KPC wins 15-year coal contract from J-Power

KPC wins 15-year coal contract from J-Power

Bloomberg, Jakarta

Kaltim Prima Coal, Indonesia's largest coal exporter, won a 15- year contract to supply 45 million tons of coal to Electric Power Development Co., Japan's fifth-largest power generator, a Kaltim Prima executive said.

Kaltim Prima will ship 3 million tons a year of thermal coal to Electric Power Development, which is known as J-Power, Evan Ball, the miner's managing director, said on Tuesday in a telephone interview from Kalimantan.

That represents one-sixth of the Japanese utility's current annual coal consumption, he said.

Indonesia, the fourth-largest coal producer in the Asia Pacific region, shipped 15 percent more of the fuel last year as China reduced exports and congestion disrupted shipments from Australia.

Kaltim Prima is spending $30 million to boost output and meet demand from Asian utilities.

"This is our first contract to J-Power and they are a significant consumer of coal," Ball said. "For us to sign a long- term contract with them shows their confidence in KPC."

The agreement was signed on May 9, Ball said. For the first year, the contracted price is $50 per ton, he added.

The spot price of coal delivered from Newcastle in Australia rose 0.6 percent to $52.12 a ton in the week ended May 6, according to the global Coal NEWC Index. Annual contract prices for thermal coal rose by between 15 percent and 20 percent from April 1.

"The volume per year is set and every year the price will be re-negotiated, depending on what other utilities pay for their settlements," Ball said.

Kaltim Prima, which produced 24 million tons of coal last year from its East Kalimantan mine, is aiming to raise output to 30 million tons this year, Ball said.

Kaltim Prima is a unit of PT Bumi Resources, which bought two coal companies this decade to become among the top five global exporters of thermal coal.

Most of Indonesia's coal is thermal coal.

Mitsubishi Corp. brokered the J-Power contract for Kaltim Prima, Ball said. J-Power is lifting spending as it begins construction in August 2005 of an additional generator at the Isogo thermal power plant, and its first nuclear power plant in Aomori prefecture starting August 2006.

Japan was Kaltim Prima's second-largest market in 2004, accounting for 23 percent of sales. Taiwan was the company's biggest market, accounting for 30 percent.

J-Power, which generates 7 percent of Japan's electricity, was set up in 1952 to increase Japan's power output using coal and hydropower.

J-Power has 67 power stations with 16,380 megawatts of capacity and a nationwide transmission network with 2,404 kilometers of power lines.