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mid a weak global coal market, major coal producer Berau Coal Energy (Berau) says it will allocate up to US$180 million to build a new coal-fired power plant to generate greater income.

Berau'€™s newly appointed president director, Amir Sambodo, said the company was currently studying the possibility of building a 2 by 100 megawatt (MW) mine-mouth power plant.

Amir did not elaborate further, but added that the plant would be built in a coal mining area in Sumatra and that it would cost around $170 million to $180 million in total investment.

He added that the money to finance the plant'€™s construction would be sourced from Berau'€™s capital expenditure (capex) next year.

 '€œThe plant will not be constructed this year, and we are still studying the plan. We are looking for potential coal sources to feed the plant, whether from acquiring surrounding coal mines or from other available options,'€ he said.

The new power plant will add to an existing plant in the firm'€™s mining area in Berau, East Kalimantan, which launched commercial operations in 2005 and was the first mine-mouth power plant in Indonesia.

Back in 2012, the company kicked off construction of a 2 by 20 MW mine-mouth power plant in the area, which cost the company a total of $60 million.

'€œ[Expanding into the power plant business] is necessary for us to generate alternate revenue other than from our core business,'€ Amir said.

Berau '€” a subsidiary of the London-listed Asia Resource Minerals plc (ARMS) that recently split from the Bakrie Group over internal tensions '€” reported a net loss of $7.79 million in the first quarter of this year, which was an improvement on the $36.39 million net loss registered in the same period last year.

Last year, Berau suffered a 7.2 percent year-on-year decline in sales to $1.42 billion, in line with other coal mining companies that had come under pressure due to declining prices on the back of a global oversupply, as miners pumped up production given an improved economic outlook and binding contracts, as well as declining demand from major importer China.

The global thermal coal demand was expected to increase by 3 percent to 987 million tons this year, UBS said in a report as quoted by Bloomberg. Meanwhile, the supply of coal was expected to rise by 4 percent to 999 million tons, creating a surplus of 12 million tons, the report added.

Berau'€™s limited business diversification and unfavorable commodity prices have led to concerns over the company'€™s ability to pay off its debt.

Ratings agency Moody'€™s Investors Service, in a statement published late last month, announced that it had assigned a provisional B1 rating with negative outlook for Berau'€™s plan to issue $450 million bonds to refinance its Singaporean-listed subsidiary'€™s debt, which is due next year.

Berau'€™s US dollar-denominated bonds will mature in five years and will be offered with a maximum coupon rate of 12 percent.

The company gained approval for the bond issue from its shareholders during a meeting on Wednesday. Barclays, Standard Chartered and Citibank '€” according to Amir '€” would be the initial purchasers of the bonds.

Moody'€™s listed the firm'€™s lack of product and concession diversification as well as exposure to commodity cycles against Berau'€™s strength as one of the country'€™s largest coal producers as its rationale behind its rating.

To make up for the potential losses from plunging coal prices, Berau hopes to produce 26 million tons of coal this year, up from 23 million last year, and maintain its stripping ratio to reduce costs.

The target is pending approval from the government, but Amir said that Berau had produced 14 million tons of coal as of July.