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ocal mining company Mitrabara Adiperdana has established two subsidiaries through which it will expand into biomass energy business amid persistent low coal prices.

The subsidiaries are Mitra Malinau Energi (MME), which will engage in renewable energy power production, and Malinau Hijau Lestari (MHL), which will focus on biomass energy plantations.

Its decision to enter the biomass energy arena was based on analysis of opportunities created by the Energy and Mineral Resources Ministerial Decree No. 27/2014.

The decree stated that in order to meet national electricity demand and increase the use of environmentally friendly renewable energy, the government would encourage companies to develop biomass and biogas energy by guaranteeing that the electricity would be bought by state-owned electricity company PLN.

“The ministerial decree stated that if a company could provide electricity through biomass power plants, PLN would buy it in accordance with tariffs mentioned in the decree,” Mitrabara finance director Widada said on Thursday during the company’s public announcement.

The company also based this decision on careful observation of the potential demand for electricity in Malinau regency of North Kalimantan, the home of its coal-mining operations.

Currently, Mitrabara is conducting a feasibility study to find out whether the plan can be realized or not.

“We are still developing strategies and conducting a feasibility study on these projects,” he said, adding that the investment value was still being calculated by the company’s consultants.

A few months back on Feb. 9, the company signed a memorandum of understanding (MoU) with PLN for doing the feasibility study together. If the results are favorable, both companies will step forward to sign the electricity sale and purchase agreements.

In conducting the project, Mitrabara has benefitted from a “technical assistance and project preparation (TAPP) grant” from the Millennium Challenge Account — Indonesia (MCAI), which contributed funds amounting to US$371,000, Widada said.

Besides the company’s big plan to explore entry into biomass energy business, the company will maintain business as usual with its coal mining amid the sluggish outlook in the coal industry at present.

This year, Mitrabara has set a coal production target of around 4 million tons, similar to last year’s production of 4.1 million tons.

“We are taking a wait-and-see approach [to the market],” said Ridwan, the newly appointed president director of Mitrabara who succeeded former president director Khoirudin.

Mitrabara will maintain its current strategy around exporting coal to its major markets, which include Taiwan, which accounts for 50.21 percent of Mitrabara’s sales as of December last year, India (17.81 percent) and Japan (15.75 percent).

“We are taking a wait-and-see approach [to the market],” said Ridwan, the newly appointed president director of Mitrabara who succeeded former president director Khoirudin.

However, despite the sluggish outlook for the coal industry in recent years, Mitrabara has seen its net income soar 149 percent to $34.7 million from $13.92 million in 2014. In the first quarter of this year it has booked a net income of $8.1 million, compared with $6.3 million in first quarter 2015.

Former president director Khoirudin said that the sharp increase was due to a jump in production by about 83 percent to 4.1 million tons in 2015, from 2.2 million tons in 2014. Moreover, he said, the company has executed some efficiency programs that contributed to the increase.

This year, the company has allocated capital expenditure (capex) of about $18 million, of which $14 million will be used for building construction and $2.9 million for machinery and equipment. From January to March the company spent $1.1 million. (win)