Adaro upbeat on coal export despite tight competition

By Berni K. Moestafa

BANJARMASIN, South Kalimantan (JP): PT Adaro Indonesia, one of the country's major coal producers, said demands for its coal would continue to increase despite growing competition in the world's coal market.

Adaro general manager A.H. Chia said coal output would be further increased to 20 million tons in 2001 from about 14 million this year to anticipate the estimated high demand.

"We expect that demands for our coal in Asian countries will rise," Chia told journalists visiting Adaro's mining site here on Monday.

Chia said the increase in the Asian coal market was due to the economic recovery in the region.

He cited the revival of the construction industry, which tumbled during the economic crisis, caused cement producers to increase coal imports for their plants.

Chia said an increasing awareness of using environmentally friendly coal in Asia would also benefit the company.

Adaro's product "Envirocoal" contains only a moderate energy level, but the company claimed it has the world's lowest sulfur and ash content, resulting in environmentally friendly coal.

Adaro's customers use Envirocoal as a blend with high heat value coal to achieve local environmental standards of emission, Chia explained.

However, clean coal was just a key to entering the market, Chia said, adding that Adaro could hardly rely on its moderate heat value to find buyers.

The company eyed European and American markets, where legislation limiting emissions from coal-fired power plants had created a strong demand for clean coal.

Spain has so far become Adaro's biggest market, importing 2.2 million tons for the country's Puentes 700 megawatt power plant.

Even though Chia expected a drastic increase in Asian coal demand, he said the European market would only increase by about one percent.

This year Adaro has sold 3.8 million tons of coal to Europe while sales to Asian countries have contributed some 4.6 million in exports, compared to only 2.9 million in 1998.

About 68 percent of the company's 1999 sales -- which Adaro estimated to reach some 14 million tons between US$18 and $20 per ton -- was sold to foreign markets.

Chia said at present the company had exported coal to 15 countries, including Spain, the Netherlands, Bulgaria, the United States, Chile, Taiwan and India.

Adaro commissioner Soetaryo Sigit said its coal, which has a high-moisture content, was not suitable for burning purposes, but most industrial companies bought it due to its low sulfur and ash content.

He said with such specifications power stations were able to avoid using expensive technology to meet local environmental standards, which otherwise would cost up to 20 percent of a power plant investment.

Another disadvantage, he added, was the location of Adaro's three coal mining deposits in the Paringin subdistrict, some 220 kilometers north of Banjarmasin.

The company was forced to build a 75-kilometer road to the Barito river from where coal vessels transport the coal to a bulk terminal on Laut Island.

Adaro currently operates the biggest open pit coal mine in Indonesia, the Tutupan coal deposit, measuring some 3.5 kilometers in length and some 600 meters in width.

Adaro senior chief of main planning Taufik Hidayat said the Tutupan coal deposit was estimated to hold some 700 million tons of coal reserves.

"Tutupan will offer us about 30 years of continued work," Taufik said.

Meanwhile, Adaro spokesman Priyadi said the cancellation of a contract this year between state-owned PT PLN with one of Adaro's customers, PT Paiton Energy Corporation, had not affected the company's sales.

"Paiton constitutes only a small market of our sales," Priyadi said, adding that the company focuses more on overseas markets.

Paiton was slated to buy 580,000 tons of coal from Adaro this year before a dispute over Paiton's high electricity rates resulted in a suspension of its contract with PLN.

He said despite losing Paiton, the company was able to increase sales, which had allowed them to revise its 1999 projected sales from 12 million tons to 14 million.

Adaro's shareholders are Australian-based New Hope Corporation Ltd., which owns 50 percent, American-based Mission Energy, which has 10 percent, and the Indonesian Swabara Group with 40 percent.

Chairman of the Tirtamas Group, Hashim Djojohadikusumo, and chairman of the Raja Garuda Mas Group, Sukanto Tanoto, took over the Swabara Group from Australian-based Washington H. Soul Pattinson Ltd. on April 4, 1997.