Market News Vol.

55

Content:
1. Noble or Maple?
2. Noble Group Appointed as the Exclusive Marketing Agent for PT Berau Coal 3. Bumi and Bukit Mutiara Deal 4. Adaro Estimates 40% Net Profit Drop 5. Bukit Asam Sees 2011 Capex of Up to 1.7 Trillion Rupiah 6. Indika Mitra to Sell 10 Percent of Indika Energy 7. Komipo Wants 400 KT of Sub Bituminuous Coal 8. Banpus Net Profit has Increased 249 Percent in 3Q 2010 Compared to the Same Period Last Year 9. Indonesia Shipped 8.73 % More Coal in October than a Month Earlier 10. Mercuria Energy Group Acquires Strategic Coal Consession in Indonesia 11. Borneo Pockets 2 Million Tons Coal Contract 12. Rothschild Buys Indonesian Coal Stakes for $3 Billion 13. Vallar PLC to Become BUMI PLC Post Deal

14. Buma Awarded US $ 200 Million Contract from Arutmin 15. Tuck Kwong Buys 1.46 Million Shares BYAN 16. Bakrie and Glencore Agreement on BUMI 17. Coal Production Predicted to Climb in Sunnier 2011 18. Analysis: Coal Sector: Value Emergence 19. India will Import 100 Million Tons of Coal by 2012 20. Indika Energy to Acquire Mitra Bahtera

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Noble or Maple? If you closely watch September's financial statement of PT Berau Coal Energy Tbk (BRAU) at page 70, parent company of PT Berau Coal, it was stated that Berau entered into a marketing services agreement with Maple Holdings Limited on December 30 2009.Under the agreement, Maple has agreed to act as the exclusive marketing agent of Berau for all coal sales except those coal products which Sojitz Corporation is entitled t market and sell to customers in Japan under terms of the Japan marketing agreement. The agreement shall become effective from December 30 2009 to December 30 19 and can be renewed for a further period of 10 years by mutual agreement. As compensation, Berau is required to pay Maple a 2% commission of the sales. Berau Coal Energy via a wholly owned subsidiary Seacoast Offshore Inc acquired 1 share in Maple Holding, a company engaged in coal sales service, a private limited company incorporated in Labuan, from Regulus International Pte Ltd at US$200 million. The question is who is truly exclusive marketing agent for Berau Coal? Is it Maple or Noble? If one of them, Berau Coal Energy should clarify who is the real marketing agent. If both are mandated as exclusive marketing agents, in which market should they sell coal from Berau Coal? (Insider Stories, November 2010) Noble Group Appointed as the Exclusive Marketing Agent for PT Berau Coal Noble Group Limited has recently been appointed as the exclusive marketing agent for PT. Berau Coal production exported to international destinations excluding Japan and Malaysia, said Noble's website. Noble's web site further said, PT. Berau Coal currently mines coal in East Kalimantan, and is

Indonesias fifth largest producer with targeted total production in 2014 of 30 million metric tonnes. The Noble marketing agreement extends for the life of the PT. Berau Coal assets, with Indonesian domestic sales by PT. Berau Coal (accounting for about 30% of total production) continuing to be marketed by PT. Berau Coal directly, and with export sales to Japan continuing to be handled by Sojitz Corporation (a 10% shareholder in PT. Berau Coal). Noble will co-ordinate the marketing of PT. Berau Coal product from its Singapore office and will immediately utilise its extensive global network of offices to market PT. Berau Coal production directly to the end consumer. Noble will be responsible for the contract management of all current and future export coal sales agreements (excluding Japan and Malaysia) and will be closely integrated with the PT. Berau Coal logistics team to provide a world class execution service. (www.coalspot.com, November 2010) Bumi and Bukit Mutiara Deal On the other hand, there was a loan agreement signed by PT Bumi Resources Tbk (BUMI) and PT Bukit Mutiara, controlling shareholder of Berau Coal Energy. As mentioned in June 2010's financial statement page 161, Bumi Resources entered into loan agreement with Bukit Mutiara on November 2 2009. Under the agreement, Bumi provided US$300 million loan facility to Bukit Mutiara in connection with a share sale and subscription agreement, which Bukit Mutiara was negotiating in relation to the acquisition of an indirect 90.0% interest in one of the largest coal producers in Indonesia (coal company target).The loan is unsecured and shall be repaid in full upon its maturity in 2015. The interest rate of the loan is 12% per annum and is payable every quarter.

Here is the quote from Bumi financial statement page 162: As one of the conditions precedent of Bumi advancing the aggregate principal amount of the loan, Bukit Mutiara has to procure that the coal target enters into an agreement with Bumi or its affiliate under which the coal company target will grant Bumi or its affiliate marketing rights over all its coal other than the coal it sells in certain countries under existing marketing arrangements. Any marketing arrangements which are eventually agreed between Bukit Mutiara and the coal company target would be conditional upon the successful completion of Bukit Mutiaras acquisition of the coal company target, and such marketing arrangements will be novated to the company or one of its affiliates thereafter. But, until now Bumi management hasn't explained and made a clear clarification regarding to the coal marketing agreement to the public. Does Bumi manage coal marketing agreement with Berau Coal via Maple? or via other affiliated SPV? Still, there is no answer. (Insider Stories, November 2010) Adaro Estimates 40% Net Profit Drop One of Indonesia's coal miners PT Adaro Energy Tbk projected its net income at the end of this year will drops 40% compared to the end of 2009. Director of Adaro Energy Andre J. Mamuaya said the heavy rainfall in the mining site is one of the reasons for the net income drop. The conditions make us have to lower the target. At least similar to the one that occurred in quarter III/2010 year on year [YOY], he said. Up to 2009, the listed coal mining company has booked a net income of Rp4.4 trillion with drop estimation around 40% while the corporate bottom line projected to be around Rp2.64 trillion.

Meanwhile, the net income of ADRO-coded company until the end of September 2010 has reached Rp1,6 trillion or decreased 52% compared to Rp3.5 trillion in same period last year. The drop of net income caused by weather factor so that the companys coal production only increased 12% to 31.84 million tons while its sales volume at 32.36 million tons. In addition, the strengthening rupiah up to September 2010 also influenced its revenues. The heavy rainfall made the consolidated operating revenue of the company up to quarter III/2010 dropped 9.7% to Rp18,07 trillion compared to Rp20,01 trillion in same period last year. Andre Mamuaya also added that the coal average prices are in range of US$56US$57 per metric ton. We are trying to restore the company performance by increasing the production volume next year, Andre said. Adaro plans to spend capital expenditure for next year as much as US$464 million and will be financed by the company internal cash. So far, Adaro total cash amounting to US$1.2 billion. The company will conduct a number of business expansions by entering electrical sector as eyeing the power plant project in Pemalang worth of US$106 million. The rest will be used to buy bulk carrier for coals. We will use the rest of the cash for coal acquisition. However, we will increase the number of mines, said Andre Mamuaya. (Insider Stories, November 2010) Bukit Asam Sees 2011 Capex of Up to 1.7 Trillion Rupiah State coal miner PT Bukit Asam (PTBA.JK: Quote) will spend 1.5 to 1.7 trillion rupiah ($191.1 million) in capital expenditure next

year, said President Director Sukrisno, adding most will be used for business expansion, including a planned coal freight port development. The company sees sales reaching 14million tonnes in 2010 and gradually increasing to 16.8 million tonnes next year (Bisnis Indonesia, November 2010) Indika Mitra to Sell 10 Percent of Indika Energy PT Indika Mitra Energy will sell a 10 percent stake or 570.71 million shares in PT Indika Energy (INDY.JK: Quote) at a price of 3.675 rupiah per share to strategic investors, in an effort to raise 1.91 trillion rupiah ($214.7 million), said Retina Rosabai, senior vice president investor relations. (Bisnis Indonesia, November 2010) Komipo Wants 400 KT of Sub Bituminuous Coal Korea Midland Power Co. Ltd. (KOMIPO) is looking for 400,000 MT of sub bituminous coal through International open bidding. The delivery of cargo should be within 7 months starting from January 1 2011. KOMIPO is asking bidders to offer either on CFR discharge port basis or FOB mother vessel basis. The calorific value of coal should not below 5600 kcal/kg on NAR basis for SP1 requirement and 4800 kcal/kg on NAR basis for SP2 requirement. The bidders are required to submit their competitive offer on or before 10:00 a.m. on November 18, 2010. (Korean Standard Time). For more details about the tender visit KOMIPO's web site (www.coalspot.com, November 2010) Banpus Net Profit has Increased 249 Percent in 3Q 2010 Compared to the Same Period Last Year

Banpu Public Company Limited (BANPU) reports its financial performance for the third quarter 2010, posting a net profit of THB 13,293 million, an increase of 249 percent from the same period last year as a result of gain from the divestment of its Indonesian subsidiary, according to Banpu's offical website. The website firther said, Mr. Chanin Vongkusolkit, Chief Executive Officer of Banpu said that a higher than two times increase of net profit in the third quarter compared to the same period last year was mainly due to a gain from the divestment of 8.72 percent shares in the Indonesian listed subsidiary, PT Indo Tambangraya Megah (ITM), accountable for 88 percent of the total net income. The core business performance in the third quarter, he said, was marginally lower than the same quarter last year. The Companys total sales revenue was THB 13,688 million, a decrease of THB 193 million or 1 percent compared to the same period last year. Coal sales revenue, accountable for 92 percent of total sales revenue, was THB 12,607 million while sales of power and steam from the three combined heat and power plants in China, representing 8 percent of total sales revenue, was THB 1,081 million. The Indonesian coal operations recorded a total coal sales volume of 5.05 million tonnes in the third quarter, weakened by 5 percent from the same period last year and 6 percent from the second quarter this year. This was due to the unseasonal rainfall in Kalimantan during the third quarter which affected production at Indominco and Trubaindo. Jorong mines production of this quarter was lower than its normal output since it was granted with forestry permit to resume the operation in August. Meanwhile, the Chinese coal business contributed an equity income of THB 130 million, declining substantially from THB 618 million or 79 percent from the same period last year and THB 1,492 million or 92 percent from the second quarter this year. This was a result

of the operational stoppage of Daning mine due to a delay of mining permit renewal which lowered its production to 0.54 million tonnes in the third quarter. With a flat diesel price at USD 0.71 per litre, gross profit margin of coal business, therefore, remained firm at 47 percent. The average coal selling price in this quarter, however, held up well at USD 87.18 per tonne, increasing 13 percent from the same period last year and 1 percent from the previous quarter as a result of the favorable market situation. As coal prices in the international market are favorable, we expect the average selling price for this year to be higher than that of last year at USD 71.7 per tonne. The coal sales volume target for this year will be a little bit lower than 23 million tonnes while total sales revenue is expected to be close to last year at around THB 58 billion added Mr. Chanin. The power business generated a sound performance in the third quarter when BLCP contributed a stable equity income of THB 1,128 (including foreign exchange gain of THB 311 million resulted from the appreciation of Thai Baht against US Dollar during the period.) The three combined heat and power plants in China continued to face with high coal price situation, resulting in a modest net profit profit of THB 24 million or 77 percent lower than the same period last year. Banpu Public Company is one of leading energy companies in Asia-Pacific. As of 30 September 2010, Banpus assets totaled THB 185,753 million, an increase of THB 84,336 million or 88 percent compared to those of 31 December 2009. The Company recorded total liabilities of THB 109,207 million, an increase of THB 63,742 million or 140 percent. Net Debt to Equity ratio as of 30 September 2010 was 0.24 times compared to 0.16 times as of 31 December 2009. The third quarters earning per share (EPS) was THB 48.92 a share, an increase of 248

percent when compared to THB 14.02 a share of the same period last year. (www.coalspot.com, November 2010) Indonesia Shipped 8.73 % More Coal in October than a Month Earlier Indonesia, the world largest coal exporter, shipped 23.55 mln mt of coal in October 2010, which is 8.73 percent more compared to September exports of 21.66 million tons. Exports to China Indonesia's coal exports to china have increased by 8 percent in October. China once again or as usual become the largest importer of Indonesian coal in October 10. China has imported 5.422 million tons of Indonesian coal, and china's September imports were 5.02 million tons. Chinese's utilities have imported more Indonesian coal than Indian Utilities since last year. India Imports India was the second largest importer of Indonesian coal in October. Indonesia has exported 4,289,843 MT of coal to India in October or 10.44 percent higher than its September exports. 41.23 percent of total Indonesian coal exports in October goes to China and India. Coal demand from India and China drastically increasing for Indonesian coal since two years back. NTPC India to import 12 mln ton India's State Trading Corp Ltd a public sector of Govt. of India is recently out for 12 million tones of imported coal for NTPC. According to one of the international major coal player, the major quantity for NTPC against recent tender may come from Indonesia. According to our sources in India, STC on behalf of NTPC has received five offers on 12 November from International coal traders. Adani Global Pte Singapore, Ghomez

General Trading, Dubai, Coastal Energy Private Limited, India, Knowledge Infra, India and Bhatia Intl have submitted their respective coal offers to STC to supply 12 mln tons of imported coal for the period of 12 months starting from January 2011. The entire process of awarding coal supply contract to successful bidder is expecting to complete within next ten to fifteen days. Indonesian producers are now offering higher price for Q1 2011 supplies said a buyer of Indonesian coal. 5200 GAR calorific value coal being offered around US$ 82/ MT for early next year supplies and other type of coal is being offered higher than current market price. Indonesian coal price reference which is declaring by government of Indonesia has increased 4.13 percent in November. Indonesian total coal export Around 95 percent of total exported Indonesian coal in October goes to China, India, South Korea Japan, Taiwan, Thailand, Malaysia Philippines, Italy and Hong Kong. Indonesia is expected to ship more coal in 2010 compared to its exports of around 230 million tons in 2009. Indonesia has already shipped around 209.371 million tons of coal during first 9 months of this year. One of the coal producer in Indonesia said, Indian & Chinese buyers are still dominating Indoensian coal market, the trend will continue as the demand from India & China is continuing high". Indian buyer are prefer to buy coal based on FOB Indonesia basis wheres majority of Chinese buyers are looking for CIF China basis. Coal Mine Investment More than two dozens of Indian companies have already Invested in coal mines in Indonesia to secure fuel supplies to their respective plants on the long term basis and around five to ten companies have already in operation stage.

Indonesian government is also strictly monitoring the contracted price between sellers and buyers of Indonesian coal to avoid price transferring. Indonesian suppliers were required by law to obtain governments approval prior to sign any term contract with their buyers. (www.coalspot.com, November 2010) Mercuria Energy Group Acquires Strategic Coal Consession in Indonesia Mercuria Energy Group Ltd. announces the acquisition of a coal concession in South East Kalimantan. The purchase of this brown fields operation represents a strategic investment by Mercuria to create an additional growth platform for its coal trading activities. The concession covers an area of 6000 hectares in SE Kalimantan, of which 2500 hectares are currently being exploited. First geological due diligence promises exceptional further development in terms of resources available but not yet extracted. "The acquisition of this existing facility continues the build out of Mercuria's international coal strategy. It will bring investment to the Indonesian and regional markets and further strengthen Mercuria's coal trading capability for its global client base," commented Paul Chivers, Mercuria Chief Investment officer. The concession is strategically equipped with a haul road and a barge loading facility. These amenities will ensure fast and efficient coal transportation in the region and abroad. Current plans are to develop this operation into a 2 million ton per annum exporter of its own good quality bituminous coal. Geoff Kelly, Mercuria, Global Head of Coal Assets added, "Mercuria Energy Group has again shown its commitment to invest and further develop its energy and coal strategy in Asia by successfully acquiring its first Indonesian coal facility. This investment will consolidate its

existing trading and logistics platform and strengthen its ability to create value." Mercuria is a privately-owned international group of companies active over a wide spectrum of global energy markets including crude oil and refined petroleum products, natural gas (including LNG), power, coal, biodiesel, vegetable oils and carbon emissions. It is one of the world's five largest independent energy traders and has a longstanding sector expertise (Reuters, November 2010) Borneo Pockets 2 Million Tons Coal Contract

Borneo has increased the IPO size to 4.42 billion new shares or 25% of its enlarge capital at Rp1,170 per share, enabling the company to grab Rp5.17 trillion. Post IPO, Borneo's controlling shareholder PT Republik Energi & Metal will own 75% stake in Borneo Energi and public shareholders hold 25% stake. Borneo intends to use 35% stake of the proceed or Rp1.75 trillion to jack up coal production and capital expenditure.About 50% of the proceed or Rp2.5 trillion will be used to refinance some or all debt facilities to creditors and 13% or Rp650 billion will be utilized to develop coal reserves and resources. (Insider Stories, November 2010)

Coking coal miner PT Asmin Koalindo Tuhup (AKT), wholly owned subsidiary of PT Borneo Lumbung Energi & Metal Tbk (BORN) has secured another 1 million coal sales supply from General Nice Group for 1 year. AKT has signed into agreement to supply coking coal to General Group on October 13 2010, 9 days after AKT signed 1 million coal sales supply from Zhonglian Resources Company for 1 year. The contract with General Group has been effective on October 1 2010. Assuming the coking coal price at US$200 per ton, AKT has secured US$400 million from the coal sales supply contracts Loan PT Borneo Mining Services (BMS), wholly owned subsidiary of Borneo Energi on November 8 2010 has also drawn Rp152.79 billion as part of loan facility provided by PT Bank CIMB Niaga Tbk. AKT also entered into revolving loan agreement worth US$50 million with First Gulf Bank PJSC, Singapore branch with annual interest rate of 6.25%.

Rothschild Buys Indonesian Coal Stakes for $3 Billion Bloomberg reported that, Nathaniel Rothschild, the only son of U.K. financier Jacob Rothschild, agreed to invest $3 billion in two Indonesian coal companies through Vallar Plc, allowing the nations biggest producer of the fuel to list in London. Bloomberg further reported, Vallar will buy 75 percent of PT Berau Coal Energy and 25 percent of PT Bakrie & Brothers PT Bumi Resources in a cash and stock transaction, the company said today in a statement. Bakrie Group will be the largest combined shareholder in Vallar -- to be renamed Bumi Plc -- and have the right to nominate the chairman, chief executive officer and chief financial officer. The reverse takeover, which gives control to the holders of the acquired company, will create an Indonesian resources champion, combining the nations largest coal producer, Bumi, and fifth-largest, Berau, according to Vallar. Rothschild, former co-president of New York hedge-fund firm Atticus Capital LLC, raised 707.2 million pound ($1.13 billion) in Vallars

initial public offering in London in July and had considered deals of as much as $5 billion. This acquisition should be well received by investors since this is a good price for high-quality coal assets, Liberum Capital analysts wrote in a report. A London-listed, large scale, pure play Indonesian coal play should offer a unique commodity exposure and have strong investment appeal. Bumi Plc will target coal output of 140 million metric tons a year and be the largest thermalcoal supplier to China, Rothschild said on a conference call. Mandatory Offer Vallar, whose London-traded shares were suspended today, plans to make a mandatory offer to Beraus minority shareholders and increase its ownership in Bumi in 2011, it said. Bakrie Group will hold 43 percent of Vallar stock after the deal. The planned London listing, the first for an Indonesian company, will enhance our international profile, provide a currency and platform for development in the region and put us in a much stronger position to build on the organic growth that our combined assets already provide, Indra Bakrie, proposed chairman of Jersey, Channel Islands-based Vallar, said in the statement.

The Jakarta-based company is a unit of Bakrie & Brothers, an investment company controlled by the family of billionaire and politician Aburizal Bakrie, Indonesias fourth-richest man, according to Forbes Asia. Sovereign wealth fund China Investment Corp. bought $1.9 billion of debt from Bumi in September 2009. Bumi shares reversed losses after todays announcement, rising 2 percent to 2,600 rupiah at 3:40 p.m. Jakarta time. The stock has climbed 7.2 percent this year, compared with a 44 percent gain in the benchmark Jakarta Composite Index. Berau, with a market value of 18.2 trillion rupiah, is 75 percent owned by PT Bukit Mutiara, a unit of PT Recapital Advisors. Bukit Mutiara will retain 15.3 percent after the sale, Berau said in a statement. Berau expects to produce 17.9 million tons of coal this year, rising to as much as 22 million tons by 2012, President Director Rosan Roeslani said Aug. 19. The Jakarta-based company raised $152 million selling shares in an August IPO. (Bloomberg, November 2010) Vallar PLC to Become BUMI PLC Post Deal The Jakarta Post reported that, The United Kingdoms Vallar Plc will change its name to Bumi Plc following a cash and stock transaction with two Indonesian coal giants, Bumi Resources and Berau Coal Energy, co-founder of the London stock exchange-listed firm has said. Nathaniel Rothschild told reporters in a teleconference on Tuesday that the transformation process from Vallar Plc to Bumi Plc would take five months and be complete by April 2011 at the latest. Rosan P. Roeslani, president director of Recapital, which owns Berau, said on Tuesday that the partnership would create a new entity named Bumi Plc, in which Bumi and Recapital

The remarkable deal is a win-win for shareholders, said Rothschild, who in April ranked seventh in the Sunday Times Rich List, an annual estimate of net worth of the 25 wealthiest U.K.-based hedge-fund managers. Bumi Production Indonesia is Asias biggest exporter of thermal coal, used in power stations. Bumi Resources, the countrys largest coal miner by volume with a market value of 54 trillion rupiah ($6 billion), produced 60 million tons and sold 58 million tons of the fuel last year.

will hold the controlling 60 percent stake. Nathaniel and Indra Bakrie will be chairmen at the new entity, while Ari Hudaya, the current chief executive officer of Bumi, will be the CEO of Bumi Plc, Rosan added. (Jakarta Post, November 2010) Buma Awarded US $ 200 Million Contract from Arutmin PT Delta Dunia Makmur Tbk (DOID), parent company of Indonesia's second largest coal mining contractor PT Bukit Makmur Mandiri Utama (BUMA), has sealed a 3-year contract worth US$200 million from coal miner PT Arutmin Indonesia. In a public statement submitted to the Indonesia Stock Exchange (IDX) today, BUMA has entered into an agreement of coal mining services with Arutmin on November 12 2010. Under the agreement, BUMA will act as coal mining contractor at Senakin Pit4-7 coal site, targeting 81 million bank cubic meter of overburden removal and 6.7 million tons of coal production. The new agreement is an extension of a previous 3-year contract with Arutmin signed in 2008. Based on Citi conferences material, Bukit Makmur currently manages 12 coal-mining contracts. Of the 12 contracts, two contracts with PT Bukit Baiduri Energy and PT Arutmin Indonesia will soon be maturing. The contract period with Baiduri Energy started from 2001 until 2010, while Delta Dunias contract with Arutmin began in 2008 and will end in 2011. Apart from that, two contracts with Bayan Groups Perkasa Inakakerta and Marunda Graha Mineral shall mature in 2012. BUMAs biggest earning contributor last year was Berau Coal, contributing 33%, followed by Adaro with 17% and Kideco Jaya Agung with 14%. Last year, Berau Coals coal production

reached 14.3 million tons, Arutmin Indonesia posted 19.3 million tons of coal, Adaro produced 40.6 million tons. Kideo Jaya Agung and Bayan Group recorded production of 24.7 and 12 million tons respectively. List of Bukit Makmur contracts: 1. Berau Coal-Lati: 1998-2018 2. Berau Coal-Binungan: 2003-2018 3. Berau Coal-Suaran Port: 2003-2018 4. Kideco: 2004-2019 5. Adaro: 2009-2013 6. Bayan-Gunung Bayan: 2007-2013 7. Bayan-Perkasa Inakakerta: 2007-2012 8. Maruda Graha Mineral: 2003-2012 9. Lanna Harita Indonesia: 2001-2013 10. Arutmin: 2008-2011 11. Bukit Baiduri Energy:2001-2010 12. Darma Henwa: 2010-2013.

(www.mitraismining.com, November 2010) Tuck Kwong Buys 1.46 Million Shares BYAN Dato Low Tuck Kwong, controling shareholder in coal miner PT Bayan Resources Tbk (BYAN), has made a purchase of 1.46 million shares at Rp12,264/share. In the public statement filed to Indonesia Stock Exchange (IDX) today, Tuck Kwong has spent Rp17.91 billion for the stocks purchase. He bought Bayan shares during the period of November 4 2010 to November 11 2010 with investment purpose. Post shares purchase, Tuck Kwong controls 51.66% stake in Bayan Resources. (Insider Stories, November 2010) Bakrie and Glencore Agreement on BUMI Parent company of Bakrie Group, PT Bakrie & Brothers Tbk (BNBR), today surges 5.77% to Rp55 per share, despite a prolonged 'sleep'.

This has made the stocks lagging from the massive advanced on Indonesia Composite Index. However, during a public expose at Investor Summit last week, Bakrie & Brothers, attended by completed board of directors, has signaled that the company would come with positive stories. Is it time to play Bakrie & Brothers? The company aims to pay Rp2 trillion debts by the end of this year. The problem is where is the money to pay the debts? According to Bakrie management, the company will use financing from non-core assets disposal and investments redemption. As of June 2010, Bakrie & Brothers recorded Rp9.55 trillion debts. Long term debts reached Rp7.79 trillion and short term debts were Rp1.76 trillion. The largest long term debt is medium term promissory notes worth Rp5,21 trillion as a result of restructuring with its creditors Piper Price Company Ltd. Tranche A notes amount Rp1.16 trillion and tranche B of Rp3.10 trillion. Tranche A notes, charged an annual interest rate of 15%, will mature on January 12 2012. Tranche B notes were restructured into three notes, A worth Rp31 billion, B worth Rp279 billion, and C worth Rp2.79 trillion with maturities in 2009, 2009, and January 2012. Bakrie & Brothers had paid the notes A and B. The source said Bakrie & Brothers has agreed with notes holders to pay Rp1 trillion debts. "When the stock market keeps bullish, Bakrie & Brothers is estimated to settle up to Rp5.2 trillion medium term notes," the source said Glencore swap agreement Bakrie & Brothers managed short term investments worth Rp1.19 trillion at Asean Agricultural Fund of Rp640.62 billion and Rp556.11 billion at Recapital Asset Management. Bakrie has recorded Rp11.45 billion banks deposit.

But, don't forget, Bakrie & Brothers has managed a shares swap transaction agreement worth US$200 million with one of the global largest commodities player Glencore International AG. The agreement, signed on June 26 2010, has made Glencore to be one of shareholders at Indonesia's largest thermal coal miner PT Bumi Resources Tbk (BUMI). The latest data shows that Glencore holds 4.98% stake or 968 million shares in Bumi Resources (before non-preemptive rights) Based on Bakrie & Brothers's June financial report, under the swap agreement, Bakrie has rights to buyback Bumi shares from Glencore within 2 years. The source said Glencore had purchased Bumi shares at the average price of Rp1,840/share, a 37.23% discount from Bumi current price at Rp2,525/share, via local brokerage Sinarmas Sekuritas. When Bakrie & Brothers calls the rights, Bakrie requires Rp1.78 trillion financing to buyback Bumi shares from Glencore, enlarging the ownership at Bumi from 19.30% to 24.28% stakes. But, it seems Bakrie won't keep Bumi shares. Bakrie will dispose Bumi shares when the price is high. "Bakrie will use the buyback rights and dispose Bumi shares at the market price." Considering Bumi's current market price at Rp2,525 per share, Bakrie will bag Rp663.08 billion from the shares sale. But, the capital gain would be higher when Bakrie sold Bumi shares at the higher level. (Insider Stories, November 2010) Coal Production Predicted to Climb in Sunnier 2011 The Jakarta Globe reported that, Indonesias coal producers are expected to increase output by 13 percent in 2011, thanks to predicted better weather. An extended rainy season this

year saw coal production reach 300 million tons, below target. The Indonesian Coal Mining Association (APBI) had earlier targeted coal production to hit 320 million tons this year. With better weather, coal production should reach 340 million tons in 2011, a 4.1 percent increase over the governments estimate. Higher coal production coupled with near record-high prices will translate into better earnings for coal companies in 2011, according to market analysts. The countrys second-largest coal company, Adaro Energy, aims to produce 48 million tons next year, an increase of just 0.6 percent from this year.Through September this year, Adaro recorded a profit of $1.98 billion, an increase of 6 percent over the same period last year. Bumi Resources, the countrys largest coal producer, is on the other hand looking at boosting production by 10 percent from its current level of 61 million tons. Bumi accounts for 23 percent of the countrys total production. Without quoting figures, Dileep Srivastava, head of investor relations at Bumi, said the company hoped for higher gross sales revenue in 2011 and that the company would exceed the $4.2 billion it recorded this year. Coal prices are expected to average between $80 and $90 next year, up from $70 this year. He said with growing demand from India and China, Bumi would expand its market to these countries. According to the International Energy Agency, the worlds coal consumption will grow 2.6 percent per annum. China and India will grow faster for their needs, Srivastava said. China is expected to consume 50 million tons of coal in 2011 and 60 million tons in 2015. Indias thermal coal demand is forecast to be 63 million tons in 2011 and 108 million in 2015.

Both countries are expected to increase their imports of coal from Indonesia as neither is currently able to satisfy demand from domestic production. While this spells good news for Indonesian coal producers, they are still required to sell 24.1 percent of their production locally, primarily to state-owned power utility Perusahaan Listrik Negara. Local coal consumption, however is expected to rise significantly as the governments 10,000 megawatt power plant project gathers steam. Indonesias coal companies have also been hotly sought after by global investors. Last week, global financier Nathaniel Rothschild paid $3 billion for stakes in two of the countrys largest coal mining companies. Rothschild bought a 25 percent stake in Bumi Resources and a 75 percent stake in Berau Coal, the fifth-largest coal producer in the country through its London-listed Vallar. The move took industry experts by surprise as it will allow the powerful Bakrie Group, the parent company of Bumi Resources, to become the largest combined shareholder in Vallar, which will be renamed Bumi. The deal also reflected the global nature of the coal industry and the worldwide hunt for coal assets. The deal looks to be a masterstroke given the upward trend for coal prices and the high expected returns the investment should bear.The deal will also bring together Bumi Resources and Berau Coals production, which is estimated to reach as much as 140 million tons a year by 2013.The combined company will be the largest thermal coal supplier to China. (Jakarta Globe, November 2010) Analysis: Coal Sector: Value Emergence Coal demand will remain firm due to a build-up of coal-fired power plants in India, China and

Indonesia. As a result, we have upgraded our coal price from US$95 per ton to a range of between $100, 105, 108, 110 and 115 per ton, respectively in 2011, 2012, 2013, 2014 and 2015 (inflation rate of 1 percent thereafter). Additionally, Indonesia is one of the lowest cost coal producers in the world, which means that coal prices have to adjust with the incremental cost of production of higher-cost structured companies. Thermal Seaborne coal demand is set to rise by 74 percent to 1,187 million tons in 2025 from 680 million tons in 2010, according to Coaltrans Coal Conference in Amsterdam last month. This is driven by a higher demand from China and India, which currently accounts for about 28 percent of the global thermal coal market. China, which currently relies on coal to produce 80 percent of its power needs, is installing two new coal-fired power plants per week with capacities of 500 megawatts per plant. This pace will persist at least in the next decade, potentially doubling power capacity by 2020 and adding a 500-gigawatts new coal-fired electricity generation capacity according to the International Energy Agency. We highlight that with China consuming 43 percent of the global thermal coal production, imbalances between its indigenous production and consumption will drive global coal prices higher. As for India, at present it imports about 8 percent of global coal production. But the number is set to grow to 25 percent by 2015. Indian thermal coal demand is expected to rise 810 million tons, or 131 percent, by 2025, driven by a 158 percent hike in coal-fired power capacity, in line with power demand, which will rise from the current 147 gigawatts to 380 gigawatts by 2025. Meanwhile, Vietnam, which three years ago was the largest exporter of coal to China, is expected to become a net importer by 2015, putting further pressure on global supply in the

medium term. Vietnam currently exports about 50 percent of its production or about 24 million tons, but this will fall to only 3 million tons, despite rising coal production from 48 million tons in 2009 to about 105 million tons in 2025. Stripping out PT Bayan Resources (BYANs) price movements, the coal sector has underperformed the market by 9.8 percent year-to-date (ytd). We believe value is emerging, particularly for our top picks, and we raise our sector weighting to overweight. At this stage, PT Bukit Asam (PTBA) has the highest upside potential based on Discounted Cash Flow (DCF), helped by the inclusion of the Banjarsari power project in our forecasts. We like PTBAs railway expansion projects, which will increase PTBAs railway capacity from 11 million tons currently to 47.7 million tons by 2015 or 82.7 million tons by 2018. This will increase fourfold PTBAs production from 12.7 million tons to 52.5 million tons by 2015 or by seven fold to 87.5 million tons by 2018. We also like PTBA for its government link, translating to more secured supply contracts to PLN. Additionally, we like its huge reserves (fives times Indonesias coal production), which will pave the way for it to become the secondlargest coal producer after BUMI starting in 2018. This means 33 percent compound annual growth rate (CAGR) for earning per share (EPS) in the next five years through 2015. It also has cash reserves of Rp 4.9 trillion with no debt and solid corporate governance. Our second pick is PT Indika Energy or INDY (+27 percent upside), due to Kidecos strong performance (which contributes 76 percent of its pre-tax profit). This is followed by Adaro Energy (+19 percent), the largest market cap and second-highest average daily turnover after BUMI, which plans to nearly double production from about 42 million tons in 2010 to 80 million tons by 2014. (Jakarta Globe, November 2010)

India will Import 100 Million Tons of Coal by 2012

Indias coal shortfall will reach 100 million mt

topic of economic aspects of washing coal and the challenges & remedies. They opined that the current linkage of high ash domestic coal has to be washed/beneficiated thereby enhancing the Energy value and reducing the quantity of coal to be transported . By this method the pressure on infrastructure would come down and the available resources are put to best usage. Mr.V.S.Verma, Member-Central Electricity Regulatory Commission of India, New Delhi acted as chairman of the technical session and stressed the need for maintaining the consistency in the coal quality /production and need to honor the contractual obligations of the Fuel supply agreements entered by coal India ltd and its subsidiaries.

by 2011-12, said Lakshminarayana, Vice President (Operations & Marketing) of Coastal Energy Private Limited, India during two-day International Conference, Indian coal preparation Industry challenges and opportunities, organized by Indian Coal Preparation Industry yesterday in Delhi. According to Lakshmi, India will produce approximately 620 million MT of coal in 2011 2012 fiscal years wheres the demand for the coal will expecting to reach around 730 MMT. The gap between production and demand would be around 100 110 million tons by 2012. coal Imports and blending with Indian coal is the only solution, to overcome coal shortage problem in India on long term view. The current Indian installed capacity is around 164,839 MW as of ending September 2010 and an another 78,000 MW capacity is expected to be installed by 2012, he further said during his presentation. Out of 164,839 MW of installed capacity, around 87,943 MW is coal based plants. Commensurate with the Government of India policy of POWER FOR ALL by 2012, many private investments are being channelized into power sector. As a result of new UMPPs / IPPs/MPPs, the demand for coal has increased manifold. Domestic coal unable to fulfill the emerging demand and over dependence on imported coal is not at all advisable. In such situation Blending at optimal levels a key solution for fuel & energy security of future of India, Lakshminarayana concluded in his presentation. Mr.V.P. Sinha, Jt. Mg Director of Gupta Corporation of India and Mr.R.B. Mathur, President (Coal), JSW Energy Ltd, dealt with the

He maintained that steady production throughout the year is the key to maintain quality instead of rushing in the sag end of the financial year to meet the targets, this attitude results in compromise in quality and erratic supplies. (www.coalspot.com, November 2010) Indika Energy to Acquire Mitra Bahtera Integrated coal company PT Indika Energy Tbk (INDY) might acquire 51% holding in a leading logistic provider PT Mitra Bahtera SegaraSejati (MBSS). Several sources familiar with the matter said by acquiring MBSS, Indika will be fully integrated coal mining company."Indika controls 46% holding in coal miner PT Kideco Jaya Agung. The acquisition will support coal transportation business," the sources told Insider Stories. Retina Rosabai, Indika's Vice President of Investor Relations, declined to comment on the matter.

MBSS is providing coal tugs and barges operators in Indonesia. The company provides one stop fully integrated solutions to the logistical needs of the Indonesian Coal industries ranging from shore based barge loading facility to the offshore loading of the ocean going vessels. The services range from ship management, ship registration harbor assist tugs, LCT, floating cranes, floating terminals, manning services, marine consultancy, agency services, transshipment activities, domestic and international trade & marketing (Insider Stories, November 2010) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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