by: Ardhanareswari ([email protected])
JAKARTA-PT Bukit Asam (Persero) Tbk. (PTBA) planned to buy 15% to 30% ownership on Ignite Energy Resources Ltd., a coal company from Victoria, Australia.
Milawarma, PTBA President Director, said that the company is currently completing the stage of due dilligence on the project of low-calorie coal processing technology to be made into crude oil and pulverized coal injection (PCI).
He expected the due dilligence to be completed within 6 months from now. ''After that, we'll go in there as a shareholder or partner. Indeed for a while we will not be the majority, but the goal was for us to own it,“ said him when met, Monday (5/19).
At this time, said Milawarma, the company is still reviewing whether to participate in the development of the technology or in the processing of the Ignite coal resource, or both at once.
For information, Ignite Energy Resources has coal reserves up to 16.4 billion tons. According to him, the local government was very open and welcomed the participation of PTBA, especially in processing coal mine land belonging to Ignite. It is because the company was considered to be qualified and experienced enough in the mining process.
He added that currently Ignite is trying to leverage the processing of coal into crude oil capacity from 1 million tons to 8 million tons. As for the production , every 3 tons of coal could produce 1 beret of oil and 0.6 PCI materials used in steel production. Furthermore, Milawarma said that to boost the production, investment of US $ 500 million was needed. However, that number could still be changed. Portion of PTBA in the project funding will also be determined after the due dilligence is complete. When asked about acquisition fund source or the source of the technology project fund, Milawarma revealed that his side was still tend to rely on internal cash, even though the plan was not included in the allocation of capital expenditures this year.
“From our cash budget, it will still be Rp 3,5 trillion,'' he said. However, if later the project was highly profitable and enlarged, PTBA will not close the possibility to open another funding option, “It (the project that will be acquired) could fund itself through project financing,” he said.
On the other side, PTBA Secretary, Joko Pramono, said that throughout 1st quarter of 2014, the company was recorded to absorb capex around 20% of the total capital expenditures this year of Rp 1.6 trillion. “Most were for Port Tarahan upgrading project.” Throughout this year, the company was focused on development, some of them were Port Tarahan expansion capacity from 60,000-80,000 tons to 200.000 tons.
The company is also pursuing the completion of some power plant projects, such as at the mine mouth of Tanjung Enim, Banjarsari, Banko Tengah, and Pranap.
DIVERSIFICATION
Contacted separately, PT MNC Securities analyst, Reza Nugraha, assessed that the steps was positive for the company. “No problem for being a minority. This is an interesting thing in the middle of commodity price decline this year,'' he said. Claiming to be optimistic, he outlined that the work steps will be better if there are two acquisitions, compared with the main positive impact earning for PTBA on 1st semester of 2013, which was income diversification. According to him, the increase and technology transfer will give long-term profits with coal production volume and coal sales increase.
Crude oil product sales and PCI has opportunities to leverage other revenues and in the end will push the company's net profit.
Reza also assessed that the financial condition of PTBA was very healthy, thus allow it to expand. “The loan was very small and the cash was big enough.” Meanwhile, the performance of the first half of this year has given optimistic that at least the performance will be better compared with the gains in the first semester of 2013.
According to him, the improvement was mainly influenced by production volume coal sales. The company's performance will also be supported by the increase of production utilities, including the increase in the carriage volume by train. The company is working with PT Kereta Api Indonesia.
Ignite Energy Resources has coal reserves up to 16.4 billion tons.
PTBA will use internal cash to finance the stock purchase of Ignite Energy Resources plan.
Source: Indonesia Business case, page 13, May 20, 2014.
