PTBA backs off from acquiring MHU

Leony Aurora, The Jakarta Post, Jakarta

State coal and mining company PT Tambang Batubara Bukit Asam (PTBA) has backed off from its plan to acquire small coal miner PT Multi Harapan Utama (MHU), putting the smaller company's future at risk, a government official said.

PTBA reported the planned acquisition to the Ministry of Energy and Mineral Resources recently, director-general of geology and mineral resources Simon Sembiring said over the weekend.

Simon said MHU currently owed the government some US$8 million in royalties and some $42 million more to contractors.

"We wanted to terminate (MHU's contract), but when PTBA said that it was going to acquire the company, we gave it another chance," said Simon.

If there were no updates from the small coal miner in a week, the ministry would go ahead with its plan to terminate the contract, Simon said.

"We will seize its assets and mining area," he said. "We may tender out the area afterwards."

PTBA had announced that it expected a significant boost in its coal output starting this year, pending the successful acquisition of several coal mining firms.

PTBA president director Ismet Harmaini on Sunday confirmed the cancellation of his company's plan to acquire MHU. The firm is currently having a due dilligence of two coal producers in Kalimantan.

The fifth-largest coal producer in the country, PTBA mined 9.9 million tons of coal in 2004. The company, which exports a third of its output, aims to raise production to 10.2 million this year.

MHU, which operates a mine in Busang, East Kalimantan, produces some 1.6 million tons of coal annually. MHU has estimated reserves of between 25 million and 30 million tons.

PTBA needs to rise its output significantly as it has inked several new domestic commitments -- a 200-megawatt (MW) coal- fired plant in Lahat and a 2400 MW plant in Tanjung Enim, both in South Sumatra -- which require a supply of 1.2 million tons of coal a year and 10 million tons, respectively, starting in 2009.

The publicly-listed company will also supply 3.5 million tons of coal a year to another planned 500-MW power plant in Indragiri Hulu, Riau, when it starts producing electricity in 2010.

The company also wants to cash in on rising international prices, as the world turns to coal and gas to fire its power plants amid soaring oil prices. A supply cut from China, as the country concentrated its coal output for domestic use, forced other major consumers to look elsewhere for the mineral fuel and further increased prices.

PTBA more than doubled its unaudited net income in the three months ending March 31 to Rp 116 billion ($12 million) from Rp 51.22 billion booked in the corresponding period the previous year.

Operating mines in West and South Sumatra, PTBA has coal resources of about 7.36 billion tons -- or about 17 percent of the country's total coal deposits -- with total mineable reserves of 1.47 billion tons.

At present, the government controls 65 percent of shares in Bukit Asam, which mines about one-tenth of the country's coal output, with the public owning the rest.