Press Release

Since two years ago, state-owned enterprises were encouraged to compete in the international arena. Therefore, the Ministry of State-Owned Enterprises together with a number of red plates signed a memorandum of understanding on May 28, 2015. Nevertheless, Minister of State-Owned Enterprises Rini Soemarno reminded that state-owned SOEs should be prioritized the interests of the nation and the state so that the main goal is to build the country.

In the oil and gas sector, Indonesian red plates have started to compete in the international arena either through PT Perusahaan Gas Negara (Persero (Tbk, and PT Pertamina (Persero).

Meanwhile, in the minerals and coal sectors, some SOEs do not have mining assets abroad either through PT Aneka Tambang (Persero) Tbk or PT Bukit Asam (Persero) Tbk. However, Bukit Asam admitted to start looking for acquisitions of mine assets abroad. This desire has been disclosed several times the management of PTBA-coded stock issuers.

PTBA is targeting three to five lime mines that are entering the stage of due diligence. In the process, there are several mines located overseas, but the majority of mines that follow the process come from domestic ones. Thus, the mine acquisition plan also has an opportunity to thicken reserves in the domestic if the passing due diligence is a local participant Nevertheless, management believes that the current acquisition of coal mines is not easy compared to the past 3 years, especially with respect to prices. Therefore, PTBA is still closing the name of the company that is becoming the target of the company.

The desire to acquire the mine is reaffirmed by PTB President Director Arviyan Arifin at the Annual General Meeting of Shareholders held on Thursday (20/4). He admitted there is a review of a number of coal mining assets to bias in the acquisition of the company. However. Can still close the meeting who the company is now in the phase of due diligence with the company. "There are several companies," he said.

The acquisition of mining companies also aims to support the development of steam coal power plant (PLTU). "We already have studies in South Sumatra and other areas by conducting a pattern of acquisition of several companies that can be developed for the future." Namu, the idea to immediately re-establish coal reserves seems unlikely to be realized this year. The reason is, PTBA has prepared capital expenditure worth Rp 5 trillion in 2017 which mostly aimed to widen the saying in the electricity business and the acquisition of coal mines.

Of this amount, about 60% is used for power plant expansion and mining acquisition. Meanwhile, from the plan, sebangak 10% is allocated for mining operations in Tanjung Enim, South Sumatra. The remaining 30 percent is used to strengthen mining infrastructure.

For the mine acquisition plan, the company requires a minimum 51% ownership of the mine to be captured. In addition, from the reserve side must also have a large amount, a minimum of over 100 million tons.

If the reserves are only around 20 million tons, the acquisition will be done by a subsidiary of PTBA. As of December 31, 2016, the company's coal reserves reached 3.3 billion tons, while coal resources reached 8.3 billion tons.

Not only the acquisition, the company is also reviewing the development of underground mining or underground mining which is still studied one of them is located in Ombilin, West Sumatra. "Studies are underway so I can not say when the project started."

The selection of mining methods whether open pit or underground mining is usually adjusted to the geological location of coal reserves. Thus, the company can determine the economic value of the project.

POWER PLANTS

PTBA is also eyeing a number of independent power producer (IPP) companies that have coal-fired steam power plants for acquisition. In addition, the company also continues to follow the PLTU tender offered by PT PLN (Persero).

Arifin explained that the business line in the electricity sector is believed to be able to become one of the company's foundations in the future. With its coal reserves, PTB can develop many PLTUs up to approximately 5,000 megawatts (MW). "The development of PLTU is one of our expectations in the future. Frankly the future of PTBA in this plant, "he said.

PTBA will build a PLTU Sumsel 8 which has a capacity of 2 x 620 MW. The mine mouth power plant will be built in 2021. The power plant project has been strengthened by power purchase agreement (PAA) with PLN, although the timing of the process is slightly shifting.

Arifin is optimistic that the company can develop more power plants. The reason, the current government also continues to encourage the development of mine mouth power plant in various areas rich in black gold products.

Therefore, the company is following the tender in various locations. "We participate in the tender in Central Kalimantan, South Kalimantan, East Kalimantan. Currently, we are waiting for PLN's decision. "Director of business development PTB Fuad Iskandar Zulkarnain explains, for the expansion of the project that participated in the tender, the construction of power plants has not been reliable this year.

In addition to scheme, location, and technology issues, the construction of a power plant also requires buyer's certainty (offtaker). Therefore, the company is now continuing intensive talks with PLN.

He hopes through the synergy of SOEs, the company can get direct appointment for the construction of power plants. The reason is, with the new rules about mine mouth power plant, PLN may perform direct appointment.

The regulation, he added, also provides certainty about the tariff so that the mine mouth power plant project becomes bigger. As such, the rules provide certainty for project development as well as PTBA's business in general.

Corporate Finance Advirsory JP Morgan Sumedh Samant in his recently published research projects the electricity sector through the construction of the 2x620 MW Central Bank Mouth Power Plant, will only contribute as early as 2021 in line with the revision of PPA with PLN.

"Sekotr electrification will contribute about 20% to 25% of PTBA's revenue," he said. FUNDING To support these expansion plans, the company estimates that new bonds will be issued in 2018 and 2019. This year, the projection is projected to be bigger in line with the company's expansion plan.

On the other hand, Sumedh estimates that PTBA's cash this year will increase by US $ 5 per ton to US $ 13 per ton. In his research published last month, he expects PTBA's earnings and net profit this year to be bolted.

BCA Securities analyst Aditya Eka Perkasa said PTBA is able to reduce mining contracting cost in 2016 from US $ 2.2 per bank cubic meter (bcm) to US $ 1.7 bcm. Thus, last year the company was able to save costs worth Rp600 billion. Therefore, he expects low production costs to continue this year and will boost net income growth by 41%.

Aditya also assesses that the company's coal production increase this year can be achieved with the help of double track coal transportation system from Tanjung Enim, South Sumatra to Prabumulih.

The company, he said, has now been reinforced Tarahan port which operates since mid-2014. In addition, PTBA is also eyeing power projects by following four tenders in Bangka and Kalimantan with a total capacity of 800 MW. (Lukas Hendra - Bisnis Indonesia, Wednesday, May 3, 2017)