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Most Profitable Companies In Indonesia – August 23 (Asia): There is an opportunity for Indonesian coal companies to accelerate their energy transition, says Ghee Peh, an energy financial analyst. Its new report examines eight Indonesian coal companies, all of which benefited from historic coal prices in 2021 and 2Q22.
All of Indonesia’s coal companies’ first-quarter earnings and cash flows hit record highs in 2022, which could prompt a more radical shift away from investing in any new mines and meeting long-term climate commitments, according to Peh.
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“It is time to discuss fair and sustainable spending of $6.8 billion with Indonesia’s G20 leadership in 2022,” Peh added. “Indonesian coal companies’ cash balance of $6.8 billion at the end of 1Q22 could help to pay down financial debt and accelerate the move to a clean transition.”
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“If there is a resolution to the dispute, along with the EU’s commitment to decarbonisation, it is likely that coal prices will normalize from current levels in the long term. Coal companies should not take the opportunity to move away from coal now, before the cost of the transition increases.”
The elimination of Russian coal imports would cut 18% of global coal supplies as countries freeze purchases of Russian coal amid the conflict between Russia and Ukraine. found that Indonesian coal companies benefited from the increase in coal prices with an average price of $92/ton for 1Q22, which is 29% higher than the average price for FY2021.
As a result of the change in trade flows caused by the conflict between Russia and Ukraine, global coal prices will rise. When Japan, Korea and Taiwan begin cutting Russian coal imports in 2H22, coal will come from countries further afield, including Indonesia and Australia.
“Shipping routes to North Asia will be longer from Australia and Indonesia compared to Russia. Also, if India buys more coal from Russia, it will cause delays in shipping routes because Indonesia is closer,” he says. Peh.
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For 1Q22, the total coal sales volume of Indonesia’s eight coal companies was 25% of the FY21 level. Although Indonesia’s export ban helped reduce sales volume, it meant that these companies did not significantly increase their production capacity.
“In addition to low debt and high cash levels, their capital plans have been modest and no major coal capacity is planned. Indika Energy, a coal mining group, has proposed plans to transition to renewable energy,” says Peh.
These companies have gradually reduced their debt levels since 2020. The total combined debt position increased from $4.1 billion in FY20 to $3.7 billion in 3Q22. Both Bayan Resources and Geo Energy Resources reduced their debt to zero.
“This conservative financial strategy makes sense as more and more financial institutions withdraw from financing new coal projects,” Peh says.
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The eight companies invested only 15% of their combined cash balance by 2020 and less than 10% by 2021. In 2021, the investment of eight coal companies was 624 million dollars. Most of the capex was on infrastructure such as roads and machinery.
In terms of investments in 2021, it sees that eight companies have invested in infrastructure and other types of business, in addition to ABM Investama and PTBA (Tambang Batubara Bukit Asam), which focus on new coal-related projects.
“We see ABM Investama increasing coal volumes with plans to acquire a new coal mine, while PTBA unveils plans for a downstream DME (dimethyl ether) coal plant,” said Peh, author of previous reports focusing on the project. DME says. “Financial justification for the DME project is tenuous at best.”
Indika Energy, however, sold its coal contract arm. The company is seeking a $32 million investment in its gold project, and owns 51% ($21 million) of its solar energy company, Empat Mitra Indika Tenaga Surya (EMITS), which is a joint venture with Fourth Partner Energy.
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“As Indonesia’s coal companies have become one of the biggest beneficiaries of high coal prices, we recommend accelerating coal and the transition from high coal prices, net profits and 1Q2021 and 2022.”
Since April 11, the Indonesian government has also implemented an advanced coal royalty rate based on Indonesia’s thermal coal benchmark price, known as Harga Batubara Acuan (HBA).
According to the Ministry of Energy and Mineral Resources, the new high rate of 28% applies when the price of coal is above $100/ton. The average HBA price for January-May 2022 is currently $222/ton, so higher house rates will apply.
“The new royalty rate of 14-28%, higher than the previous 13.5%, may further encourage investment in new coal capacity,” says Peh.
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“With a cash balance of $6.8 billion, it’s time for Indonesia’s coal companies to accelerate their transition.”
Read this press release in Bahasa Indonesia: Dengan saldo kas sebagai AS$6, 8 milar, perusahaan batu bara Indonesia memiliki embassana emas untuk berinvestasi ke transisi hijau
Financial analyst Ghee Peh has worked in investment research since 1995, including at Jefferies, BNP Paribas and UBS. He has closed coal, cement and metal companies in Asia.
The Institute for Economic and Financial Analysis of Energy () analyzes issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (www.)
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Ghee Peh is an energy financial analyst focusing on the Asian and Southeast Asian coal industry. Ghee has worked on major mining IPOs in Hong Kong and Indonesia, including coal, copper and gold companies, and has a strong interest in commodity markets.
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Before going public in late 2019, Saudi Aramco was already hailed as the world’s most successful company, surpassing Apple as the most developed company.
According to Reuters, Saudi Arabian oil company Aramco released full-year results that more than doubled year-over-year oil profits to $110 billion.
SABIC’s full-year results saw Aramco’s 2021 net income fall 124% to $110 billion from $49 billion in 2020, driven by higher crude oil prices, higher refining and chemical margins and a strengthening sector. chemical
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The numbers were in line with expectations; Full-year net income is expected to be $109.7 billion, according to a Reuters poll of analysts. Following the result, Aramco shares rose nearly 4% on Saudi Arabia’s Tadawul stock exchange on Sunday.
Aramco had predicted higher oil prices in 2021, with Brent reaching more than $80 a barrel by the end of the year, up 50% from the previous 12 months. Prior to Russia’s invasion of Ukraine, a mix of conditions, including supply shortages, caused significant uncertainty in energy and commodity markets.
Aramco also announced a fourth-quarter dividend of $18.8 billion that will be paid in the first quarter of 2022. An increase in free cash flow from $49.1 billion in 2020 to $107.5 billion in 2021 will pay off.
The company also said it will invest to increase its crude oil production capacity to 13 million barrels per day by 2027 to increase production.
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