Clearing a Path to Success Through Kalimantan Swamps
With this increased focus on coal, in 1976 the Mines Department divided East and South Kalimantan into eight coal blocks and invited tenders for these blocks.
Spanish Government company Enadimsa bid for Block 8 in the Tanjung district of South Kalimantan, as coal was known to be present in the district from outcrops mapped by Dutch geologists in the 1930s and from intersections at depth in oil wells drilled by Pertamina in the 1960s.
No other company bid for this block; at that time it was regarded as being too far inland and the coal of low quality.
The name ‘Adaro’ was chosen as the company name by Enadimsa to honor the famous Adaro family, which had been involved in Spanish mining for several centuries, and PT Adaro Indonesia came into existence.
Adaro Indonesia’s Coal Cooperation Agreement (CCA) was signed on Nov. 2, 1982. Enadimsa conducted exploration work in the agreement area from 1983 to 1989, when a consortium of Australian and Indonesian companies purchased 80% of Adaro Indonesia from Enadimsa.
It was also decided to start production from the Paringin deposit as it had a slightly higher heat value than the Tutupan deposit and also because it had overburden that contained a burnt mudstone, a harder rock suitable in road construction. This mine development was fast-tracked in order to get the coal to the market as quickly as possible to develop a customer base.
Decisions were made to integrate with the community as much as possible, with all staff, expatriate or national, living in the local towns, and a recruitment focus on hiring from the local population with the attendant commitment to major training programs. Use of contractors to the maximum extent possible was also made a focus for the operations, particularly local contractors and local suppliers if available.
The first step in development of the coal deposit was to raise funds, and in May 1990 a number of banks were approached for project finance of US$28 million. However, all of the banks declined to provide funds on the grounds of perceived issues that related to the quality of the coal because Adaro’s type of sub-bituminous coal had not been traded internationally before in any significant volumes and because the domestic market was relatively small.
There were also doubts about the feasibility of the haul road construction primarily due to the fact the last 27 kilometers of the proposed road was through swamps which even if technically feasible, would mean a high cost of construction.
Banks were reluctant to fund the project over worries about the coal quality: Adaro’s type of sub-bituminous coal had not been traded internationally before. So the shareholders put up US$20 million development funds at commercial financial rates for the construction and development of Adaro’s operation with the requirement that any further funding come from cashflow.
Construction of the coal haul road started in September 1990 and took about a year due to difficulties laying road over 27km of swampland at the Barito river end. Construction of a two-million tonne per year crushing, stockpiling and barge loading system at Kelanis on the river began in March 1991.
Opening up of the Paringin pit with its single 30 meter thick seam started in March 1991 using local contractors, and the first coal was tested in stockpile conditions and was sent to Australia for combustion testing; the results came back with positive indications for its use in commercial boilers, and an official opening of the Paringin mine was held in August 1991.
During 1990 a marketing program had been developed that focused on potential markets where Adaro’s ultra-low sulphur and ash coal would have benefit. To aid marketing it was decided to adopt a brand name for the coal that would reflect these qualities and after the merits of “aquacoal” had been discussed and rejected, the name “envirocoal” was selected.
The first sale of Adaro’s coal was to Krupp Industries of Germany who were interested in its environmental qualities. The company’s vessel, MV Maersk Tanjong, self-loaded with its own gear and grabs and sailed to Europe on October 22nd with 68,750 tonnes of Envirocal.
Since those early days, the Tabalong mine has grown to be the southern hemisphere’s largest single-mine site, and production has grown from an initial 1 million tonnes in 1992, with some years recording extraordinary growth. In 2006, for example, Adaro Indonesia increased production by more than 28% from the previous year to 34.4 million tonnes.
Through to today, Adaro Indonesia’s production has kept a steady upward trend and in 2015 stood at 52 million tonnes.
Meanwhile, the past six years have seen us invest in acquiring five new coal properties, giving us a presence in each of Indonesia’s four main coal-rich provinces and boosting our coal resources significantly in order to secure Adaro’s continued future success.
The milestones in the panel on this page show some of the key developments along this successful journey.
Milestones1982 Adaro Indonesia received a Coal Cooperation Agreement (CCA) from the Indonesian Government, with a validity period until 2022.
1991 Adaro Indonesia obtained trademarks for Envirocoal because of its ultra-low ash and sulphur and low NOx.
1992 Adaro Indonesia started commercial production of the E5000 coal from Paringin pit — producing 1 million tonnes.
2005 The majority shareholders acquired Adaro Indonesia through a leveraged buyout in June 2005. The buyout entailed debt funding of US$923 million and equity of US$50 million.
2008 IPO of Adaro Energy on the Indonesia Stock Exchange raised Rp12.2 trillion (US$1.3 billion), with 35% of the company listed, to fund acquisitions to simplify the corporate structure into a single holding company with independent operating subsidiaries.
2010 Adaro Energy made its first venture out of South Kalimantan through acquisition of 25% of IndoMet Coal Project, a JV with BHP Billiton located in Central Kalimantan.
2011 Adaro Energy established its foothold in South Sumatra by acquiring two coal concessions, MIP and BEE.
2012 Adaro Energy signed option agreements to acquire up to 90% of BEP, a coal concession in East Kalimantan.
2013 Adaro Energy acquired the companies SCM, PCS and LSA, which have three IUPs at Balangan, near Adaro Indonesia’s operations.
2014 Adaro Power subsidiary TPI signs a power purchase agreement for a 2x100MW coal-fired power station in South Kalimantan.
2015Indonesian President Joko Widodo inaugurates construction of the Central Java Power Project, a 2×1,000MW coal-fired power plant owned by PT Bhimasena Power Indonesia, in which Adaro Power has a 34% stake.
Read More About Adaro
- Adaro at a Glance
Exploring for coal; mining and selling it; generating power from it. Understand our business in seconds.
- Our Vision
Adaro strives to deliver positive energy from Indonesian coal. See how our strategy helps us do that.
- Our Cleaner Coal Products
Our core product, Envirocoal, is the world’s cleanest solid fossil fuel. Find out what makes it remarkable.
- Our Reserves and Resources
We control or have options on 12 billion tonnes of coal in Indonesia. See where it is and how we plan to mine it.
- Our Market and Customers
We sell our coal to power providers and cement manufacturers in Indonesia and worldwide. Find out who and where.
- Our Corporate Structure
We own or have stakes in 21 vertically integrated subsidiaries. Find out how they operate and fit together.
We have a unique ownership based on five key shareholding families. Get to know our directors and commissioners.
Adaro has come a long way since first breaking ground. See how it has grown into one of Indonesia’s largest companies.
Adaro insists on world-class governance principles and standards, ensuring the best service for shareholders.
Adaro is consistently recognized for quality in mining, environmental care and as an employer. Read about our successes.
How do we find our coal? What CSR do we do? What is it like to work at Adaro? Find answers to these and more.
FGD, demurrage, overburden, GAR, panamax, calorific value: demystify coal’s complex terminology.