Net Revenue

As Adaro Energy’s business is almost entirely conducted in US Dollars, it would be relevant to discuss Adaro’s 2010 financial performance in US Dollar terms as it better represents and reflects the performance of the company.

Adaro Energy’s net revenue in full year 2010 increased 5% to US$2,718 million from US$2,591 million. However, due to the strengthening of Rupiah (Rp) in 2010, Adaro Energy’s net revenue declined 8% to Rp24.7 trillion. During 2010, the average Rupiah/US$ exchange rate strengthened 13% from Rp10,398 per US$ to Rp9,085 per US$.

The growth in net revenue in 2010 is attributable to the 4% and 6% increase in production and sales volume despite unseasonably wet weather patterns throughout the year at the site. The 6% increase in sales volumes is more than offset by the 3% decline in ASP to US$57.18 per tonne.

Initially, Adaro expected its 2010 ASP to be similar with 2009 as the continuing global economic recovery in the 4Q09 was anticipated to further boost Adaro’s 4Q10 ASP. However, Adaro’s 4Q10 ASP of US$58.26 did not follow the positive ASP trend of previous quarters due to two main reasons. With the wet weather condition restricting coal supply from the mine, Adaro was only able to deliver some of the higher-end priced contracts at the beginning of 2011 impacting the 4Q10 ASP. In addition, the heavy rainfall also had the impact of increasing total moisture content of the coal, thus some of the Envirocoal products incurred a discount adjustment as a result of the lower energy content on an “as received” basis. Further, the seemingly lower ASP was also due to the inclusion of the price of Envirocoal-4000.

The year 2010 was notable as it was the first year of commencement of production of Envirocoal- 4000, a lower calorific value and higher moisture coal compared to Envirocoal-5000,thereby commanding a lower ASP. This new product continues to receive strong demand from countries such as India, China, South Korea and Indonesia. Adaro sold 2.05 million tonnes of Envirocoal-4000 and that will be the key in Adaro’s goal of reaching 80 million tonnes a year in the medium term, with 25-30 million tonnes being expected from this coal by 2014.

Coal Mining and Trading: Adaro Indonesia and Coaltrade

In the 2010, the combined revenues from coal mining and trading segment, which were substantially all from Adaro Indonesia, slightly increased 3% to US$2.5 billion (or 10% decrease to Rp23 trillion). As a result of increased revenue contribution from Adaro Energy’s other business units, the contribution of coal mining and trading division accounted for 92% of Adaro Energy’s total revenues in full year 2010, slightly less compared to 94% contribution in the previous year.

In line with Adaro’s strategy of reducing customer concentration risk, Adaro maintains a geographically diversified customer base by supplying no more than 10% of its sales volume to any single customer. To capitalize and take

Adaro Energy had its best year ever in terms of revenues, which increase to US$2.7 billion due to 4% production growth despite the unprecedented and unusually wet weather

advantage of the geographical proximity to customers located in the region, Adaro has focused on developing its customer base in Asia as shown by the proportion of Adaro’s sales volumes to Asia including Indonesia further rising to 86% in 2010 compared to 84% in 2009. In addition, Adaro continued to be the largest supplier to the domestic market with 10.4 million tonnes being sold domestically during the year.

Mining Services: SIS

Adaro mining services division, conducted by Adaro Energy’s mining contractor SIS, generated revenues of US$304 million, a 15% increase over 2009 (or 1% to Rp2.8 trillion). After elimination of inter-company transactions, SIS generated revenue of US$141 million, a 26% increase due to increased volumes, reflecting improving economic condition and continuing firm demand for coal in spite of challenging operating conditions throughout the year due to bad weather.

Revenue from the mining service segment remained the second largest revenue contributor after coal mining and trading segment at 5% of Adaro Energy’s total revenues.

Others (Adaro Logistics): Coal terminal, Barging, Ship Loading, Dredging and Fuel trading

Adaro Energy’s other independent subsidiaries make up the Others segment which includes Adaro Energy’s port facility and coal terminal operation run by IBT, the barging and ship loading division operated by OML, HBI and MBP, the dredging company run by SDM, and fuel trading managed by ATA.

Total revenue from Adaro logistics segment increased 37% to US$204 million (or 20% to Rp1.9 trillion). After elimination of inter-company transactions, this translates to net revenue of US$69 million, a 50% increase from the previous year (or 31% to Rp628 billion).

The barging and shiploading division increased coal transported and loaded by 12% and 11% to 11.59 million tonnes and 12.65 million tonnes respectively.

Meanwhile, total coal shipped at IBT port increased 34% to 6.23 million tonnes and the number of vessels loaded increased to 95 vessels from 72 vessels compared to last year due to increased marketing efforts and the opening of IBT’s fuel tank terminal operated in cooperation with Shell at the Pulau Laut terminal in August 2010.

Cost of Revenue

Adaro Energy’s cost of revenue for the year ended December 31st, 2010 increased 22% to US$1,867 million (or 7% to Rp16,957 billion) attributable to a 4% increase in production volume, increase in planned stripping ratio, longer hauling distances and additional weather related costs. Higher than normal demurrage fees also contributed to the cost of revenue increase. As a result, Adaro Energy’s cash cost excluding royalties increased 17% to US$35.29 per tonne in 2010 compared to US$30.26 in 2009.

Coal Mining and Processing

Coal mining cost increased 21% to US$826 million (or 6% to Rp7,501 billion), reflecting longer hauling distances and the increase to the stripping ratio at Tutupan pit from 5.0x to 5.5x. Adaro also incurred additional weather related costs during 4Q10 due to pit dewatering efforts, construction of pipelines as well as settling ponds. Despite record-setting high volume of rainfall and number of raindays, Adaro was able to increase overburden removal and coal production by 8% and 4% respectively.

Similarly due to production increase, coal processing costs also increased 28% to US$125 million (or 12% to Rp1,136 billion). Coal processing costs largely consisted of coal crushing at Kelanis as well as other costs not borne by the mining contractor including cost for repair and maintenance of the hauling road.

The costs of coal mining and coal processing increased 22% to US$ 951 million (or 6% to Rp8,637 billion) and accounted for nearly half of Adaro Energy’s total cost of revenue at 51%.

Freight and Handling

Cost of freight and handling, which accounts for 15% of total cost of revenue, increased 6% to US$274 million (or 8% decrease to Rp2,489 billion).

All barging and shiploading contractors’ cycle time improved during 4Q10 due to the shipment schedule being better matched with production which helped reducing the average demurrage rate per vessel compared to the previous quarter. In 4Q10, freight and handling costs increased 39% to US$78 million or Rp698 billion compared to 3Q10 as demurrage fees was accounted for as part of freight and handling cost. Unlike 3Q10, demurrage fees incurred during 4Q10 were not recorded as an extraordinary item since fourth quarter has traditionally and historically been the wet season of the year. Adaro incurred demurrage fees of US$10.8 million, US$4.8 million and US$2.5 million in the months of October, November and December respectively, totaling to US$18 million during 4Q10.

In addition to the higher demurrage fees incurred in 2010, the 3% increase in total coal transported during the year to 42.44 million tonnes and 5% increase in total coal loaded using floating crane to 23.06 million tonnes also contributed to the increase in cost of freight and handling.

As part of executing Adaro’s strategy of continuously improving the efficiency of its coal supply chain, on November 18th 2010, Adaro Indonesia signed three new innovative long term barging contracts which would improve flexibility and efficiency of the barging operation. It is expected that freight rates will decrease by up to 15% on the associated tonnages covered by the new contract due to higher utilization of the existing and future barge fleets.

Royalties to the Government

Royalties paid to the Government of Indonesia slightly increased 1% to US$264 million (or 11% decrease to Rp2,399 billion), in line with the 3% increase in net revenue of coal mining. In accordance with the agreements specified in the Coal Cooperation Agreement (CCA), royalties are to be calculated using a rate of 13.5% levied against the net sales price at Kelanis River Terminal, Adaro’s final coal processing facility.

Purchases of Coal

Purchases made by Coaltrade to buy third party coal for either blending or marketing purposes rose by 382% to US$86 million (or 321% to Rp778 billion), partly conducted to help Adaro’s customers affected by shortfalls at Adaro’s Tutupan mine, Coaltrade’s third party coal purchases rose 305% to 1.39 million tonnes.

Mining Services: SIS

Adaro Energy’s mining services division is associated with the company’s mining contractor, SIS. The cost of revenue from this segment increased 36% to US$121 million (or 19% to Rp1,101 billion) due to increased third-party business and hence higher consumables, employee cost, repair and maintenance costs.

Depreciation and amortization of SIS’ heavy equipment also increased 35% to US$29 million (18% to Rp263 billion) as SIS continued to purchase newer and larger sized fleets of heavy equipment as part of its growth plans.

Others (Adaro Logistics): Coal Terminal, Barging, Ship Loading, Dredging and Fuel Trading

The costs associated with the other businesses account for 3% of the total cost of revenues. Largely due to the 93% increase in consumables to US$45 million (or 69% to Rp407 billion) for fuels purchased by ATA. Adaro Energy’s cost of revenue for the Others segment increased 62% to US$57 million (or 41% to Rp521 billion).

Operating Expenses and Operating Income

Total operating expenses in 2010 slightly declined 1% to US$105 million (or down 14% to Rp958 billion). This is due to the decrease in selling and marketing expenses, despite being slightly offset by the increase in general and administrative cost.

Selling and marketing expenses declined 11% to US$55 million (or 22% to Rp498 billion) due to the restructuring of Coaltrade’s sales agents’ contracts

which reduced sales commission fee by 12% to US$52 million in 2010.

General and administration expenses increased 12% to US$51 million (or decrease 3% to Rp460 billion) due to the 38% increase of employee costs to US$28 million in 2010. Adaro Energy and its subsidiaries continuously recruits highly skilled and qualified people to support the growth and has increased its permanent workforce to 6,242 people in 2010 from 6,004 in 2009.

Operating income declined 22% to US$746 million (or 32% to Rp6.7 trillion) due to the 20% drop in gross profit. Subsequently, operating margin declined to 27% in 2010 from 37% the previous year as the 22% rate of growth in cost of revenue outpaced the 5% growth in net revenue due to higher mining costs, longer overburden hauling distances, increased stripping ratio, additional weather related costs and higher demurrage fees incurred.

Other Income / Expenses

Adaro Energy’s Other Expenses increased 46% in 2010 to US$190 million (or 28% to Rp1,724 billion). The increase is mainly due to the higher finance costs and foreign exchange losses recorded during the year.

Finance costs increased 31% during the year from US$88 million in 2009 to US$115 million in 2010 (or 14% to Rp1.1 trillion), attributable to the first full year impact of the interest expense of the US$800 million 10-year senior notes Adaro Indonesia issued in October 2009 which were the first 10-year US dollar private sector corporate bond out of Indonesia after the Asian Financial crisis and the country’s largest ever 10-year US Dollar bond.

Due to the strengthening of the Rupiah and the weakening of the Euro against the US Dollar, Adaro Energy recorded a foreign exchange loss of US$3 million or Rp28 billion. The intention of Adaro’s Euro-cash holdings is to cover foreign exchange exposure related to equipment purchases for the mine-mouth power plant project and to protect Adaro’s budget. Due to the timing of the transaction, foreign exchange losses were also recorded as Adaro bought Rupiah to make the budgeted annual dividend payment. Furthermore, Adaro also provided (accounting losses while presenting accounts in IDR) a foreign exchange loss due to funds held in escrow for the acquisition of Adaro’s 25% share in the IndoMet Coal project.

Loss on disposal of fixed assets increased 782% to US$5.6 million due to the sales of older heavy equipments made by SIS as the company purchased and utilized more of the new and larger sized fleets of heavy equipment.

Amortization of goodwill increased 11% to US$54

million (or 3% decrease to Rp490 billion). Adaro Energy’s goodwill reflects the acquisition activities carried out to complete Adaro’s vertically integrated coal supply chain, and the differences between the acquisition price and the book value of various subsidiaries which were acquired.

Extraordinary Item

Unseasonably high amounts of rainfall and raindays, especially between July and September 2010 adversely affected production and delayed coal loading and shipment. Due to long vessel queues, Adaro Energy incurred extraordinary demurrage charges, net of tax of US$19 million (or Rp172 billion). Before tax, Adaro expensed US$34 million (or Rp312 billion) for the higher than normal demurrage charges incurred during 3Q10. In 2010, Adaro Indonesia incurred total demurrage charges of US$63 million (with US$34 million accounted for as extraordinary) due to long vessel queues at Taboneo anchorage.

Adaro began sending letters to notify its customers to delay shipments of their vessels since 3Q10 and the queue had gradually shrunk by the end of the year. Average waiting times per vessel in the months of October, November and December were 11 days, 8 days and 5 days respectively, all higher than the average waiting time during normal conditions, but better than the average waiting times in the months of 3Q10 as some shipments had been pushed back and rescheduled for 2011 deliveries.

Net Income

Despite being slightly offset by the 6% higher sales volume in 2010, the 3% decline in Adaro’s average ASP as well as higher mining costs resulted in 20% lower gross profit for the year to US$851 million.

The decline in gross profit coupled with higher finance costs, increased amortization of goodwill following the acquisition of OML, as well as extraordinary demurrage charges incurred during the year have resulted in Adaro Energy’s net profit to decline 42% to US$243 million (or 49% to Rp2,207 billion) in 2010.

Adaro Energy’s effective tax rate rose to 53% compared with 48% last year. This is largely due to the non-deductibility of amortization of goodwill, which grew relative to the declining pretax income, as well as the non-deductible tax adjustment of ATA and IBT.

BALANCE SHEET

Total Assets

Adaro Energy’s total assets remained flat at US$4,516 million by the end of 2010 (or 4% decrease to Rp40.6 trillion) due to the 20%, or US$556 million increase in total noncurrent assets being offset by the 33%, or US$547 million decrease in total current assets.

Total non-current assets increased 20% to US$3.4 billion (or 14% to Rp30.4 trillion) largely due to investments for the 25% stake Adaro made in May 2010 which was reflected in the increase of investments in associates. Additionally, advances and prepayments also increased due to remaining advances of US$47.1 million as at the end of 2010 placed by ATA for the IndoMet Coal project for use as an initial capital outlay.

Total current assets declined 33% to US$1.1 billion (or 35% to Rp10.2 trillion) due to the utilization of cash and cash equivalents by half from US$1.2 billion at the end of 2009 to US$607 million at the end of 2010.

Cash and Cash Equivalents

Adaro Energy’s cash and cash equivalents at the end of 2010 decreased by 49% to US$607 million (or 52% to Rp5.5 trillion) compared to the same period last year. The decline in the amount of cash was due to the payment for the 25% stake in the IndoMet Coal project, capital expenditure, repayment of bank loan and dividend payment.

As most of Adaro Energy’s business operations are conducted in US Dollars, Adaro held the majority or 82% of its cash and cash equivalents in US Dollars, with the remaining 10% held in Rupiah, 7% held in Euro and 1% held in Singapore Dollars.

Combined with an undrawn US$460 million committed standby amortizing revolving credit facility, which will help Adaro to maintain ample liquidity, Adaro Energy had access to cash of more than US$1 billion as at the end of 2010, allowing Adaro to seize on strategic investments opportunities that may arise in the future.

Trade Receivables

In 2010, trade receivables declined 10% to US$275 million (or 14% to Rp2.5 trillion). These receivables are largely associated with Adaro Indonesia’s customers and SIS’ domestic third party customers from different industries ranging from cement, pulp and paper as well as blue chip power utilities.

Owing to a strong and loyal customer base Adaro Indonesia had built over the years, Adaro had minimal issues with regards to payments from customers as evidenced by 98% of the total trade

“With outlook for coal remaining more robust than ever, we look forward to deliver a strong performance and solid EBITDA margin in 2011. The acquisition of a 25% stake in the IndoMet Coal project enables us to diversify our product portfolio with metallurgical coal."

Garibaldi Thohir, President Director

receivables being current or less than 30 days overdue as at December 31st, 2010 and even for the remaining amount, the management remains comfortable on its collectability .

Advances and Prepayments

Advances and prepayments for both current and non-current portions rose 141% to US$119 million (or 131% to Rp1,067 billion) largely due to advances for investments in associates, which refer to remaining funds placed by ATA for future development of IndoMet Coal project’s coking coal project amounting to US$47 million or Rp423 billion as at the end of 2010.

Advances to suppliers also increased 60% to US$36 million (or 53% to Rp325 billion) due to advance payments for the steam turbine generators for the mine-mouth power plant, which had been ordered from Siemens and was on delivery to the site, as well as for heavy equipments. MSW’s 2x30 megawatt (MW) power plant was on track to commence by 2012 and is expected to consume approximately 300,000 tonnes of Envirocoal-4000 per year.

Fixed Assets

Adaro Energy’s fixed assets grew 24% to US$980 million (or 19% to Rp8.8 trillion) during the year. In 2010, Adaro Energy spent US$119 million (Rp1,080 billion) on purchases of new heavy equipments, machineries and vehicles, US$30 million (Rp274 billion) to upgrade its crushing and processing facility at Kelanis, and US$42 million (Rp385 billion) for additional leased operational equipments.

As part of its risk management effort, Adaro Energy’s fixed assets were adequately insured from all risks for damage with total coverage of approximately US$1 billion (Rp9.1 trillion), which also included the mine mouth power plant project being constructed by MSW. The exception was for certain fixed assets that could not be insured such as land, Barito channel dredging and parts of construction in progress.

Investments in Associates

In executing one of Adaro’s main strategies to continually increase its reserves and resources by investing in large quality deposits of coal in Indonesia, Adaro Energy, through its subsidiary, PT Alam Tri Abadi (ATA) finalized the acquisition of 25% of the IndoMet Coal project in May 2010 following confirmation of Government approval, with the remaining 75% held by BHP Billiton. The IndoMet Coal project comprises seven joint venture companies, each holding a Coal Cooperation Agreement (CCA) across Central/East Kalimantan.

This deal allowed Adaro to diversify its asset portfolio to include metallurgical coal operations. Adaro Energy, together with BHP Billiton continued the study phase to determine development options of this world class coking coal asset, which is expected to generate significant shareholder value.

Adaro Energy continues to look for potential acquisitions and investments of coal deposits within Indonesia using three selection criteria: size, location and quality of assets.

Liabilities

Adaro Energy’s total liabilities declined 8% to US$2,444 million by the end of 2010 (or 12% to Rp22 trillion), which is equivalent to 54% of total assets. Current liabilities declined 24% to US$644 million (or 27% to Rp5.8 trillion) due to the reduction in taxes payable and full repayment of short-term bank loans despite being slightly offset by increase in accrued expenses, while non-current liabilities remained flat at US$1.8 billion or Rp16.2 trillion.

Trade Payables

Adaro Energy third party trade payables grew 19% to US$256 million (or 14% to Rp2.3 trillion), while related party trade payables declined 20% to US$12 million (or 24% to Rp109 billion). Most of the trade payables arose from purchases of fuel, coal mining services, coal transportation services, spare parts as well as repair and maintenance services.

Accrued Expenses

Accrued expenses rose 155% to US$82 million (or 144% to Rp738 billion) due to an increase in excess of five times in accrued freight cost to US$54 million (or Rp482 billion). This was a result of demurrage charges incurred especially during 3Q10 when there were long queues of customers’ vessels as a result of production constraint affected by wet weather.

Short-term Bank Loans

Adaro fully repaid its US$80 million syndicated short-term loan facility on its maturity in February 2010, and as at the end of 2010 Adaro had no short-term bank loans on its balance sheet.

Taxes Payable

Adaro Energy’s taxes payable declined significantly by 94% to US$15 million compared to 2009 (or 94% to Rp136 billion), due to the decline in Adaro’s corporate income tax as a result of the lower net profit.

By the end of 2010, Adaro and its subsidiaries had paid US$555 million or Rp5.0 trillion of income taxes, which included the final payment of 2009 corporate income taxes as well as provisional payments for 2010. Adaro Indonesia pays a 45% income tax rate in accordance with its Coal Cooperation Agreement (CCA).

Current Maturities of Long-term Borrowings

By the end of 2010, Adaro Energy’s current maturities of long-term borrowings declined 17% to US$191 million (or 21% to Rp1.7 trillion) compared to the end of 2009. This is a result of the 23% reduction in current maturity of long-term bank loans to US$150 million (or Rp1.3 trillion) after the increase in the maturity profiles of of Adaro Indonesia and Coaltrade’s syndicated bank loan.

Effective October 7th 2010, Adaro Indonesia and Coaltrade successfully extended the maturity profile and amortization schedule of its US$750 million facility from December 2012 to December 2015 after receiving lenders’ consent. With this extension, the outstanding term loan of US$412.5 million and revolving credit facility of US$100 million have been converted into a term loan and the combined outstanding amount of the term loan is now US$487.5 million per December 31st 2010.

SIS also refinanced its existing US$300 million five-years term loan entered in 2008 with a US$400 million seven-year loan effective February

Ariya Somanatta
GENERAL MANAGER - CORPORATE INTERNAL AFFAIRS

Ariya earned his Master of Science in Accounting majoring in Taxation from the University of Indonesia. Prior to joining the Adaro Group, he gained experiences from the big four accounting firms as a Senior Auditor and a Tax Manager. He also has acquired over 10 years of extensive experience as a registered tax consultant in Indonesia and as a public practice as an accountant in Australia. Moreover, he is also a member of National Institute Accountants of Australia and Associate Taxation Institute of Australia

18th,2011. The loan consists of US$300 million term loan and US$100 million step down revolving facility and is secured by Adaro’s mining contract with SIS. This long-term source of funding is guaranteed by Adaro Energy and will be used for capital expenditure needs and refinancing all SIS’s existing loans. The transaction was supported by 12 banks. Banks involved in this new financing include existing lenders such as Oversea-Chinese Banking Corporation Ltd., The Hongkong and Shanghai Banking Corporation Ltd., DBS Bank Ltd., Sumitomo Mitsui Banking Corporation, PT Bank UOB Buana, The Bank of Tokyo-Mitsubishi UFJ, Ltd., PT Bank Mandiri (Persero) Tbk, PT ANZ Panin Bank, Credit Agricole Corporate and Investment Bank, Standard Chartered Bank, (all as Mandated Lead Arrangers) and Chinatrust Commercial Co., Ltd., and Societe Generale (as Lead Arrangers).

Long-term Borrowings

Adaro Energy’s long term borrowings declined 4% to US$1.6 billion (or 8% to Rp14.3 trillion). This is due to the repayment of bank loans by Adaro. Adaro Energy’s outstanding bank loans as at the end of 2010 declined 9% to US$717 million (or 13% to Rp6.5 trillion) compared to the end of 2009.

Derivative Liabilities

Adaro Energy’s derivative liabilities for both current and non-current portions declined 9% to US$16 million (or 13% to Rp146 billion), due to the decline in derivative liabilities from interest rate swap for syndicated loan.

To minimize interest rate exposure and ensure Adaro’s financing costs were fixed within the predetermined budget, Adaro entered into an interest rate swaps from variable to fixed rates with its relationship banks. For instances, Adaro entered

into interest rate swap in March 2008 with US$750 million syndicated loan facility and in January 2009 with US$300 million senior credit facility as the underlying assets to lock into a fixed interest rate payment to hedge against fluctuation of a floating LIBOR rate.

Accrued Stripping Costs

Adaro Indonesia’s planned stripping ratio at Tutupan had been increased from 5.0x at the end of 2009 to 5.5x in 2010 as Adaro directed its five mining contractors to excavate from deeper areas of the Tutupan pit.

In 2010, Adaro Indonesia increased overburden removal 8% to 225 million bank cubic meter (Mbcm). Accordingly, actual average stripping ratio at Tutupan increased from 5.13x in 2009 to 5.52x in 2010. Despite the rise in stripping ratio, it was still well below the average of Indonesian coal mines, which is one of the reasons Adaro had been able to maintain its position as one of the lowest cost coal producers.

As the actual average stripping ratio in 2009 and 2010 were both higher than the planned stripping ratio, this had the effect of gradually reducing Adaro’s accrued stripping costs and as at December 31st, 2010, Adaro Energy’s accrued stripping costs declined 12% to US$34 million (or 16% to Rp308 billion) compared to the previous year.

CASH FLOWS

Cash Flows from Operating Activities

In 2010, net cash flows provided by operating activities decreased 58% to US$285 million (or 64% to Rp2.6 trillion) due to the increase in payment for income taxes, finance costs, royalties payment and payment to suppliers, despite being partly offset by the increased receipts from customers.

Payments to suppliers increased 21% to US$1.6 billion (or 6% to Rp14.1 trillion) attributed to higher production volume and increased purchase of third party coal by Coaltrade. The demurrage fee related payment caused by unprecedented wet weather also contributed to the increase in payment to suppliers.

Due to the addition of new employees and salary increases as Adaro continued its business expansion, payments to employees increased 35% to US$82 million (or 18% to Rp741 billion).

Payments of royalties increased 23% to US$165 million (or 7% to Rp1.5 trillion) due to royalties made based on the combination of a portion of 2009’s net revenues which were at a historical high, as well the majority of 2010’s net revenue. Similarly, payments of corporate income taxes doubled to US$555 million (or up 76% to Rp5.0 trillion), partly due to high 2009 income taxes that were paid in 2010.

Payments of finance costs increased 68% to US$118 million (or 47% to Rp1.0 trillion) due to coupon payments of the senior notes which are paid on 22nd April and 22nd of October every year, the first of which was paid in April 2010. As of December 31st, 2010 Adaro had made two coupon payments for its senior notes.

Combined with higher net revenues from SIS and other Adaro Energy’s businesses, the 6% increase in sales volume generated by Adaro Indonesia had resulted in 11% increase in receipts from customers to US$2.8 billion, despite being slightly offset by a lower ASP.

Cash Flows from Investing Activities

Net cash used in investing activities soared 465% in 2010 to US$656

million (or 394% to Rp6 trillion) due to investments made to BHP Billiton for the 25% shareholding in the IndoMet Coal project, and payment made for initial capital expenditure needs on this undeveloped coking coal project in Central/East Kalimantan, and 133% increase in capital expenditure in 2010.

Capital expenditure for the full year 2010 amounted to US$297 million or Rp2.7 trillion, which is more than double 2009 total capital expenditure of US$137 million or Rp1.4 trillion. This amount included spending for purchases made for new heavy equipments to support Adaro’s expansion plans, and maintenance of Kelanis crushing facility as well as maintenance of Adaro’s 80-kilometers privately owned hauling road connecting Adaro’s mining site at Tanjung and the Kelanis crushing river terminal.

Cash Flows from Financing Activities

Net cash used in financing activities in 2010 amounted to US$225 million or Rp2.0 trillion, in contrast with proceeds of US$349 million or Rp3.6 trillion generated from financing activities from the previous year. The decrease is due to the 79% or US$154 million decrease in receipt from bank loans as well as the issuance of the 10-year bond which generated proceeds of US$785 million or Rp7.4 trillion in October 2009, later to be used for Adaro’s coal supply chain improvement projects.

In 2010, SIS withdrew US$40 million (Rp363 billion) from the existing US$300 million SIS syndicated bank loan facility to fund SIS’ heavy equipment purchases.

In 2010, Adaro had increased its dividend payment by 29% to US$95 million (or 13% to Rp859 billion), which were paid on 18th June 2010 (final dividend of Rp543 billion paid for the year 2009) and 10th December 2010 (interim dividend payment of Rp315 billion for the year 2010).

These cash outflows were partly offset by the 65% decrease in repayment of bank loans in 2010 and the payment of notes redemption in 2009. On 21st October 2009, Adaro made full repayment for OML’s senior credit facility amounting to US$85 million, as well as full repayment for OML’s $40 million notes, which reflected the payment of notes redemption in 2009 of US$40 million or Rp395 billion and repayment of bank loans of US$380 million or Rp3.9 trillion in 2009.

http://www.adaro.com/investor_relations/pressrelease

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