IndoMet Coal Project with BHP Billiton

On March 31st, 2010, BHP Billiton announced it had entered into binding agreements to create a new joint venture for its IndoMet Coal project with PT Alam Tri Abadi, a wholly owned subsidiary of Adaro Energy. Adaro agreed to acquire a 25% interest in the this joint venture for US$350 million inclusive of tax, while BHP Billiton holds the remaining 75%. The IndoMet Coal project covers seven Coal Contracts of Work (CCoWs) located in East and Central Kalimantan in Indonesia where undeveloped metallurgical and thermal coal resources are estimated at 774 million tonnes. The formation of this new joint venture was approved by the Indonesian Government in May 2010.

Effective June 11th 2010, Mr. Garibaldi Thohir was appointed a Commissioner and Mr. Chia Ah Hoo and Mr. M. Syah Indra Aman were appointed Directors to the existing Boards of each of the 7 concession companies that comprise the IndoMet

Boosting Capacity at Kelanis River Terminal

A new set of barge loaders at South Kelanis will be added to support Adaro's plan to increase production to 80 million tonnes a year. Coal Project. The work to identify development options made good progress and Adaro will inform the market of the results of the study phase at the appropriate time.

Moving Further Downstream: Pit to Power

With the current power supply shortage and huge growth expected in the Indonesian power sector, Adaro aims to create sustainable value from Indonesian coal by moving further downstream into power. According to PLN's blueprint of National Energy Management for 2010-2019, coal, and specifically low rank coal, is expected to continue to play a dominant role to contribute 59% of total energy production by 2019, growing from 46% in 2010. By moving into power, Adaro intends to make investments that will provide healthy returns, a steady source of reliable cash flow and create significant base demand for low rank coals.

As at the end of 2010, Adaro had evaluated three IPP (Independent Power Producer) projects located in Java and Kalimantan. Adaro agreed to take a stake in consortiums with international recognized, power companies for these projects and plans to submit bids in 2011. Together with its consortium partners, Adaro intends to build supercritical power plants which typically have higher construction costs but have higher efficiency and produce less pollution emissions compared to subcritical power plants, when fueled by lower rank sub bituminous coals such as E 4000 (Wara).

Coal Deposits Acquisitions

As part of its overall strategy to achieve long-term and sustainable growth from Indonesian coal, Adaro was actively on the lookout for potential acquisition of coal deposits in Indonesia in 2010. As a resource based company, Adaro recognizes that the quantity of coal reserves are finite and nonrenewable. Although the company will continue to focus on organic growth and improving the efficiency and integration of the coal supply chain, Adaro foresees opportunities to diversify from a single-site operation by expanding its reserves base through acquisition. Future production growth through acquisition may also play a role and help Adaro to increase coal production capacity to 80 million tonnes a year in the medium term. Adaro uses three selection criteria when selecting investments of coal deposits: size, location and quality of assets.

According to the Directorate General of Mineral, Coal and Geothermal presentation during Coaltrans 2010, Indonesia has abundant coal resources and reserves of 104 billion tonnes and 20 billion tonnes respectively, the majority of which are medium

and low rank. Adaro aims to apply its specialized knowledge and expertise gained from developing its existing deposit to develop other inland low rank coal deposits and turn these into profitable operations. By the end of 2010, Adaro had identified several potential acquisition targets of coal deposits located in Kalimantan and South Sumatra.

Coal Enhancement

As the Tutupan mine's future production growth will be constrained, with only moderate levels of growth, Adaro's plan to reach 80 million tonnes a year is largely dependent upon production growth from the Wara deposit. Coal from Wara has a lower heat value and higher moisture, although still high quality, thermal coal. Adaro recognizes if the moisture can be permanently removed, the market for E 4000 (Wara) coal and other similar low rank coals would be increased. As at the end of 2010, Adaro continued to research the best technology and methods to enhance, or more accurately, dry the coal.

Coal Bed Methane (CBM)

CBM could be used to fuel a portion of the trucking fleet, improve efficiency and sustainability and reduce Adaro's dependency on oil. During 2010, Adaro further considered the feasibility of developing a CBM facility at the mining concession area and has had discussions with several key players in this sector on project feasibility.

Coal Briquetting

Adaro continued to research the best technology and methods to enhance, or more accurately, dry the coal.