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Better coal prices allowing ABM Investama to expand
After struggling with a slump in coal prices over the past few years, publicly listed energy company PT ABM Investama is getting back on its feet again, planning to increase its production and expand into new locations
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fter struggling with a slump in coal prices over the past few years, publicly listed energy company PT ABM Investama is getting back on its feet again, planning to increase its production and expand into new locations.
The coal mining company hopes to jack up its production by 50 percent to 9 million tons this year and to acquire new sites to boost its reserves because of a better outlook for coal prices.
The Energy and Mineral Resources Ministry’s coal reference price for July rose by 4.62 percent to US$78.95 from June.
“We are seeking 50 to 100 million tons of additional reserves of medium calorie coal. Currently, we have seven candidates in South and East Kalimantan,” finance director Adrian Erlangga Sjamsul said after the shareholders’ meeting on Friday.
The new sites were set to replace its main mine operated by PT Tunas Inti Abadi (TIA), a unit of ABM’s subsidiary, PT Reswara Minergi Hartama, the concession of which would expire by 2021, he added.
TIA holds 3,085 hectares of coal mining concessions in South Kalimantan. In the past, it controlled 106 million tons of coal reserves, but after continuous exploitation, the site now only retains 30 million tons.
ABM requires $150 million to $200 million to support its acquisition plan. It seeks to obtain $150 million through borrowing, while the rest would come from its internal cash holdings.
A shareholders’ meeting last Friday approved of the company’s plan to issue $450 million worth of global bonds.
The company is awaiting the results of rating assessments by Moody’s and Fitch Ratings, which are to be released soon.
ABM said it plans to take a road show to the United States, Hong Kong, Singapore and the United Kingdom after the results come out, Adrian said.
The proceeds from the bond issuance would also be used to pay down its bank loans,
which amount to $297 million, he added.
AMB has traditionally depended heavily on bank loans and, therefore, the planned global bond issuance would be its first move to diversify its debt sources.
“We aim to keep lowering our debt ratio, as well as reducing our costs,” Adrian said.
In the first quarter of this year, the company’s debt to equity ratio was 5.24, down slightly
from 5.52 in the same period last year. It hopes the ratio will further decline to 2.2 by the end of this year.
“With the global bonds, we will bear smaller costs because we will pay the principal after five years,” Adrian said.
To push for efficiency, ABM has been attempting to replace diesel-fueled power generation with natural gas-fueled power generation and to apply other technologies. This has resulted in lower operational costs.
Consequently, in the first quarter, its net income climbed by 128.95 percent year-on-year to $13.19 million, although its revenues only increased by 15.75 to $169.04 million.
