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ublicly listed coal mining company PT Adaro Energy is securing options to increase its ownership in PT Bhakti Energi Persada, a deal which is expected to secure its position as the leading low-calorie coal producer in the country.

Adaro revealed on late Wednesday that it had signed an agreement that would make it the majority stakeholder in Bhakti through two options. In June 2010, Adaro acquired a 10.22 percent stake in Bhakti for US$66 million.

According to a filing submitted to the Indonesia Stock Exchange (IDX), the first option provides Adaro the opportunity to lend up to $500 million in return of 51 percent stake in Bhakti over a period of three years. The second option is a share swap mechanism, in which Adaro has the right to acquire 79.8 percent of the shares held by Bhakti’s controlling shareholders in exchange for 2.38 billion of its own shares, or about 7 percent of Adaro’s total 31.99 billion shares. The second option also has a three-year-maturity period.

Currently, PT Persada Capital Investama and PT Triputra Investindo Arya each hold a 30.79 percent stake in Bhakti. The remaining 18.22 percent included in the 79.8 percent share swap option, is held by the family of Bhakti’s founder Winarto.

Under the agreement, Bhakti is valued at $854.3 million. Meanwhile, Adaro’s 2.38 billion shares are estimated to be worth $440 million or Rp 1,700 per share, higher than the company’s closing price of Rp 1,470 on Thursday, which dropped 2.33 percent from Rp 1,590 a day earlier.

“Both are only options for Adaro and not obligations,” Adaro said in the stock filing, adding that if Bhakti’s value increased, significantly exceeding Adaro’s, Adaro had no obligation to offer more than 2.38 billion shares.

The deal is thought to be a consolidation move as Persada and Triputra currently hold shares in Adaro. Persada and its owner Benny Subianto hold a 13 percent stake in Adaro, while Triputra and its owner Teddy Rachmat control
12 percent.

Adaro acknowledged that although Bhakti’s shareholders, Persada and Triputra, were also two of five key shareholders in Adaro with a combined 63 percent stake. However, the company said that he two options had not been designed to benefit certain interests.

Three other important shareholders in Adaro are president director Garibaldi Thohir, Edwin Soeryadjaya and Sandiaga Uno.

“We are delighted with the options we have signed. We feel BEP [Bhakti] has excellent potential to help us achieve our main goal of generating substantial and sustainable long-term value from Indonesian coal. We worked for two years to negotiate a deal that is structured in a unique way to minimize risk to Adaro. While we are excited with the BEP opportunity, we must also emphasize that we will use our best judgment before injecting any funds to develop the asset,” Garibaldi said in a written statement.

Bhakti was established in 2002 and currently has seven mining concessions (locally known as IUPs) for low-calorie thermal coal mining sites in Muara Wahau, Kutai Timur, East Kalimantan. SRK Consulting (Australasia) estimates that Bhakti’s seven concessions have resources totalling 9.53 billion metric tons of coal. Bhakti also has two coal transportation businesses, which transport Bhakti’s coal to coastal areas.