Letter from The Board of Commissioners

In 2008, Adaro Energy performed as expected in terms of operations and financial results despite difficult and challenging conditions. Production increased by 7% to 38.5 million tonnes, while consolidated revenue grew by 56% to Rp 18,093 billion. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) rose 84% to Rp 4,455 billion. Net Income increased significantly by 902% to Rp 887 billion.

Poised for Growth
With the success of our IPO in July 2008, which raised more than Rp 12,253 billion, Adaro Energy is poised to further integrate its business and reach its vision of becoming the largest and most efficient integrated coal mining and energy company in South East Asia.

Adaro Energy is currently Indonesia's second largest thermal coal producer, operates the largest single coal mine in Indonesia, and is a significant supplier of thermal coal to the global seaborne market. The Company is vertically integrated either directly or indirectly and controls all aspects of its business from exploration through to marketing. With a present capacity of approximately 45 million metric tonnes per year, the Company is executing plans to double production capacity to 80 million metric tonnes per year. The Company has approximately 3.5 billion tonnes of coal reserves and resources.

Adaro Energy is continuing to make infrastructure and other improvements along the coal supply chain to remove bottlenecks and improve efficiencies. Such improvements include investment in PT Sarana Daya Mandiri (SDM), operator of the Barito River Channel tollway which has removed tidal restrictions for loaded coal barges transiting from the river to the open sea, and investment in a new crusher at the Kelanis River port -when this new crusher installation is completed in February 2009 annual capacity will increase from 45 million metric tonnes to 55 million tonnes.

In addition to those investments, to further support operational efficiency and to boost production capacity, Adaro Energy is finalizing its power plant and

Governance and CSR
As a publicly listed mining and energy company, good corporate governance goes hand-in-hand with our Corporate Social Responsibility (CSR). Our commitments to support the local communities and preserve the environment in which we operate have also been demonstrated in the past, and continue to define our business practices and methods.

Adaro Energy has made commitments to integrate with the community and create sustainable community programs. The aim is to address the social, economic and environmental impacts and issues created in subsistence level rural communities by open cut coal mining and other operations such a way that they will provide positive benefits to the community both during and beyond the life of these projects. The basis for this is communication, by informing all levels of the community of all ongoing planning relating to the project developments and operations, and then listening to what the community requires. Importantly, an established support structure ensures that the two-way communication process remains an inherent part of community service programs. The key to Adaro Energy's community service program has been this two-way dialogue, which has ensured the success of its community based business development projects and its educational, religious and social welfare programs.

In addition to the community programs, Adaro Energy recognizes that coal mining will have an impact on the surrounding environment and local communities and applies strict standards on all phases of its operations through an Environmental Policy and Master Plan to ensure that negative impacts are minimized. Land affected by mining is reclaimed as soon as possible and made available to the local community. The reclamation includes planting of commercial crops, creating fish farms and developing recreational areas. Continuous monitoring of air and water quality as well as strict programs for air, water and waste handling and control are an integral part of the environmental program with an extensive range of equipment to handle all aspects of monitoring and analysis.

In line with our increased responsibility as a public listed Company, we have met the statutory requirements of the capital market and bourse authorities, and continue to build our governance structure in line with best practices. This includes the establishment of the Audit Committee and the Internal Audit Unit in January 2009, and plans to form the Nomination and Remuneration Committees as well as the Risk Management Committee in the future. We understand the need to improve our corporate governance and risk management. Although we believe that none of our core values are contradictive to the principles of good corporate governance, we always seek ways to better govern ourselves.

We believe good corporate governance should be more than just a set of procedures or policies that comply with prevailing rules and regulations. Most importantly good corporate governance should be practiced and become an inherent part of our business. It is our intention to develop good corporate governance as a perpetual system that ensures the interests of both our shareholders and stakeholders are safeguarded and to ensure the Company’s sustainability.

Change of the Board Members
The Extraordinary General Meeting of Shareholders in October 2008 approved the appointment of Lim Soon Huat as a new member of the Board of Commissioners. With experience of more than 15 years in the financial industry, we expect he will strengthen the oversight function of the Company.

Despite our ongoing improvements, we must remain attentive and alert in the coming years, especially while we are still facing the global financial crisis. The role of the BOC shall be continually improved by strengthening oversight. As the Company faces an increasingly uncertain economic outlook ahead, we need the capability to anticipate future trends and reflect these in the formulation of our business strategies. In light of this, the monitoring and controlling of the Company’s operations will become even more important in responding to future conditions.

The progress and the results we have achieved would not have been possible without the patronage and strong support from our customers and partners, and the commitment, dedication and hard work of the Board of Directors, Senior Management and staff. Finally, we would like to thank all of our stakeholders who have supported our endeavors in 2008, and count on their continuing trust and support to ensure our sustainable growth in years to come.