Coal prices to drop in Q3, says Indika Energy

JAKARTA. Indonesia’s third largest coal producer PT Indika Energy (INDY) expects coal prices to drop by 11 percent on average in the third quarter of this year in line with declining commodity prices as global demand weakens.

“At first, we targeted an average selling price of US$71 per ton. It turns out that in the first quarter we sold coal at $75 per ton. Looking at weakening commodity prices, we estimated this year’s coal price would decrease to $67 or $68 per ton,” said president director M. Arsjad Rasjid during Indika’s public expose in Jakarta.

Apart from weakening global demand, Indika vice president director Wishnu Wardhana attributed the price decrease to technological advancement in the energy sector in the US, in terms of gas consumption in particular.

“There has been technology innovations in the US where some companies have converted their power plants from coal-fired to gas-fired,” Wardhana explained.

Indika stepped up its performance in the first quarter of this year. The firm booked $162.20 million in revenue, up 87.8 percent compared to $86.38 million in the same quarter last year. Half of the revenue was yielded from PT Petrosea, a service provider, to oil and gas and mining industries.

Other subsidiaries under the company include coal producers PT Kideco Jaya Agung and PT Santan Batubara, energy service provider PT Tripatra, and energy infrastructure developer Mitrabahtera Segara Sejati, Cirebon Electronic Power and Petrosea Offshore Supply Base.

The remarkable performance allowed Indika to gain profits of up to 68.8 percent in the first three months this year to $50.29 million, from $29.80 million in 2010.

“This year we aim to produce 36.6 million tons of coal, comprising of 34 million tons from Kideco, 2.3 million tons from Santan and 300,000 tons from the newly acquired PT Multi Tambangjaya Utama (MTU),” he said, without disclosing a revenue target.

The company paid $136 million to acquire an 85 percent ownership in Central Kalimantan coal producer MTU, which carries financial liabilities worth $69 in the form of unpaid loans. Indika has also completed an acquisition worth $27 million for a 60 percent share in PT Mitra Energi Agung, based in East Kalimantan.

Currently, Indika’s coal production is supported by Kideco and Santan located in East Kalimantan, with 1.37 billion tons and 283.7 million tons of coal resources respectively.

Last year, Indika generated Rp 5.20 trillion ($551.2 million) in revenue, up by 38 percent from

Rp 3.76 trillion in 2010. The firm’s net profit increased by 43 percent to Rp. 1.11 trillion in 2011 from Rp 772 billion in the previous year.

Wardhana said that Indika had set aside $256.2 million in capital expenditures this year, about $71.5 million of which, or 27 percent, had been disbursed from January to March, mainly for heavy equipment procurement.

In the annual stakeholders meeting, Indika agreed to pay out dividends worth Rp 312.61 billion, or Rp 60 per share. The firm also accepted a letter of resignation from its commissioner M. Chatib Basri, after he was appointed by President Susilo Bambang Yudhoyono as chairman of the Investment Coordinating Board (BKPM) on Wednesday. (The Jakarta Post)