Despite depressed coal industry conditions, Indonesian state-owned coal producer PT Tambang Batubara Bukit Asam (Persero) continues to seek growth through acquisitions and extra production. Along with increasing domestic needs, the company says demand in South East Asia as well as India, Japan and Taiwan will remain solid, as coal is far cheaper than other energy sources.

Bukit Asam president director Milawarma said that the company had opportunity for expansion because companies with highest costs would be forced to leave the industry, particularly smaller players with limited scope to improve profitability.

It showed its intentions in 2015 with the acquisition of two coal-related companies for US$36 million and a stake in Australian coal technology company Ignite Energy Resources for A$30 million.

Coal prices have been declining since 2011 and this has been exacerbated by China’s economic slowdown. Outlook for a recovery remains bleak while producers face increasing pressure from environmental groups opposed to coal production owing to its environmental impacts.

However, Bukit Asam, which sells more than half of its coal domestically, aims to produce 60 million tonnes annually by 2020, about three times more than current levels. The company’s finance director Achmad Sudarto said the target was realistic owing to the government’s plans to add 35,000 megawatts (MW) of electrical capacity by 2019.

He said Bukit Asam was doing due diligence on other acquisition targets within Indonesia and further afield, and aimed to buy majority stakes in them. The company’s major Indonesian operation was in the middle of South Sumatra and development was hindered by lack of infrastructure, which is “why we are looking at acquisitions outside Sumatra”.

A joint venture between Bukit Asam and a subsidiary of China’s state-owned China Huadian has kicked off construction of the 1240MW coal-fired Sumsel 8 power plant at Tanjung Enim, near Bukit Asam’s mine. The company plans to supply 5.4 million tonnes of coal annually to the plant, which will cost US$1.6 billion and is expected to begin operations by 2019.

The company is also planning a 3x600MW plant, Sumsel 9&10 in the region. This is expected to consume up to 8.1 million tonnes of coal per year, also from Bukit Asam’s mine.

Investment in a third new coal-fired plant in Peranap Riau, Sumatra, is estimated at US$2.4 billion. It is planned to generate 800-1200MW by 2020 and consume about 8.4 million tonnes annually.

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