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Coaltrans Vietnam - 31 Oct 2014

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Neil Little

Vietnam's coal imports are projected to significantly increase to meet growing demand for coal-fired power generation. Indonesia is well-positioned to be a major supplier due to its large coal reserves and geographical proximity to Vietnam. While Indonesia has abundant coal resources, much of it is low-quality lignite that is fully committed to meet growing domestic demand. As Vietnam's demand for higher-quality coal increases, Indonesia's ability to meet demand will depend on developing more projects with bituminous and sub-bituminous coal.

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INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 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 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 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.
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 SOUTHEAST ASIA COAL IN THE ENERGY PICTURE Coal Flows - 2013 As of 2013, Vietnam remained a net exporter, but for how long? 2013 Net Exporter Net Importer 44 M t 13Mt 18 MT PHILIPPINES VIETNAM THAILAND 23 MT 21 MT 12 MT INDONESIA 419 MT 375 Mt Exports outside ASEANAustralia to ASEAN: 9 Mt Exports to ASEAN MYANMAR, LAOS, CAMBODIA 3 MT MALAYSIA Exportsto China Source: WoodMackenzie, 2014; China Coal Resources, 2014; Salva, 2014; Adaro Research
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Vietnam Energy Mix The Mix in 2013 Growth by Fuel (compared to 2009) Coal : 2.9 GW Hydro : 6.7 GW Natural Gas : 0.1 GW Renewable : 0 GW Oil : -0.4 GW Total Growth : 9.4 GW (56%) Source: WoodMackenzie, Coal Market Service, 2014
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Vietnam Supply and Demand Growth History VIETNAM Increased coal fired generation resulted in domestic demand growth of 7 million tonnes since 2009, due to new coal fired power plants in northern Vietnam. Consequently, by 2013, Vietnamese coal exports declined 26% compared to 2009. 2013 Source: McCloskey, 2014; WoodMackenzie, Coal Market Service, 2014
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Future Vietnam Energy Mix Source: WoodMackenzie, Coal Market Service, 2014 The Mix in 2030 Growth by Fuel (compared to 2013) Coal : 26.6 GW Natural Gas : 12.0 GW Hydro : 7.8 GW Renewable : 6.0 GW Nuclear : 2.0 GW Oil : 1.1 GW Total Growth : 65.7 GW (217%)
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Coal Imports Projection Total Vietnamese production will likely be flat over the next decade, thereafter declining year-on-year. By 2018 WoodMackenzie expects Vietnam will be a net- importer of coal. Adaro expects that Vietnamese imports will reach 50 and 80 million tonnes by 2020 and 2030, respectively. Based on future Vietnamese power projects, average imported coal CV is expected to range from 4500 GAR to 5000 GAR in 2020 -2030. Source: WoodMackenzie, Coal Market Service, 2014; Adaro Research
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Vietnam Coal Supply and Demand Growth History Source: McCloskey, 2014; WoodMackenzie, Coal Market Service, 2014 VIETNAM ? 2030 Vietnamese coal fired generation is expected to increase by 15x that of 2009. Vietnam coal demand is expected to increase by 6% CAGR. Exports are expected to drop significantly in the next 10 years. Despite Vietnam limiting future exports domestic supply will not meet future demand. CAGR=6.4%
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Indonesias Geographical Advantage 3days 10 days South Kalimantan Australia 13days Russia South Africa 17 days Australian and South African coals need to be transported much further than Indonesian coal in order to reach southern Vietnam. This logistics disadvantage will remain crucial in the future, making coal imports from those origins arbitrage based. Indonesia, on the other hand, will remain as a base supplier in spite of price movements. Southern Vietnam Source: AXS Marine, 2014
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Logistics Cost Forecast Source: WoodMackenzie, Coal Market Service, 2014; AXS Marine, 2014 Freight remains a key competitive advantage for Indonesian coals compared to other exporting countries. FOB cost of Indonesian coal is expected to grow at a slower rate than other major coal exporters in the next 20 years. The logistics advantage, coupled with low FOB cost, consolidates Indonesias position as the most competitive coal producing region to supply Vietnam in the next two decades.
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY Southeast Asian Coal Reserves Source: BP, 2014; Indonesian Geological Agency, Ministry of Energy and Mineral Resources, 2013; WoodMackenzie, 2014; World Coal, 2014; Adaro Research 1.2 BT 1.0 BT PHILIPPINES VIETNAM THAILAND Southeast Asia Coal Reserves* as per 2013 (in Billion Tonnes) * Anthracite, Bituminous, Sub-bituminous, and Lignite INDONESIA Within the ASEAN region, Indonesia has been endowed with plentiful coal reserves. Other ASEAN countries have a much smaller reserve base. The region also has gas and oil resources as well as access to renewables 31.4 BT 0.3 BT 0.4 BT MALAYSIA
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY Indonesia Coal Reserves as of 2013 1 2 3 4 Source: Indonesian Geological Agency, Ministry of Energy and Mineral Resources, 2013; ICMA, 2013 Indonesia has a large resource coal base, in close proximity to the coast. However, most of the reserves are low-CV coals. (in Billion Tonnes) Total Total Reserves 31.4 Low Rank 12.0 Sub-Bituminous 17.5 Bituminous 2.5
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY High Availability of Lignite Source: WoodMackenzie, Coal Supply Service, 2014; Adaro Research
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES China and India Coal Supply China India Chinese domestic production is expected to slow after reaching 4 billion tonnes, while domestic coal demand is estimated to grow at CAGR : 3% (base : 2013) by 2030. China to remain as net importer in the next 20 years. Indian domestic production to reach > 1 billion tonnes by 2030, increasing more than 600 million tonnes from 2013. However, domestic supply is not expected to cope with demand growth. Indias energy shortage to raise imports. Coal Demand - Imports Coal Demand - Domestic Source: WoodMackenzie, Coal Market Service, 2014
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES Other Southeast Asian Countries Coal Supply Additional capacity developments are expected in Myanmar, Thailand, Malaysia, Philippines and Cambodia Expected growth of coal-fired power from these countries is around 88 GW by 2030 compared to 2013 Thailand Philippines Source: WoodMackenzie, Coal Market Service, 2014; Salva, 2014; Adaro Research Myanmar and Cambodia Imports Domestic Malaysia (in Million Tonnes) Indonesia Southeast Asia (excluding Vietnam)
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY Projection of Indonesian Coal Availability Expected Increase of Indonesian Domestic Coal Demand by 2020 Source: WoodMackenzie, Coal Supply Service, 2014; Adaro Research Over the next 10 years Indonesian domestic demand to grow by approximately 64 million tonnes, only for PLNs Crash Program. Its expected that the majority of new bituminous and sub- bituminous coal project developed in Indonesia will be consumed domestically. Based on current reserve base the majority of likely, probable and possible projects will be low rank coal : < 4500 GAR Average Indonesian export Calorific Value to decline due to increasing amount of low-rank supply Current Coal Production Rate: Domestic + Export Expected Increase of Indonesian Domestic Coal Demand by 2030
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
Adaro Energy Mining Assets 21 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* 33 44 55 66 11 33 44 66 BEP: 10.22% stake with option to acquire 90% East Kalimantan sub-bituminous Resources 7.9 Bt 55 Balangan: South Kalimantan sub-bituminous Resources 172 Mt 22 22 11 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 AEs equity ownership
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 OUR MODEL INTRODUCTION TO ADARO Focus on Four Product Ranges COAL SPECIFICATIONS Basis Unit TUTUPAN WARA BALANGAN MIP Typical Typical Typical Typical Calorific Value GAR kcal/kg 4,900 5,050 4,000 4,400 4,300 Total Moisture ARB % 26 - 28 40 32.5 34 Ash ARB % 2.5 3.0 3 2.5 6 - 7 Sulphur ARB % 0.1 0.15 0.2 0.09 0.48 Volatile Matter ADB % 42 - 43 41 34 37 HGI - - 46 47 61 42 - 44 NA Ash Fusion Temperature (reducing atmosphere) Initial deformation deg. C 0 C 1,140 - 1,150 1,150 1,100 NA
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 CONCLUSIONS 1) Increased demand in coal fired power generation, as a percentage of the total Vietnamese fuel mix, will consume growing amounts of domestic production, consequently reducing Vietnamese coal exports. 2) Due to proximity, reserves and cost of production, Indonesia remains the most competitive fuel supplier to meet Vietnamese demand growth. 3) Indonesian demand to consume much of the higher-rank domestic bituminous and sub-bituminous coals : leaving low-rank lignite for export. 4) Vietnamese growth in the ASEAN region will compete for coal supply with Thailand, Philippines and Malaysia. 5) Adaro is well position to bring on new coal developments suitable for consumption in super critical and ultra-super critical designed power plants.

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Coaltrans Vietnam - 31 Oct 2014

  • 1. INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014
  • 2. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 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 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 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.
  • 3. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
  • 4. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 SOUTHEAST ASIA COAL IN THE ENERGY PICTURE Coal Flows - 2013 As of 2013, Vietnam remained a net exporter, but for how long? 2013 Net Exporter Net Importer 44 M t 13Mt 18 MT PHILIPPINES VIETNAM THAILAND 23 MT 21 MT 12 MT INDONESIA 419 MT 375 Mt Exports outside ASEANAustralia to ASEAN: 9 Mt Exports to ASEAN MYANMAR, LAOS, CAMBODIA 3 MT MALAYSIA Exportsto China Source: WoodMackenzie, 2014; China Coal Resources, 2014; Salva, 2014; Adaro Research
  • 5. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Vietnam Energy Mix The Mix in 2013 Growth by Fuel (compared to 2009) Coal : 2.9 GW Hydro : 6.7 GW Natural Gas : 0.1 GW Renewable : 0 GW Oil : -0.4 GW Total Growth : 9.4 GW (56%) Source: WoodMackenzie, Coal Market Service, 2014
  • 6. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Vietnam Supply and Demand Growth History VIETNAM Increased coal fired generation resulted in domestic demand growth of 7 million tonnes since 2009, due to new coal fired power plants in northern Vietnam. Consequently, by 2013, Vietnamese coal exports declined 26% compared to 2009. 2013 Source: McCloskey, 2014; WoodMackenzie, Coal Market Service, 2014
  • 7. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Future Vietnam Energy Mix Source: WoodMackenzie, Coal Market Service, 2014 The Mix in 2030 Growth by Fuel (compared to 2013) Coal : 26.6 GW Natural Gas : 12.0 GW Hydro : 7.8 GW Renewable : 6.0 GW Nuclear : 2.0 GW Oil : 1.1 GW Total Growth : 65.7 GW (217%)
  • 8. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Coal Imports Projection Total Vietnamese production will likely be flat over the next decade, thereafter declining year-on-year. By 2018 WoodMackenzie expects Vietnam will be a net- importer of coal. Adaro expects that Vietnamese imports will reach 50 and 80 million tonnes by 2020 and 2030, respectively. Based on future Vietnamese power projects, average imported coal CV is expected to range from 4500 GAR to 5000 GAR in 2020 -2030. Source: WoodMackenzie, Coal Market Service, 2014; Adaro Research
  • 9. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Vietnam Coal Supply and Demand Growth History Source: McCloskey, 2014; WoodMackenzie, Coal Market Service, 2014 VIETNAM ? 2030 Vietnamese coal fired generation is expected to increase by 15x that of 2009. Vietnam coal demand is expected to increase by 6% CAGR. Exports are expected to drop significantly in the next 10 years. Despite Vietnam limiting future exports domestic supply will not meet future demand. CAGR=6.4%
  • 10. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Indonesias Geographical Advantage 3days 10 days South Kalimantan Australia 13days Russia South Africa 17 days Australian and South African coals need to be transported much further than Indonesian coal in order to reach southern Vietnam. This logistics disadvantage will remain crucial in the future, making coal imports from those origins arbitrage based. Indonesia, on the other hand, will remain as a base supplier in spite of price movements. Southern Vietnam Source: AXS Marine, 2014
  • 11. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 VIETNAM IMPORTS: HISTORY AND PROJECTIONS Logistics Cost Forecast Source: WoodMackenzie, Coal Market Service, 2014; AXS Marine, 2014 Freight remains a key competitive advantage for Indonesian coals compared to other exporting countries. FOB cost of Indonesian coal is expected to grow at a slower rate than other major coal exporters in the next 20 years. The logistics advantage, coupled with low FOB cost, consolidates Indonesias position as the most competitive coal producing region to supply Vietnam in the next two decades.
  • 12. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
  • 13. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY Southeast Asian Coal Reserves Source: BP, 2014; Indonesian Geological Agency, Ministry of Energy and Mineral Resources, 2013; WoodMackenzie, 2014; World Coal, 2014; Adaro Research 1.2 BT 1.0 BT PHILIPPINES VIETNAM THAILAND Southeast Asia Coal Reserves* as per 2013 (in Billion Tonnes) * Anthracite, Bituminous, Sub-bituminous, and Lignite INDONESIA Within the ASEAN region, Indonesia has been endowed with plentiful coal reserves. Other ASEAN countries have a much smaller reserve base. The region also has gas and oil resources as well as access to renewables 31.4 BT 0.3 BT 0.4 BT MALAYSIA
  • 14. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY Indonesia Coal Reserves as of 2013 1 2 3 4 Source: Indonesian Geological Agency, Ministry of Energy and Mineral Resources, 2013; ICMA, 2013 Indonesia has a large resource coal base, in close proximity to the coast. However, most of the reserves are low-CV coals. (in Billion Tonnes) Total Total Reserves 31.4 Low Rank 12.0 Sub-Bituminous 17.5 Bituminous 2.5
  • 15. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY High Availability of Lignite Source: WoodMackenzie, Coal Supply Service, 2014; Adaro Research
  • 16. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
  • 17. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES China and India Coal Supply China India Chinese domestic production is expected to slow after reaching 4 billion tonnes, while domestic coal demand is estimated to grow at CAGR : 3% (base : 2013) by 2030. China to remain as net importer in the next 20 years. Indian domestic production to reach > 1 billion tonnes by 2030, increasing more than 600 million tonnes from 2013. However, domestic supply is not expected to cope with demand growth. Indias energy shortage to raise imports. Coal Demand - Imports Coal Demand - Domestic Source: WoodMackenzie, Coal Market Service, 2014
  • 18. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES Other Southeast Asian Countries Coal Supply Additional capacity developments are expected in Myanmar, Thailand, Malaysia, Philippines and Cambodia Expected growth of coal-fired power from these countries is around 88 GW by 2030 compared to 2013 Thailand Philippines Source: WoodMackenzie, Coal Market Service, 2014; Salva, 2014; Adaro Research Myanmar and Cambodia Imports Domestic Malaysia (in Million Tonnes) Indonesia Southeast Asia (excluding Vietnam)
  • 19. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 PROJECTION FOR COAL SUPPLY Projection of Indonesian Coal Availability Expected Increase of Indonesian Domestic Coal Demand by 2020 Source: WoodMackenzie, Coal Supply Service, 2014; Adaro Research Over the next 10 years Indonesian domestic demand to grow by approximately 64 million tonnes, only for PLNs Crash Program. Its expected that the majority of new bituminous and sub- bituminous coal project developed in Indonesia will be consumed domestically. Based on current reserve base the majority of likely, probable and possible projects will be low rank coal : < 4500 GAR Average Indonesian export Calorific Value to decline due to increasing amount of low-rank supply Current Coal Production Rate: Domestic + Export Expected Increase of Indonesian Domestic Coal Demand by 2030
  • 20. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
  • 21. Adaro Energy Mining Assets 21 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* 33 44 55 66 11 33 44 66 BEP: 10.22% stake with option to acquire 90% East Kalimantan sub-bituminous Resources 7.9 Bt 55 Balangan: South Kalimantan sub-bituminous Resources 172 Mt 22 22 11 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 AEs equity ownership
  • 22. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 OUR MODEL INTRODUCTION TO ADARO Focus on Four Product Ranges COAL SPECIFICATIONS Basis Unit TUTUPAN WARA BALANGAN MIP Typical Typical Typical Typical Calorific Value GAR kcal/kg 4,900 5,050 4,000 4,400 4,300 Total Moisture ARB % 26 - 28 40 32.5 34 Ash ARB % 2.5 3.0 3 2.5 6 - 7 Sulphur ARB % 0.1 0.15 0.2 0.09 0.48 Volatile Matter ADB % 42 - 43 41 34 37 HGI - - 46 47 61 42 - 44 NA Ash Fusion Temperature (reducing atmosphere) Initial deformation deg. C 0 C 1,140 - 1,150 1,150 1,100 NA
  • 23. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 INDONESIA: MEETING VIETNAMS FUTURE COAL REQUIREMENTS Presentation Outline VIETNAM IMPORTS: HISTORY AND PROJECTIONS SOUTHEAST ASIAN COAL FLOWS - 2013 ENERGY MIX SUPPLY AND DEMAND GROWTH HISTORY IMPORTS PROJECTION INDONESIAS GEOGRAPHICAL ADVANTAGE LOGISTICS COST FORECAST PROJECTION FOR COAL SUPPLY SOUTHEAST ASIAN COAL RESERVES INDONESIAN COAL RESERVES AS OF 2013 HIGH AVAILABILITY OF LIGNITE SUPPLY AND DEMAND IN EMERGING ASIAN COUNTRIES CHINA, INDIA, AND SOUTHEAST ASIA INDONESIAN COAL SUPPLY AND QUALITY INTRODUCTION TO ADARO CONCLUSIONS
  • 24. 3rd Annual Emerging Asian Coal Markets, Vietnam 5 6 November 2014 CONCLUSIONS 1) Increased demand in coal fired power generation, as a percentage of the total Vietnamese fuel mix, will consume growing amounts of domestic production, consequently reducing Vietnamese coal exports. 2) Due to proximity, reserves and cost of production, Indonesia remains the most competitive fuel supplier to meet Vietnamese demand growth. 3) Indonesian demand to consume much of the higher-rank domestic bituminous and sub-bituminous coals : leaving low-rank lignite for export. 4) Vietnamese growth in the ASEAN region will compete for coal supply with Thailand, Philippines and Malaysia. 5) Adaro is well position to bring on new coal developments suitable for consumption in super critical and ultra-super critical designed power plants.