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ublicly listed coal miner Toba Bara Sejahtra (Toba Bara) aims to make a fortune by diversifying its business to the electricity sector to balance against the downward trends in global coal prices over recent years.

The company, controlled by the family of Coordinating Maritime Affairs Minister Luhut Pandjaitan, signed a 25-year power purchasing agreement (PPA) contract in July for the Sulbagut-1 coal-fired power plant (PLTU) through subsidiary Gorontalo Listrik Perdana with state-owned electricity firm Perusahaan Listrik Negara (PLN).

The PLTU, which has an investment value worth around US$180 million to $220 million, will be located in North Sulawesi and is expected to begin construction in July next year. It will have a capacity of 2x50 megawatts.

“We hope the company can generate a significant amount of revenue from this PLTU project. We’ll definitely talk more about the power business in years to come,” Toba Bara finance director Pandu Sjahrir said on Monday.

In the period of January to September, Toba Bara disbursed $8.6 million in capital expenditure (capex), including for the PLTU project. The figure is expected to surpass $10 million by the end of this year.

Pandu said the capex figure could double next year as the company would focus on developing the PLTU within the next two years. Around 70 percent of the PLTU’s investment will be covered by loans from local and foreign banks.

Toba Bara director Arthur Simatupang said the PLTU was expected to provide a more stable revenue source for the company as global coal prices had been volatile in recent years.

The company plans to complete the land procurement process for the Sulbagut-1 PLTU before the year’s end. At present, the company has procured 45 hectares out of a total of 60 hectares needed for the project.

It also aims to acquire another coal mine nearby its operation site in Kutai Kartanegara, East Kalimantan, to supply coal needed for the PLTU in the future.

“We have completed due diligence on at least 10 prospective coal mines around the area, so we’ll see where this goes,” Arthur said.

Toba Bara saw a 28.4 percent decrease in sales to $192.1 million within the period of January to September, while profits also plunged more than half to $9.7 million.

Coal prices dropped by 70 percent in the period 2011 to 2015, but a surprise change in Chinese government policy recently led the country to lower its domestic production and encouraged fuel prices to increase.

Coal exports to China have also surged, boosting global coal prices.

Despite this latest development, Toba Bara has started to diversify its coal exports to other countries
outside China as a preventive measure.

Exports to China, which stood at 33 percent of its total export volume in 2014, were only equal to 5 percent within the first nine months of this year. Meanwhile, South Korea and India have been Toba Bara’s biggest importers this year, with 25 percent and 21 percent, respectively.

“We really want to reduce our dependency on China,” Arthur said.

Meanwhile, Toba Bara has also constructed a new factory in Kutai Kartanegara through its subsidiary Perkebunan Kaltim Utama I to penetrate into the downstream palm oil business.

The factory, slated for operations by the end of the year, is expected to produce 30 tons of fresh fruit bunches (FFB) per hour and 39,600 tons of crude palm oil (CPO) per year.

— JP/Viriya P. Singgih