Indonesia: Bukit Asam readies $500m for power plant push

Indonesia: Bukit Asam readies $500m for power plant push

STATE-OWNED coal miner Bukit Asam plans to allocate $500 million in capital
expenditure and issue global bonds worth up to $2.5 billion in 2017
following its plan to develop power plants with a total capacity of 5,000
megawatts (MW) in the near future.

Struggling with nosediving coal prices over the past years, the company has
found a lifeline from the electricity sector, taking opportunities from the
government's ambitious 35,000 MW electricity procurement programme, which
will run until 2019.

At present, Bukit Asam operates three power plants in South Sumatra with a
total capacity of 266 MW. It also has several other power plant projects in
the pipeline, which will generate a total capacity of around 5,000 MW.

Those projects include the Bangko Tengah (Sumsel 8) facility in South
Sumatra with a capacity of 2 x 620 MW, the Peranap facility in Riau with a
1,200 MW capacity, and a joint power plant project with state-owned
aluminium producer Indonesia Asahan Aluminium (Inalum) that is designed to
produce 2 x 350 MW in electricity in Kuala Tanjung, North Sumatra.

"If we want to complete those projects on schedule, we will need an equity
boost," Bukit Asam finance director Achmad Sudarto said last Thursday.

"So, this year [2017] we might issue global bonds with an estimated value of
$2.5 billion. We also plan to allocate $500 million in capital expenditure
[for the projects]."

The allocated capital expenditure for this year will mark a significant
annual jump of 82.6 per cent compared with the 3.68 trillion rupiah ($273.8
million) allocated for 2016.

In line with those power plant development projects, Achmad, who also serves
as Bukit Asam acting president director, said the company aimed to increase
its coal production by 20 per cent to 30 million tonnes in 2017 following a
recent surge in global coal prices.

A surprise change in Chinese government policy has led the country to lower
its domestic production, which has encouraged a fuel price rise. Therefore,
coal exports to China have also surged, boosting global coal prices to more
than $100 per tonne in October, before stabilising at around $85 per tonne
recently.

Recapital Securities analyst Kiswoyo Adi Joe praised Bukit Asam's decision
to penetrate deeper into power plant sector, as the company could guarantee
the coal supply for the facilities in the long term.

"It's going to be difficult for them to rely only on the coal sales per se,
especially considering the high volatility of the commodity," Kiswoyo said.

Bukit Asam owns almost 8 billion tonnes of coal deposits, around 40 per cent
of which are mineable.

Kiswoyo said the company had also made the right move by expanding its power
plant business to neighbouring countries in the back of high demand for
electricity in the region.

Bukit Asam is in the middle of negotiations with the government of Myanmar
to build a 2 x 100 MW power plant in the country.

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com