Coal miner Borneo seeks $400 million from IPO

Domestic coal producer PT Borneo Lumbung Energi & Metal expects to generate US$400 million from the sale of its new shares through an initial public offering (IPO) in November this year.

I Wayan Gemuh Kertaraharja, the corporate finance director of PT CIMB Securities Indonesia, which is managing the IPO, said Borneo planned to offer 3.3 billion new shares.

“This represents 20 percent of the enlarged capital,” he said.

“If the market is conducive, the number of shares offered may be increased to 4.4 billion, which will account for 25 percent of the enlarged capital,” said Wayan, adding that the shares would be offered for between Rp 980 and Rp 1,280 each.

Borneo expects to pay dividends of up to 30 percent of the company’s net profit to shareholders, he said.

Borneo said half of the funds generated from the IPO would be used to refinance its debts.

“The company’s debt currently stands at around $274 million,” Borneo finance director Eva Novita Tarigan said, adding that the debt was used by the company to increase its production capacity to 2.4 million tons per annum in 2009.

Eva added that up to 35 percent of the proceeds from the IPO would be used to boost the company’s capital expenditure, and the remaining 15 percent would be used for working capital and expansion including acquisitions.

Borneo is currently 99.99 percent owned by PT Republik Energi & Metal, while the remaining shares are owned by PT Muara Kencana Abadi. Former National Intelligence Agency (BIN) chief Syamsir Siregar is acting as the company’s president commissioner.

Through its subsidiary PT Asmin Koalindo Tuhup (AKT), Borneo operates two coal mines, Kohong
and Telakon, in Central Kalimantan, with combined mineable reserves of 69.2 million tons as
of June 30, 2010. While Borneo produces coal from the Kohong mine, the Telakon mine is still in
an exploration stage and is expected to begin production in 2012.

Borneo said its coal production capacity had reached 2.4 million tons per year as of December 2009, and that it was in a process of increasing its capacity to 3.6 million tons a year by the end of 2010.

The company’s actual coal production in the first half of 2010 was 752,107 tons. Whereas throughout 2009 it produced 882,039 tons.

A number of companies have already launched IPOs this year, including coal mining firm Berau Coal Energy, oil and gas firm Benakat Petroleum Energy, regional development bank Bank Jabar Banten, two telecommunications-related firms Skybee and Sarana Menara Nusantara, Indofood CBP and mining firm Harum Energy.

Several other firms have signaled firm commitments to list shares on the Indonesian stock exchange (IDX) before the end of 2010, including flagship carrier Garuda Indonesia, state-owned steel-maker Krakatau Steel and property firm Agung Podomoro.