Hogsback on Indonesia

AUSTRALIAN coal mines might be unloved by the anti-Adani brigade at home but they are starting to be coveted by Indonesians wanting to keep playing big in the global seaborne market.
Hogsback on Indonesia Hogsback on Indonesia Hogsback on Indonesia Hogsback on Indonesia Hogsback on Indonesia
Indonesia is a favourite holiday destination for Australians and it is also our biggest coal export competitor.
A change in Indonesian government policy aimed at keeping a greater proportion of its coal for domestic consumption means Indonesian companies wanting to keep their hand in the predicted growth of exports in Asia have been eyeing off Australian coal mining companies.
 
Indonesia's consumption of domestic coal for its own power generation is set to almost double by 2027.
 
The increase from 84 million tonnes in 2018 to 157Mt by 2027 will increase Indonesia's power generation's share of domestic consumption from 18.5% to 33.6%, which is likely to displace export tonnage, according to Wood Mackenzie research analyst Vicky Adijanto.
 
Another factor contributing to the higher coal consumption is that Indonesia's new power plants are designed to consume lower energy coal. This means more coal will be required per unit of electricity generated.
 
"This increase in domestic consumption combined with potential government efforts to conserve coal reserves represents a downside risk for Indonesian exports," Adijanto said.
 
One notable acquisition by an Indonesian company of a quality Australia coal asset occurred when Indonesian PT Adaro Energy paid US$2.25 billion with EMR Capital for 80% of Rio Tinto's Kestrel longwall mine in Queensland.   
 
EMR entered into a binding agreement with PT Adaro Energy, one of the world's largest coal producers, to buy and jointly manage the longwall mine.
 
Kestrel produced 4.25 million tonnes of hard coking coal on a 100% basis in 2017 and had marketable reserves of 146 Mt and resources of  241Mt as of December 2017.
 
Adaro Energy CEO Garibaldi Thohir said Adaro earmarked 2018 as a year of expansion.
He said 2017 was a good year for Adaro as it marked 25 years of operations with resilient performance.
 
 "Therefore, we have entered 2018 with strong optimism as we are ready to capture the opportunities offered by the excellent market momentum for sustaining the company's growth and continuing to deliver positive contributions to Indonesia," Thohir said.
 
More recently, Indonesian coal giant Golden Energy and Resources lobbed a low-ball A$240 million offer for Stanmore Coal whose main asset is the Isaac Plains complex in Queensland. 
 
The offer has been rejected by the Stanmore directors but Hogsback reckons you should keep watching this space. 
 
The Indonesians won't be giving up that easily and there are too many unloved coal assets in Australia that are ripe for the picking by our northern neighbours.