcm/tonne 5.8 5.8 6.4

*Production for E4700

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SLIDE 17

Improving Efficiency and Cost Control

17

MSW steam turbine generator buildings Barge loading at Kelanis River Terminal

Adaro has consistently engaged in cost-reduction projects, including sealing the haul road, dredging the Barito River channel and pioneering the Taboneo offshore anchorage

Engineering works for overburden conveyor

Project Purpose Overburden Crusher Conveyor (OPCC) Transport 34 Mbcm of overburden annually Mine-mouth Power Plant 2 x 30MW Power operations in South Kalimantan and our OPCC Kelanis River Terminal Expand our capacity to 70 Mt from 55 Mt

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SLIDE 18

Adaro Energy Mining Assets

18

Sumatra: Resources 75.03 Bt Reserves 13.22 Bt Kalimantan: Resources: 85.25 Bt Reserves: 14.80 Bt

Indonesian Coal: Resources 160.65 Bt Reserves 28.02 Bt

Source: Ministry of Energy and Mineral Resources

12 billion tonnes of coal resources are attributable to Adaro across 6 locations and 20 mining concessions, eight of which are CCA and CCoWs and the remaining IUPs.

Adaro Indonesia: Existing, South Kalimantan sub-bituminous Resources 4.9 Bt, Reserves 900 Mt MIP: 75% stake South Sumatra sub-bituminous Resources 288 Mt, Reserves 254 Mt BEE: 61.04% stake South Sumatra sub-bituminous Geological study phase IMC: 25% joint venture with BHP Central Kalimantan Metallurgical coal Resources 1.27 Bt*

3 4 5 6 1 3 4 6

BEP: 10.22% stake with option to acquire 90% East Kalimantan sub-bituminous Resources 7.9 Bt

5

Balangan: South Kalimantan sub-bituminous Resources 172 Mt

2 2 1

Due to additional drilling and updated model, IMC increased resources to 1.27 Bt from 774 Mt. Source: BHP Billiton Annual Report 2013, page 76-77 Note: Reserves and Resources numbers stated above are before taking into account AE’s equity ownership

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SLIDE 19

Balangan Acquisition

19

  • Purchased 75% for US$30.4

million enterprise value in 1Q13.

  • Strategically located 11 km

southeast from Adaro’s concession in S. Kalimantan.

  • Initial capex plan to get up

and running is US$15 million and will use our contractor SIS for mining services.

  • We expect the project to

begin production in 2014 with future potential of up to 8 Mt per year.

Total (Mt) Total Moisture % Ash % (GAR) Total Sulfur % (GAR) Calorific Value (kcal/kg, GAR) Resources 172.3 31.9 1.9 0.08 4,436 JORC Compliant Coal Resources and Reserves (Millions of ROM Tonnes)

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SLIDE 20

Deepen Integration by Moving into Power

20

Bhimasena Power 2 x 1000 MW South Kalimantan 2 x 100 MW Stake Acquired 34% 65% Partner(s) J-Power (34%) and Itochu (32%) Korea EWP (35%) Location Central Java South Kalimantan Rationale

  • Commercially and financially attractive with solid IRR and low-cost long-term

project financing

  • Creates a new captive market and helps meet our DMO
  • Helps to lessen volatility in Adaro’s business model
  • Contributes to the development of our country’s energy needs

Development Progress

  • Signed 25 years PPA with PLN
  • Total Capex: US$4 billion
  • Declared forced majeure, indicating BPI’s

commitment to build the CJPP

  • Acquired more than 87% of the power

block and received the approval of AMDAL

  • Consortium announced as

the sole qualified bidder

  • Signed the PPA with PLN in

October 2014 Financing Combination of ECA and commercial loan Expected Debt vs. Equity 80:20 75:25 Diversify and Secure Predictable Long-term Demand for Our Coal

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SLIDE 21

III. Industry Outlook

21

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SLIDE 22

Key Themes – Market Still Awash with Coal

  • Slow supply contraction, thus oversupply likely to persist at least until the second half
  • f 2015.
  • China to influence international pricing, based on their domestic price and marginal

costs.

  • Producers curtail capex and implement cost cutting measures. Major focus on cost

reduction in 2013. Focus on further lowering stripping ratios unlikely to be sustainable.

  • Many miners underwater. Some forced to compromise long term reserves (i.e. high

grading, back filling, etc.).

  • Minimal investment will be made by small and medium sized players in view of the lack
  • f access for their funding, with increased market share reclaimed by the established

miners.

  • Indonesia and Australia will continue to dominate the export markets.

22

  • If not rationalized, thermal coal supply will continue to weight down prices
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SLIDE 23

Thermal Coal Prices Have Declined Since 2011

  • The current weak coal price is mainly due to undisciplined supply growth on the back of excess

liquidity and overinvestment made in the recent years. Supply contraction is slowly underway but the market has not yet rebalanced.

  • Wood Mac expects the market to continue to rationalize supply with medium term positive demand

fundamentals remain intact. As supply and demand rebalance, a price rebound should occur.

23

McCloskey Newcastle Index

$131 $63 50 100 150 200 250 Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Apr-12 Nov-12 Jun-13 Jan-14 Aug-14

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SLIDE 24

Market Update - Prices

24

  • China’s economic slowdown combined with high

hydro power availability continues to have an impact in the coal markets.

  • Chinese domestic prices have been stable, due to

seasonality factor as the country prepares for winter restocking and coal price negotiation has started.

  • .
  • Australian coal prices continued to decline, due to

lack of growth markets and recent coal import t tax in China – Oz’s largest export destination.

  • Indonesian coal prices have remained more stable

than Australian prices due partly to better access to Indian growth than Australian coals.

31 Oct 2014 25 Oct 2013 % Change Month-to-Date Average Month-on-Month Year-to-Date Average Year-to-Date Average 2013 % Change Bituminous (US$/Tonne) gCN 64.20 83.86

  • 23%

64.32 (2.05) 72.30 85.30

  • 15%

API2 74.18 87.88

  • 16%

72.92 (2.17) 75.90 81.11

  • 6%

API4 65.86 86.78

  • 24%

65.74 (2.11) 73.70 79.53

  • 7%

Aus Off-Spec (Platts) 54.50 63.00

  • 13%

54.56 (2.07) 61.79 71.02

  • 13%

Sub-Bituminous Indonesia (US$/Tonne) ICI3 - 5000 GAR 49.31 55.89

  • 12%

49.52 (1.03) 54.12 58.96

  • 8%

ICI4 - 4200 GAR 36.59 38.89

  • 6%

36.47 0.02 37.50 41.36

  • 9%

South China CFR (US$/Tonne) 6000 NAR 71.40 85.95

  • 17%

72.27 (1.94) 80.41 89.91

  • 11%

5500 NAR 64.05 79.10

  • 19%

64.98 (1.85) 71.90 81.49

  • 12%

4900 NAR 58.95 67.30

  • 12%

58.84 (0.15) 62.99 69.82

  • 10%

Qinhuangdao Coal FOBT (RMB/Tonne) 5500 NAR 490.00 540.00

  • 9%

484.20 9.82 513.39 587.67

  • 13%

5000 NAR 430.00 475.00

  • 9%

424.90 10.40 449.18 501.74

  • 10%

4500 NAR 395.00 410.00

  • 4%

388.00 8.00 398.30 418.84

  • 5%
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SLIDE 25

Global Cost Curve

25

Indonesia’s greatest advantage is its low cost, recording 9.5% reduction in 2013 YoY – one of the best among thermal coal exporters world wide Average Indonesian coal production cost is ~US$47/ton. Based on Wood Mac data, the 2013 global weighted average cash cost is about US$60/t (2012: US$64/t) Cash Cost for Global Seaborne Thermal Coal Supply (2013) 2011 - 2013 Average Seaborne Thermal Cash Cost

Source: Wood Mackenzie CMS and CSS Currency in Real terms 2013 50 100 150 200 250 98 196 294 392 490 588 686 784 882 980 Cost (US$/t, Real 2013) Cumulative capacity (Mt) Australia Canada Colombia Indonesia Mozambique Russia South Africa USA Other Source: Wood Mackenzie Coal Market and Coal Supply Services

Adaro Energy’s cash cost (ex. royalty) was U$34.86/ton for FY13

Country 2011 Total cash cost 2012 Total cash cost 2013 Total cash cost Canada 87.11 93.56 87.68 Venezuela 86.54 82.57 81.47 Mozambique 83.14 78.37 79.66 Russia 74.63 76.81 79.04 Australia 74.85 83.38 75.45 United States 72.39 69.49 69.63 Vietnam 58.36 58.48 58.37 South Africa 59.94 59.56 56.21 Colombia 54.17 52.90 52.06 Indonesia 50.97 51.88 46.97 Global weighted average 61.70 64.05 60.11 Note: not adjusted for heat value

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SLIDE 26

The Market in 2015 - Demand

  • China thermal coal

import growth is likely to be flat to slightly negative in 2014 and 2015 due to the domestic oversupply.

  • India growth is

expected to improve in H2 2014 and continue its robust trend.

  • Growth in South

Korea and Indonesia is likely to expand in 2015 given new power plants coming on-line.

  • Growth in the Atlantic

market will be almost flat in 2014 and 2015.

Source: Adaro Research, 2014 26

DEMAND (in Million Tonnes) 2013

Y-O-Y Δ

2014E

Y-O-Y Δ

2015E

Asia & Pacific China 202 (6) 196 (6) 190 Japan 130 4 134 1 135 India 133 10 143 5 148 South Korea 91

  • 91

5 96 Indonesia - Domestic 76 4 80 6 86 Taiwan 65

  • 65

1 66 Malaysia 24

  • 24

1 25 Thailand 17

  • 17

1 18 Philippines 14

  • 14

1 15 Hong Kong 13

  • 13
  • 13

Vietnam 1

  • 1
  • 1

TOTAL ASIA & PACIFIC 766 12 779 15 794 Europe 149 (2) 147 (2) 145 Mediterranean - (Israel, Morocco, Turkey) 38 2 40

  • 40

Central & South America, Caribbean + other 21 2 23 2 25 North America 9 1 10 (1) 9 Other 19 1 20 3 23

WORLD TOTAL DEMAND 1,002 16 1,019 17 1,036

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SLIDE 27

The Market in 2015 - Supply

  • Indonesia: Growth to slow-down, but some

capacity slack remains in the system - uncertainty about whether the latest government controls would be effective enough.

  • Australia: Producers have been more resilient to

market conditions than originally expected. The government seems to be attempting to support the industry by implementing miner-friendly policy

  • Colombia: Both Cerrejón and Drummond are

expected to continue their expansion next year and will have no union negotiations in 2015

  • The market is likely to be oversupplied in 2015

Source: Adaro Research, 2014 27

SUPPLY (in Million Tonnes) 2013

Y-O-Y Δ

2014E Y-O-Y Δ 2015E

Indonesia 472 15 487 5 492 Australia 187 10 197 10 207 Russia 95 2 97 2 99 Colombia 75 5 80 2 82 South Africa 72 72 72 USA 42

  • 4

38 (2) 36 Others (Vietnam, Canada, North Korea, Chile) 61

  • 2

59 (5) 54

WORLD TOTAL SUPPLY 1,002 26 1,028 12 1,040

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SLIDE 28

China: Market Slows while Demand for Adaro Coal Remains Solid

28

Aspects impacting the Chinese coal market:

  • Slow power-generation growth, especially coal-fired

plants.

  • Abundant domestic supply from new, low-cost mines
  • wned by Shenhua and China coal.
  • NDRC has requested major power utilities to reduce

coal imports by 30% to 40% from September to December 2014. However:

  • New

Regulations in China have highlighted the importance of low-ash, low-sulphur coals.

  • Trace elements have also become a critical aspect for

imported and domestic coals.

  • The environmentally-friendly nature of Adaro coals fits the

current needs of China better than any other coal available in the market.

  • Our customers have indicated their intention to increase

purchases of our coals through long-term contracts.

Jan-Dec 2013 202.0 Jan-Dec 2014E 196.0 Y-o-Y

  • 6.0

Y-o-Y (%)

  • 3%

Source: McCloskey and Adaro Research

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SLIDE 29

India: Promising Second-half 2014

29

2013 Imports 2014 Imports - Actual 2014 Imports - Forecast

  • Power Generation increased by 54 TWh y-o-y

in Jan-Jul 2014. Hydro was strong (increased by 5% y-o-y), but this was offset by a decrease in gas consumption (decreased by 10% y-o-y).

  • Imports have not fared so well, decreasing

three million tonnes Y-o-Y due to low demand in Q1 and stand-by effect from the elections.

  • However, this was at the expense of power

plant stocks, which have decreased to critical levels at approximately 5 days on average.

  • The 2014 monsoons have been stronger than

usual and left large portions of India flooded.

  • Hydro generation is not currently a priority

and the government might decide to use dams for flood control instead of maximizing electricity generation.

  • Overall, with the new Government already in

place, state electricity board tenders have resumed as well as the electricity tariff revision in some states.

Jan-Dec 2013 133.0 Jan-Dec 2014E 143.0 Y-o-Y 10.0 Y-o-Y (%) 7.5%

Source: McCloskey and Adaro Research

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SLIDE 30

Future of Coal in the Energy Mix

30

  • Coal demand in China might slow at some point in the next decade. However, that is the time when India’s

energy requirements will peak, compensating any potential downfall.

  • The emergence of ASEAN countries will play a major role in the energy picture in Asia due to the large

population and low levels of electrification in this group of countries.

  • As a result of limited economic development and improvement in efficiency, energy growth in the OECD

countries is expected to remain limited in the next two decades. Coal Demand by Region

Source: Wood Mackenzie CMS 2013

Key demand driver for growth in coal demand is the low cost of electricity produced

World Primary Energy Demand by Fuel

Source: IEA World Energy Outlook 2013

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SLIDE 31

Coal Fired Capacity Growth in Asia

31

200 400 600 800 1000 1200 1400 10 20 30 40 50 60 70 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total Capacity (GW) Growth Y-o-Y (GW) Growth Y-o-Y Total Capacity (GW)

  • Avg. 2011 – 2017:

50 GW

  • Avg. 2018 – 2030:

26 GW

100 200 300 400 500 5 10 15 20 25 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total Capacity (GW) Growth Y-o-Y (GW) Growth Y-o-Y Total Capacity (GW)

  • Avg. 2011 – 2016:

19 GW

  • Avg. 2017 – 2024:

7 GW

  • Avg. 2025 – 2030:

12 GW

Coal Fired Capacity Growth in China Coal Fired Capacity Growth in India

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SLIDE 32

56 131 268 78 132 259 80 97 73 2013 2020 2030

Domestic Consumption (Non-Indonesia) Domestic Consumption (Indonesia) Imports

Total 214 Mt Total 360 Mt Total 600 Mt

Southeast Asia Coal Production Southeast Asia Coal Demand

32

Source: WoodMackenzie Energy Market Service, IEA SEA Energy Outlook, Adaro Analysis

Fueling Southeast Asia’s Coal Requirements

slide-33
SLIDE 33

Regulatory Environment

33

Indonesia IUP Royalty Increase Indonesia Coal Export Royalty Payment Indonesia Coal Production Limit China Low Quality Coal Ban China Coal Import Tariff

  • Issue: Royalty rate increase to 13.5% from the

current 3% to 7% for IUP license holders. We understand that this issue is currently on hold.

  • Impact to Adaro: Positive
  • Issue: Royalty has to be paid and verified by

government officials before coal can be shipped

  • Impact to Adaro: Neutral
  • Issue: Keep production flat at ~430 Mt
  • Impact to Adaro: Neutral to Negative
  • Issue: Coal import tax of 3% on ash and sulphur

above 15% and 0.6%, respectively.

  • Impact to Adaro: Neutral to Positive
  • Issue: Coal import tariffs of 3% for anthracite,

coking coal and lignite, 6% for thermal coal and 5% for briquettes and other coal.

  • Impact to Adaro: Neutral to Positive
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SLIDE 34

Thank You Delivering Positive Energy

34

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SLIDE 35

IV. Appendix

35

slide-36
SLIDE 36

Adaro’s Operational and Financial Highlights

36

OPERATIONAL 9M 2014 9M 2013 % Change Production (Mt) 41.9 38.7 8% Sales (Mt) 42.4 39.1 8% OB removal (Mbcm) 241.7 223.0 8% FINANCIAL (US$ millions, unless indicated) 9M 2014 9M 2013 % Change Net Revenue 2,507 2,435 3% Cost of Revenue (1,921) (1,902) 1% Gross Profit 586 533 10% Net Income 225 315

  • 29%

Core Earnings 291 214 36% EBITDA 701 630 11% Operational EBITDA 701 630 11% Cash 1,628 618 163% Net Debt 1,215 1,690

  • 28%

Net Debt to Equity (x) 0.36 0.51

  • Net Debt to LTM EBITDA (x)

1.36 2.06

  • Free Cash Flow

407 456

  • 11%

Cash from Operations to Capex (x) 3.36 3.75 Basic Earnings Per Share (EPS) in US$ 0.00695 0.00988

  • 30%
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SLIDE 37

Supply Chain Vertical Integration

37

  • Adaro Indonesia (AI) produced 52.3 Mt

in 2013 from a single Coal Cooperation Agreement (CCA) area in S Kalimantan.

  • 900 Mt of Reserves and 4.9 Bt of

Resources in S Kalimantan.

  • Saptaindra Sejati (SIS) provides ~35% of

AI mining and overburden removal.

Coal Mining

  • 80km private paved haul road

improved operational efficiency.

  • More than 350 units of 130 tonnes

capacity truck trailers in operation.

Coal Hauling

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SLIDE 38

Supply Chain Vertical Integration

38

At Kelanis river terminal:

  • Completed the first stage of expansion in

2013 (increase throughput capacity to 60Mt per year). The second stage of expansion is underway to bring capacity to 70Mt per year.

  • 2 barge loading jetties with a loading

rate of 5,000 tonnes/hr each.

Coal Processing & Barge Loading Barging

  • Supported by our subsidiary,

PT Maritim Barito Perkasa (MBP).

  • 55 sets of tugs and barges used by

Adaro with an average capacity of 12,063dwt.

slide-39
SLIDE 39

Shiploading and Port

Supply Chain Vertical Integration

39

  • Offshore loading at Taboneo: capacity

up to 165,000 tonnes/day: floating cranes (15,000-20,000t/day), FTU (60,000t/day) and self-loading geared vessels.

  • IBT port and fuel terminal JV with

Shell: coal loading capacity 12 Mt/year, fuel storage capacity 60,000 kiloliters.

  • Sarana Daya Mandiri (SDM), dredged

the river channel in 2008, increasing capacity to 200 Mt per year and now manages and maintains the channel.

  • Adaro owns 51.2% of SDM with the local

port authority and local government

  • wning the remaining interest.

Barito River Channel

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SLIDE 40

Corporate Milestones: Pre-LBO, LBO to Growth

40

US$400m bonds make-whole call at premium

Refinancing with US$750m bank loans

Acquired SIS (mining contractor)

US$973m LBO by consortium of international investors

US$400m bonds to refinance LBO debt

First ratings upgrade by Moody’s to Ba2

Adaro Energy IPO

  • n IDX, raising

US$1.3bn

Acquired SDM and completed dredging

  • f Barito River

channel mouth

First venture out of South Kalimantan through JV with BHP Billiton in the Indonesian Coal Project

Commenced production at Wara mine

Infrastructure developments post LBO

Increased production nearly by 30% to 34.4 Mt

1982: Coal Cooperation Agreement signed

1990: Envirocoal trademark obtained

1992: First year of commercial production (1 Mt)

2002: Production of 20.8 Mt

First 10 year corporate loan in Indonesia for Adaro Indonesia

Established foothold in South Sumatra through acquisition of MIP, BEE and SMS

Won 2GW coal fired power project along with JPower & Itochu

Second ratings upgrade by Moody’s to Ba1

Acquired MBP (barging contractor)

US$500m RCF signed

Issued US$800m 7.625% Guaranteed Senior Notes due 2019. Largest 10 year US$ private sector corporate bond from Indonesia

Pre LBO Growth LBO

Sole qualified bidder for 200MW coal fired power project in S. Kalimantan

Signed option agreement to acquire up to 90% of BEP

Concluded $380m refinancing facility for AI and was 7.5x

  • versubscribed

Acquired Balangan coal Project

1982-2002 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Completed $1b refinancing facility for AI that was 9.1x

  • versubscribed
slide-41
SLIDE 41

Adaro Group – Journey from LBO

41

*) 2006 and 2007 (AI, IBT and CTI only). 2008 onwards AE figures. **) Only AI, IBT and CTI as per financial covenant calculation Note: In 2010, 2011 and 2012, incl. attributable resources and reserves from acquired concessions in 2010 and 2011 and upon exercise of BEP’s option

LBO (Jun '05) 2005 2006 2007 2008 2009 2010 2011 2012 2013 Revenue (US$m)

  • 951 1,383 1,512 1,869 2,591 2,718 3,987 3,722

3,285 EBITDA (US$m) 175 202 254 262 506 1,067 883 1,474 1,101 822 EBITDA Margin (%)

  • 21.2%

18.4% 17.4% 27.1% 41.2% 32.5% 37.0% 29.6% 25% Net Debt / EBITDA** 5.27 4.45 2.53 2.43 1.10 0.30 1.10 1.04 1.64 2.24 DSCR** 0.79 0.95 1.59 1.93 4.97 2.90 3.20 6.20 3.85 3.35 2005 2006 2007 2008 2009 2010 2011 2012 2013 Production volumes (Mt) 26.6 34.4 36.0 38.5 40.6 42.2 47.7 47.2 52.3 Resources (Mt) 2,368 2,841 2,803 3,484 3,443 4,622 5,594 12,288 12,756 Reserves (Mt) 448 414 938 930 889 938 1,095 1,125 1,092 R/P (years) 16.8 12.0 26.0 24.2 21.3 22.2 23.0 23.8 21.5*

slide-42
SLIDE 42

Reputable Shareholders and Experienced Management

42

  • Edwin Soeryadjaya
  • Teddy Rachmat
  • Boy Garibaldi Thohir
  • Benny Subianto
  • Sandiaga Uno

together hold 64%

Reputable and Supportive Shareholders Management Team with Proven Track Record Strong Corporate Governance Structure In Line with International Best Practices

  • No family has outright control
  • Two of six Commissioners are independent
  • Audit Committee consists of all independent

members

  • Conduct regular internal audit of operations
  • Disclosure exceeds international standards

52.3 26.7 2005 2013

Production (Mt)

96%

419 84 2005 2013

PBT (US$ millions)

500%

1.9x 6.3x 2005 2013

Net Debt/EBITDA

(70)%

  • More than 100 years of combined industry experience
  • Combined 60+ years at Adaro Energy