Interested In The Coal Mining Business, The Company Owned By Conglomerate Hary Tanoesoedibjo Officially Changed Its Name To MNC Energy Investments

Conglomerate Hary Tanoesoedibjo. (Photo: Doc. MNC)

JAKARTA - PT Indonesia Transport & Infrastructure Tbk (IATA) officially changed its name to PT MNC Energy Investments Tbk. The company belonging to the conglomerate Hary Tanoesoedibjo at the same time changed its main business activity from a commercial air transportation and air transportation service company, to an investment and holding company, particularly in the coal mining sector. This change was made to mitigate losses due to the COVID-19 pandemic.

IATA recorded operating revenues of USD 7.2 million in September 2021, up 15 percent compared to USD 6.3 million in September 2020.

However, this increase was followed by an increase in various operating expenses which resulted in a net loss of USD 4.7 million for the period ended September 30, 2021, an increase of 118 percent compared to a net loss in the same period the previous year of USD 2.1 million.

Considering that the aviation industry is still not recovering, IATA believes that expansion in new business fields is the solution to improve company value. Taking advantage of the momentum arising from the continuous spike in coal commodity prices and their increasing demand, IATA took a strategic step by expanding into the energy sector, particularly coal mining.

Today, IATA has held an Extraordinary General Meeting of Shareholders (EGMS) and approved the change in IATA's main business, from previously air transportation to an investment company, by investing in its business units engaged in mining, infrastructure, and air transportation.

The EGMS also approved the transfer of air transportation assets to one of IATA's 99.99 percent owned subsidiaries, namely PT Indonesia Air Transport (IAT), which has also obtained an Aircraft Operator Certificate from the Ministry of Transportation, Directorate General of Civil Aviation. Thus, IAT can officially organize commercial air transportation in accordance with operating instructions and applicable Civil Aviation Safety Regulations.

In order to better reflect the business activities and strengthen the company's position in the industry, on this occasion, PT Indonesia Transport & Infrastructure Tbk officially changed its name to PT MNC Energy Investments Tbk.

The company has also received approval from its shareholders to take over 99.33 percent of PT Bhakti Coal Resources (BCR) shares from PT MNC Investama Tbk (BHIT).

BCR is the holding company of nine coal companies with Mining Business Permits (IUP) in Musi Banyuasin, South Sumatra, which include:

- PT Bhumi Sriwijaya Perdana Coal (BSPC) and PT Putra Muba Coal (PMC), both of which are already operating and actively producing coal with a GAR range of 2.800 - 3.600 kcal/kg. With a total area of 9.813 ha, BSPC has an estimated total resource of 130.7 million MT, while PMC has 76.9 million MT, with estimated total reserves of 83.3 million MT and 54.8 million MT, respectively.

- PT Indonesia Batu Prima Energi (IBPE) and PT Arthaco Prima Energi (APE), both of which are targeted to start coal production within this year. In addition, PT Energi Inti Bara Pratama (EIBP), PT Sriwijaya Energi Persada (SEP), PT Titan Prawira Sriwijaya (TPS), PT Primaraya Energi (PE), and PT Putra Mandiri Coal (PUMCO) are being prepared to operate in one operation. or two years from now. These seven IUPs with an area of 64.191 ha have an estimated total resource of more than 1.4 billion MT.

Production of BSPC and PMC in 2021 reached 2.5 million metric tons, generating revenues of approximately USD 74.8 million with EBITDA of USD 33 million.

In the nine-month period to September 2021, BCR managed to record revenues of USD 44.1 million with EBITDA of USD 20.4 million. Assuming IATA's acquisition of BCR takes place in January 2021, IATA's report for September 2021 will generate revenue of USD 51.4 million with an EBITDA of USD 20.4 million, rather than revenue of USD 7.2 million with an EBITDA loss of 54.8 thousand US dollars.

The income statement assumption will be much better for the 2021 annual period and of course the acquisition of BCR is considered very beneficial for IATA. The acquisition of BCR becomes even more attractive because the nine IUPs belonging to BCR previously mentioned will be acquired for a value of 140 million US dollars, 23 percent lower than the valuation of BSPC and PMC.

By 2022, BCR has obtained permission to increase production to 8 million metric tons. With the estimated coal price continuing to strengthen and the production target being achieved, IATA's financial performance in 2022 is expected to be very good, with the expectation of increasing revenues up to 3 times from 2021, after experiencing losses since 2008

Promising prospect of coal

Throughout 2021, global coal prices will continue to climb. Even entering the second half until the end of the year, the price of this mineral shot up to touch the highest price of all time.

The surge was influenced by various aspects, especially to meet energy needs caused by the reopening of the economy after the pandemic. Additional complications such as supply disruptions and conflicts between countries, coupled with demand for winter and flooding in Shanxi province, China's biggest coal mining hub.

In 2022, coal prices are predicted to continue to skyrocket due to high demand and decreasing supply. This increase certainly helped boost the national coal price. Citing data from the International Energy Agency (IEA), Indonesia exported 455 million tons of coal worldwide in 2019, and moved to 400 million tons in 2020 due to the COVID-19 pandemic. This position shows that Indonesia is a dominant coal exporter in the global market.

Meanwhile, China occupies the top position as a coal importing country in the world. Deteriorating relations between China and Australia have made Indonesia a major coal supplier, with China's coal imports from Indonesia rising 60 percent since late November 2021, according to Chinese Customs data.

It can be concluded that as long as coal is the main source of power generation in various countries, Indonesian coal will continue to be the world's prima donna.