Building a Bigger and Better Adaro Energy Standard Chartered Earth's Resources

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1 Building a Bigger and Better Adaro Energy Standard Chartered Earth's Resources Conference in Hong Kong June 20 21, 2012

2 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. 1

3 Recent Developments HIGHLIGHTS For first quarter, 2012, our net income increased 11.8% to US$122 million. EBITDA increased 21.3% to US$319 million and we maintained a robust EBITDA margin of 34.8%. For 1Q 2012, we increased coal production volume 3.4% year over year to million tonnes and increased sales volume 3.1% to million tonnes. Overburden removal climbed 6.5% to Mbcm. We are on-track to reach guidance of 50 to 53 Mt of production in We continue to progress on the development of MIP with work on mine planning, construction of the site facilities, installment of the coal crusher and building access and haul roads. MIP s JORC compliant statement of Reserves is 273 million tonnes with a heat value of 4,281kcal/kg (GAR). Production is expected to begin this year. IndoMet Coal with BHP Billiton: A phased approach to development is planned, commencing in early 2012, with construction of a road and associated infrastructure in support of future mine development. Adaro Power was selected as the sole qualified bidder for a 2x100 MW power project in South Kalimantan. 2

4 Adaro Energy s 1Q 2012 Operational and Financial Highlights OPERATIONAL 1Q Q 2011 % Change Production (Mt) % Sales (Mt) % OB removal (Mbcm) % FINANCIAL (US$ millions, unless otherwise indicated) 1Q Q 2011 % Change Net revenue % Cost of revenue (618) (507) 21.9% Operating Income % Net income % EBITDA % EBITDA margin 34.8% 34.7% 0.1% Interest bearing debt 2,075 1, % Cash and cash equivalents % Net debt 1, % Net debt to equity (x) Net debt to last twelve months EBITDA (x) Free cash flow (EBITDA - capex) % Cash from operations to capex (x) Earnings per share (EPS) in US$ % 3

5 Agenda Adaro s Strategy Corporate Information Industry Outlook 4

6 Strategy Creating Maximum, Sustainable Value Strategy Action Plan Organic growth from current reserve base Production ramp up and mine planning Majority of organic growth will come from Wara mine Focus on improving efficiency of coal supply chain and cost contol Implementation of OPCC, Minemouth Power Plant and control of barge cycle time Chip sealing of hauling road, dredging of channel etc have been initiatives in past that brought down costs substantially Increase reserves, diversify products, locations and licenses Acquistion of mines at different locations in Kalimantan and Sumatra islands Acquired concessions in South Sumatera. Partnering with BHP on coking coal Continue to deepen integration PIT Investment into IPPs PORT First Indonesian company to participate in IPPs in a significant way. Partnering with reputable global players in IPP sector POWER China will remain a highly coal dependent economy for next two decades, even if current nuclear, gas and renewable targets are met. 5 - Gavekal Report, March 2011

7 Strategy Organic Growth Units 2012 Guidance 2011 Actual 2010 Actual Production volume Mt E 5000 Tutupan Mt E 5000 Paringin Mt E 4000 Wara Mt Strip ratio bcm/tonne

8 Strategy Improving efficiency and cost control Adaro has consistently initiated cost reduction projects over the years such as sealing the haul road, dredging the river channel, and using the Taboneo anchorage Project Reason Project Cost Overburden Crusher Conveyor (OPCC) Mine-mouth Power Plant 2 x 30MW Kelanis Increase Truck Size Transport 34 Mbcm of overburden annually Power operations in S. Kalimantan and our OPCC Expand our capacity to 70 Mt from 55 Mt Improve operating efficiency reduce pit congestion Spend through Q411 Completion Date US$212m US$94m Q US$160m US$110m Q US$55m US$20m Q NA NA Ongoing Engineering works for overburden conveyor Steam turbine generator building, boiler 1 & 2 7 Kelanis River Terminal

9 Strategy OPCC and Mine Mouth Power Plant OPCC (Overburden Crushing and Conveying) OPCC is to improve operational efficiency, reduce the use of diesel, lower overburden hauling costs via trucks, and allow overburden to be placed further distances from the mine. The first unit will be installed at the Tutupan pit with a capacity to crush and transport approximately 34 Mbcm of overburden annually. Expected to reduce hauling costs by US$ /bcm for the overburden handled by the system. Mine-mouth Power Plant Our 2 X 30MW mine-mouth power plant will power the OPCC. The plant will be fuelled by approximately 300,000 tonnes of E 4000 (Wara) coal per year. Mine-mouth Power Plant to replace 20MW of diesel-fired electricity consumed by the mine, reducing expense as much as US$20 million per year. Location of the OPCC 8 Electrical switchyard has been installed as a hub for electrical sources

10 Strategy Acquisition Increase reserves, diversify location, maturity of licenses and product type Acquisition IndoMet Coal (IMC) JV with BHP Mustika Indah Permai (MIP) Bukit Enim Energi (BEE) Servo Meda Sejahtera (SMS) Price/ Ownership US$335m 25% US$222.5m 75% US$67m 61% US$22m 35% Date Location Asset License / Expiry March 2010 August 2011 October 2011 October 2011 Central Kalimantan Greenfield - coking coal South Sumatra Greenfield - thermal coal South Sumatra Greenfield - thermal coal South Sumatra Logistics: Haul road and port CCoW NA IUP 2030 IUP 2031 Expected Operation TBA 2012 TBA NA 2012 Bhakti Energi Persada (BEP) US$66m 10.22% and option up to 90% May 2012 East Kalimantan Greenfield - thermal coal IUP NA

11 Strategy Bhakti Energi Persada Bhakti Energi Persada ( BEP ) is owned by two of Adaro s key shareholders; Persada Capital Investama and Triputra Investindo Arya. BEP has undeveloped, low grade (average 3,400 kcal/kg GAR) and large deposit (JORC certified coal resources of approximately 9 billion tonnes) located in East Kalimantan. There are 7 IUPs with license to mine for 30 years with potential ability to extend twice for 10 years each. A uniquely advantageous acquisition structure for AE where no upfront payment to the Majority shareholders is made. AE commits funds as mine development progresses Option 1 Option 2 Option (and not obligation) to provide Convertible Loan of up to US$500 million that can be converted into 51% equity over 3 years; The amount can be brought in as loan, and refunded if Option 2 exercised; The amount will be used for development of the mine, including infrastructure development Option to acquire the existing Majority shareholders (79.8%) of BEP by issuing 2,381.7 million shares in AE If Option 2 is exercised by AE; there is no need for Option 1 to be exercised and the amount lent by AE will be repaid Both the options are given to AE for free and these are only Options available to AE and not its Obligations.

12 Strategy South Sumatra MIP JORC Compliant Coal Resources and Reserves (Millions of ROM Tonnes) Total Total Mt Total Moisture % Ash % (GAR) Sulfur % (GAR) Calorific Value (kcal/kg) (GAR) Resources ,345 Reserves ,281 The key advantages of our investments in South Sumatra: Provides Adaro Energy entry into the South Sumatra coal industry. Coal qualities are relatively good. Projects are in close proximity to land transportation, in particular the SMS dedicated hauling road. 11

13 Strategy IndoMet Coal Project IndoMet Coal Project ( IMC ) is an unique opportunity for Adaro to partner with a world class mining company in BHP Billiton to develop a metallurgical and energy coal deposit in seven Coal Contracts of Work ( CCoWs ) located in Central Kalimantan. A phased approach to development is planned, commencing in early 2012, with construction of a road and associated infrastructure in support of future mine development. IMC has 774 Mt of JORC compliant coal resources in five out of seven of its CCoWs. BHP Billiton owns 75% of IMC. ATA, a wholly owned subsidiary of Adaro Energy, owns 25% of IMC. 12

14 Strategy Other Coal Acquisitions As part of our efforts to increase our reserves, Adaro Energy continues to look for potential acquisitions of coal deposits in Indonesia that play to our strength of developing in-land, greenfield coal deposits into operating mines. The four provinces of focus are South, Central, and East Kalimantan and South Sumatra. Our acquisition strategy is part of our plan to continuously grow and develop both organically and inorganically, creating maximum value from Indonesian coal. Indonesia s Coal Resources and Reserves Resources: Bt Reserves: Bt Resources: Bt Reserves: Bt Resources: Bt Reserves: Bt Source: Ministry of Energy and Mineral Resources 13

15 Group Operations and Coal Acquisitions 25% JV with BHP, IndoMet Coal project (Central Kalimantan Coking coal) Resources 774 million tonnes 10.2% stake in BEP (E. Kalimantan Sub-bituminous Coal) Adaro Indonesia (Existing, S. Kalimantan Sub-bituminous Coal) Resources 4.4 billion tonnes 75% stake in MIP (South Sumatra Sub-bituminous Coal) Resources 286 million tonnes 61.04% stake in BEE (South Sumatra Sub-bituminous Coal) Geological Study Phase 14

16 Adaro Indonesia KPC Cerrejon Kideco Arutmin Berau Anglo American New Vaal Indominco Abundant Resources and Scale Reserves and Resources Comparison 2011 Largest Producing Site Concession in Southern Hemisphere (Mt) ,782 7,290 Resources Reserves , ,904 1,990 1,140 1,008 1,650 1, Adaro Bumi PTBA Indika Bayan ITMG Top 5 Global Thermal Coal Exporters (Mt) Adaro Energy s Reserves and Resources Evolution Resources Reserves Xstrata Bumi Resources Anglo American E BHP Billiton Adaro Energy ,684 3,694 2, ,865 2,427 1, , In 2010 and 2011, includes contributed resources and reserves from acquired concessions Top 5 Domestic Supplier Market Share (2011) 19.4% 16.9% 12.6% 10.4% 7.5% Potential to increase resources through exploration of Wara and Paringin areas. Currently assessing potential extensions into West and North Tutupan 15 Adaro Indonesia Bukit Asam Kideco KPC Arutmin Source: Company Filings, Wood Mackenzie and Indonesia Coal Report

17 Strategy Downstream into Power Diversify and provide predictable revenue stream Bhimasena Power Indonesia Joint venture between Adaro (34%), J-Power (34%), Itochu (32%): IPP project for a 2 x 1000MW power plant in Central Java Project cost estimated at US$4 billion using ultra supercritical boiler technology Estimate the project will consume approximately 7 million tonnes of low-rank coal annually Plan for significant long dated financing through JBIC and commercial banks backed by an Indonesian government guarantee Signed 25-year Power Purchase agreement on October 6, 2011 with financial closure expected within one year Expected commercial operations 2016/2017 IPP Project South Kalimantan Joint venture between Adaro (65%) and Korea EWP (35%): IPP project for a 2 x 100MW power plant in South Kalimantan The consortium has been announced as the sole qualified bidder 16

18 Agenda Adaro s Strategy Corporate Information Industry Outlook 17

19 Simplified structure Creating Sustainable Value from Indonesian Coal PIT TO POWER INTEGRATION PT Adaro Energy Tbk Listed on IDX in July 2008 Adaro Energy FY11: Revenue: US$3,987million EBITDA: US$1,472million Alam Tri Abadi Adaro Logistics Adaro Marketing Adaro Mining Services Adaro Power 100% 25% 75% 61.04% 10.22% 100% 100% 51.20% 100% 85% 35% 100% Adaro Indonesia IndoMet Coal Project Mustika Indah Permai Bukit Enim Energi Bhakti Energi Persada 100% SIS Servo JPI MBP SDM IBT IMPT Meda CTI Sejahtera 100% MSW 34% Bhimasena Power 65% 2x100MW Project Kalsel Mining license holder - Thermal Coal Mining license holder - Coking Coal Mining license holder - Thermal Coal Mining license holder - Thermal Coal Mining license holder - Thermal Coal Mining and hauling contractor Conveyor System Barging and Ship loading Dredging Barito River mouth and water toll contractor Coal storage, blending, loading terminal and fuel facility Port Terminal Haul Road and Barge Loading Port Coal export marketing and trading Mine Mouth Power Plant IPP Adaro Energy has vertically integrated operations from Coal Mining to Power Generation 18

20 Balikpapan East Kalimantan Central Kalimantan Kelanis Barge River Terminal Tanjung PT Adaro Indonesia Banjarmasin South Kalimantan Taboneo Anchorage Domestic and Direct Barging South Pulau Laut Coal Terminal Coal and Fuel Storage Handling Port

21 PT Adaro Indonesia - Mining Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Wara Deposit Resources Measured (Mt) Indicated (Mt) Inferred (Mt) Total (Mt) Tutupan ,412 North Paringin Wara ,302 Wara Total 1,518 1,410 1,452 4,380 ROM Reserves Probable (Mt) Proven (Mt) Total (Mt) Tutupan Wara Total Based on the Independent Statement on the Coal Reserves and Resources by Terence Willsteed & Associates (TWA) as of 31 Dec 2010 reduced by the 2011 production volume Tutupan Deposit 20

22 9 Dedicated Coal Hauling Road Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Hauling Equipment Capacity: 60 million tonnes Hauling Road Capacity: 80 million tonnes Hauling Road Distance: 80 km Hauling Road Vehicles: 200 road trains Balikpapan Central Kalimantan East Kalimantan Kelanis Barge River Terminal Tanjung Banjarmasin South Kalimantan Taboneo Anchorage Domestic and Direct Barging South Pulau Laut Coal Terminal The hauling road is 100% owned by Adaro 21

23 Kelanis: One of the World s Largest Inland Bulk Terminals 9 Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Crushing Capacity: - 7 crushers with total capacity of 7,500 tph - Annual capacity of 55 Mt Stockpiling Capacity: 2 stockpiles with capacity of 250,000t Barge Loading Capacity: 2 load out conveyor systems each rated at 5,000 tph Balikpapan Central Kalimantan East Kalimantan Kelanis Barge River Terminal Tanjung Banjarmasin South Kalimantan Taboneo Anchorage Domestic and Direct Barging South Pulau Laut Coal Terminal Adaro is expanding the crushing, stockpiling and barge loading facilities at Kelanis from 55 Mt to 70 Mt 22

24 PT Maritim Barito Perkasa ( MBP ) Barging 9 Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Balikpapan East Kalimantan Central Kalimantan Kelanis Barge River Terminal Tanjung Banjarmasin South Kalimantan Taboneo Anchorage Domestic and Direct Barging South Pulau Laut Coal Terminal 23

25 PT Maritim Barito Perkasa ( MBP ) Ship Loading 9 Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port MBP s floating cranes Vessels with their own gear and grabs at the Taboneo anchorage Balikpapan [FY11: Total Coal Loaded: 13.6 Mt Central Kalimantan Kelanis Barge River Terminal Tanjung East Kalimantan - 7.5% increase compared to FY10 Banjarmasin - 99% of MBP s volume was Adaro s coal South Kalimantan Taboneo Anchorage 24 Domestic and Direct Barging South Pulau Laut Coal Terminal

26 PT Indonesia Bulk Terminal ( IBT ) Coal Terminal Services 9 Coal Reserves Coal Mining Coal Hauling Coal Crushing Coal Barging Coal Loading Coal Port Shell s fuel terminal recently constructed at IBT s facility Balikpapan East Kalimantan Central Kalimantan Kelanis Barge River Terminal Tanjung Banjarmasin South Kalimantan Taboneo Anchorage Domestic and Direct Barging South Pulau Laut Coal Terminal 25

27 Benefit from the Fully Integrated Operations of AE Strategy is centred on improving control and efficiency of the supply chain Kelanis Crushing Plant, 55 Mt Hauling Road 80 km, 80 Mt Strong control Medium control Controlling stake held by the Group PT Maritim Barito Perkasa Coal Barging, 250 km PT Adaro Indonesia Coal Concession Owner PT Sapta Indra Sejati Mining Contractors, 15 Mt PT Maritim Barito Perkasa Taboneo Shiploading Activities PT Sarana Daya Mandiri Dredging & Water Toll, 200 Mt Local customers PT Indonesia Bulk Terminal Coal Terminal 12 Mt 26

28 Value Creation at the Subsidiary Level Our very large scale means adding significant volume is more challenging than for smaller mines. As we grow, the vertical integration of our subsidiaries allows for better control of our coal supply chain and so we can continue to guarantee reliable supply for our customers. Provides information as to the various parts of each business, so we can better negotiate terms with third party providers and improve efficiency. We do not have to pay a profit margin to third party service providers. While we expect that each subsidiary s share of Adaro Indonesia s volumes will grow, each is kept in a competitive environment and will be rewarded with additional volumes only if their performance beats or exceeds that of the competition. Each subsidiary prioritizes Adaro s growth, but operates as a stand alone business and profit center. Where possible each subsidiary will expand third party revenue. When the time is right and if it will create value and further improve performance, we will publicly list the subsidiaries. 27

29 Operating Subsidiary SIS Highlights SIS started its commercial operation in April 2002 and is the 4 th largest contractor in Indonesia. SIS provides a broad range of coal mining services including exploration, drilling, transportation and logistical support, overburden removal and coal mining services. Increasing truck size from 100t to 200t reduces unit costs per bcm and per tonne by 14%. Accounted for 31% of Adaro s coal production and 32% of overburden removal in 2011 with a maximum target of 50% for future volumes. US$ millions Revenue EBITDA Debt Capex Coal Volume External % of Adaro s SIS FY % SIS FY % 28

30 Operating Subsidiary MBP Highlights An Indonesian barging and ship loading company that used to be one of Adaro s principal barging contractors and the largest of its three ship loading contractors. Following its purchase, Adaro is able to better control demurrage costs and more efficiently utilize its barges. The largest ship loading contractor and also the second largest barging contractor for Adaro. US$ millions Revenue EBITDA Debt Capex Coal Volume External % of Adaro s MBP FY % MBP FY % 29

31 Exceptional Access to Capital US$800 million 10 year, non call 5, Reg S/144A, Guaranteed Senior Notes Currently rated at Ba1 and BB+ US$400 million 7 year, concluded with 12 banks Undrawn $100M US$750 million 10 year bank loans club deals with key relationship banks Undrawn $600M Large group of relationship banks and bond holders continue to be very supportive of Adaro At end of March 2012, Adaro Energy had approximately $700 million undrawn facilities Key Lenders to the Group 30

32 Consistently Improving Financial Profile Superior Access to Bank Loan and Bond Markets Adaro has a track record of no default, rescheduling of debts nor breaching its financial covenants LBO: Jun 05 Dec 05 Mar 07 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Key Ratios 1) DSCR 0.79x Net Debt to EBITDA 5.27x DSCR 0.95x Net Debt to EBITDA 4.45x DSCR 1.59x (1) Net Debt to EBITDA 2.53x DSCR 1.93x (1) Net Debt to EBITDA 2.43x DSCR 4.97x (1) Net Debt to EBITDA 1.1x DSCR 2.9x (1) Net Debt to EBITDA 0.3x DSCR ~ 3.2x (1) Net Debt to EBITDA ~ 1.1x DSCR ~ 6.0x (1) Net Debt to EBITDA ~ 1.1x (1) Only for Adaro Indonesia, Indonesia Bulk Terminal, Coaltrade FCCR 10x FCCR ~8.6x FCCR ~13.2x Debt Maturity Profile in % 97% 100% 100% % 60% 24 45% 54% 49% 19 38% 60% % 21 40% 8% % % Bond USD Syndicated Loan Facility USD Senior Credit Facility (SIS) OCBC NISP Tbk Facility (SDM) Amortizing RCF Finance Leases New 10yr US$ Term Loan Cumulative % of Total Debt Note: Assumes new US$ 10-year committed RCF to be undrawn Adaro Energy's access to the credit markets has continuously improved over time. As such, the Group has been able to extend its debt maturity profile and achieve attractive IG type covenants and pricing 31

33 Strong Operational Performance Versus Domestic and International Peers Adaro Indonesia is a leading player across key operational and financial metrics and achieves one of the highest EBITDA margins despite lower CV and significant financial flexibility 2011E Production Volumes (million tonne) Cash Cost(US$/tonne) FOB Vessel Peabody BHP - thermal Anglo - thermal coal only coal only Bumi 47.7 Adaro Energy Xstrata - thermal coal only ITM 12.6 PTBA 20 0 Peabody Xstrata BHP Billiton ITM Bumi Anglo Adaro Energy PTBA Source: Company Filings, Indonesia Coal Report Source: Wood Mackenzie 2011E EBITDA* Margin 2011E EBITDA (US$/tonne)* 37% 35% 35% 33% 32% 28% 27% 26% Adaro Energy Bumi PTBA Xstrata - thermal coal only ITM Anglo - thermal coal only BHP - Peabody themal coal only Anglo - thermal coal only PTBA Bumi ITM Adaro Energy Xstrata - thermal BHP - thermal Peabody coal only coal only Source: Company Filings, Research Reports As at 2011E, except for Anglo, BHP and Xstrata as of 30 June 2011 *) EBITDA calculated based on Op. Profit + Depreciation + Amortization Source: Company Filings, Research Reports As at 2011E, except for Anglo, BHP and Xstrata as of 30 June 2011 *) Calculated as EBITDA/sales tonnage. For BHP, EBITDA/production volume 32

34 Adaro Energy Historical Cost Analysis Coal Cash Cost and Strip Ratio¹ (US$/tonne) A 2009A 2010A 2011A 2012F Strip Ratio Cash Cost Note: Cash cost includes mining cost, coal processing cost, freight and handling costs and marketing and G&A expenses 2008A 2009A 2010A 2011A While costs have increased due to higher strip ratios, overburden hauling distances and fuel prices, Adaro has maintained amongst the best profit margins throughout the industry EBITDA Margin (%) EBITDA (US$/tonne) Adaro Energy continues to deliver strong EBITDA and earnings with stringent cost control and operational efficiency 33

35 Adaro Energy: 2012 Guidance Production Volumes (mt) Consolidated Strip Ratio A 2009A 2010A 2011A 2012F 2008A 2009A 2010A 2011A 2012F Coal Cash Cost (US$/t) A 2009A 2010A 2011A 2012F EBITDA (US$b) Capex A 2009A 2010A 2011A 2012F 2008A 2009A 2010A 2011A 2012F 34

36 Diversified and Loyal Customer Base with Earnings Visibility Customer type by % volume (FY11) Geographical breakdown of customers (FY11) Others Cement Power Mostly sovereign backed power companies and more than 50% have relationship more than 10 years Exports to Asia Domestic sales Contracted tonnage (million tonne) Asia and the domestic market are Adaro s dominant sales destinations, with Europe and the Americas accounting for around 18% of sales in FY

37 CSR Commitment has been Recognised Two Platinum Category in Indonesian Corporate Social Responsibility Awards 2011 For free cataract eradication and clean water programs. Presented by Minister of Social Affairs of Republic of Indonesia. Indonesian Corporate Social Responsibility Award 2008 First rank for Social and second rank for Environment and third rank for Economic. Presented by Minister of Social Affairs of Republic of Indonesia. PROPER Green Award for the year 2006, 2008,2010 and 2011 Adaro Indonesia received the green level PROPER award for environmental rehabilitation excellence. The only Indonesian mining company to receive this award for fourth consecutive year. Presented by Minster of Environment of Republic of Indonesia. GKPM Awards in 2011 For Ensure Environmental Sustainability (Gold), Reduce Child Mortality (Gold) and Improve Maternal Health (Silver). Presented by Coordinating Minister for People s Welfare of Republic of Indonesia. Platts Top 250 Global Energy Awards in 2011 No 9 in Coal and Consumables Energy in Asia and No 12 in Coal and Consumable Energy Globally. Primaniyarta Award in 2010 and 2011 Best performing exporters from the Ministry of Trade. Presented by Indonesia s Vice President Boediono. Adaro received similar award in Aditama Gold Award in 2010 and 2011 For environmental excellence in the coal sector. Presented by Director General of Mineral Coal and Geothermal (ESDM) Social Empowerment Award in 2007 Presented by Coordinating Minister for People s Welfare of the Republic of Indonesia. One of the largest Taxpayers in 2008 and 2009 Presented by the Tax Office. 36

38 Safety and Environment During 4Q11, there were 6 Lost Time Injuries (LTI s) with a resultant Lost Time Injury Frequency Rate (LTIFR) of We strive to create a safe working environment for everyone to go home safe and healthy at the end each day. Initiatives include the implementation of Adaro Safety, Environment and Production (ASEP), which is aligned to ISO and OHSAS 18000, and conducting safety awareness meetings every quarter with the senior management of each contractor. FY11 FY10 Actual Plan Actual LTI LTIFR

39 Reputable Shareholders and Strong Corporate Governance Reputable and Supportive Shareholders Wide Recognition Across the Board Edwin Soeryadjaya Teddy Rachmat Boy Garibaldi Thohir Benny Subianto Sandiaga Uno together hold 63% Top Performing Listed Companies 2010 by Investor Magazine International Coal Producer of the Year by McCloskey Strong Corporate Governance Structure in Line with International Best Practices 1/3 of Board of Commissioners are independent commissioners Audit Committee consists of 3 independent members Conduct regular internal audit of operations Disclosure meets or exceeds with international standards 3rd Fastest Growing Company in Asia by Platts One of highest tax payers on Jakarta Stock Exchange in 2008 and 2009 PROPER Green Award for the 3rd consecutive time from Ministry of Environment Only coal company to ever receive the PROPER Green Award Best CEO in Mining 2010 by Ministry of Energy and Mineral Resources 38

40 Experienced Management Team with Proven Track Record Management Team with Proven Track Record Benefits from experience and active participation of key shareholders representatives High operating and safety standards Prudent financial policies Strong corporate governance and regulatory compliance More than 135 years of combined industry experience Combined 75 years with Adaro Energy Average 12 years with Adaro Energy Leadership continuity is key to successful execution of Adaro Energy s strategy and navigating through challenging times Production (Mt) Sales (US$ mm) PBT (US$ mm) % % 3, % 1, Net Debt/EBITDA Mine Life (Years) LTIFR 6.3x (83)% 11% (68)% 1.1x

41 Agenda Adaro s Strategy Corporate Information Industry Outlook 40

42 Robust Industry Fundamentals and Outlook Indonesia s Advantage in the Midst of Challenges in the Coal Mining Industry Potential challenges in the coal mining industry include government policies and regulations in most export markets such as: South Africa: Export quota to satisfy Eskom domestic requirement, labor issues, port access China: Government export quota Australia: Resource and carbon tax, labor issues, land issues Indonesia: DMO, land issues Infrastructure bottlenecks are expected to remain for some time in South Africa and Australia Unexpected extreme weather conditions could further impact supply in Indonesia and Australia Source: Wood Mackenzie 41

43 Robust Industry Fundamentals and Outlook Strong Demand for Low CV Coal Demand for Adaro Indonesia s Coal Specifications is Expected to Grow Strongly Million tonnes Asia is expected to make up 76% of total global sea-borne trade in 2021 and contribute 82% of the growth from 2010 to Demand, 5105 Kcal/kg Demand, 4029 Kcal/kg India and China are expected to contribute over 50% of the growth from 2010 to 2021 and together will take up to 33.5% of total global sea-borne demand, an increase from 23.6% in 2010 Source: Wood Mackenzie 42

44 Coal Key source of generating electricity in Target Markets China India Indonesia Domestic Coal Consumption for Electricity Generation (Million Tons) Coal is forecasted to continue to be the key source of electricity production in China and India. China, India and the domestic markets are the key Target Markets given the geographic proximity. Demand for coal in Indonesia is forecast to increase in the next decade at a CAGR of 12%. The coal required for power generation in China, India and Indonesia is sub-bituminous to low rank coal similar to the coal being produced by Adaro. Source: Wood Mackenzie 43

45 China s Production to Lag Demand Power consumption key driver for demand The China Electricity Council forecasts 2015 electricity consumption to climb to 6.4 trillion kwh per year, an increase of ~8.8% per annum from 2011 levels. By 2020, total capacity is expected to be 1,935GW, of which 1,170GW will be coal-fired. Chinese electricity consumption is set to continue to trend above GDP growth over the coming years. China is expected to continue to import thermal coal as power demand increases Supply and Demand Imbalance Generation by Fuel and Coal Imports Source: Wood Mackenzie 44

46 China and India continue to dominate increase in demand for coal for electricity generation Global Energy Demand by Fuel Global Electricity Output by Fuel Electricity Demand (Indexed to 2009) Coal is overtaking oil as the key contributor of Global Energy with the highest CAGR (except renewables, which are growing from a low base) Source: Wood Mackenzie 45

47 Electricity Consumption (Kwh/Capita) Robust Industry Fundamentals and Outlook Electricity Demand - India, Indonesia still have long way to catch up.. Potential Growth in Electricity Consumption Canada US Asia Indonesia Russia Korea Japan Asia France Germany China Thailand Brazil India WORLD GDP/Capita, at Current Price (US$) Source: IMF, International Energy Outlook 2010, Wood Mackenzie Despite being the largest consumer of coal, and having added significant power generating capacity in the past couple decades, China still lags in electricity consumption compared to South Korea and the European countries. In fact, the shortage of power has been growing in China as well as in India; Other highly populated and fast growing countries in Asia like India and Indonesia too have very lower electricity consumption/capita coupled with heavy power shortages; Indonesia, as the largest exporter of thermal coal, is geographically well positioned to serve the growing Asian demand for coal 46

48 Thank you 47