Strategic Plans
    Category: Rightsizing the SOEs By : Gloria Haraito Read : 999 Date : Tuesday, August 06, 2013 - 06:57:01

    Ahmad Zamroni / Forbes Indonesia

    This year has been a busy one for Milawarma, the president director of coal miner PT Bukit Asam (Persero). The state-owned coal miner is now in the midst of a major expansion, much of it coming online in 2014. Next year the state-owned miner is scheduled to open a new 220 megawatt (MW) power plant, finish an upgrade on a 570 km long railroad, expand its port from 13 to 25 meters, and open a new coal bed methane operation. If all that weren't enough, this year Milawarma (who uses one name) oversaw the opening of a new 16 MW power plant and aims to raise coal sales by about 47%. “If all the power plant projects are completed, the company will have a new source of revenue in order to balance the decline in coal prices,” says Milawarma.

    Starting last year, Bukit Asam has added power plants to its coal mines. Its first power plant at Tanjung Enim has a capacity of 30 MW. Electricity from this mine-mouth plant, which cost $41 million to build, is used to power the company's own operations or sold to state utility PLN. The 16 MW plant about to open will be steam operated and is meant to power its port in Tarahan through a $33 million investment. The much larger 220 MW plant in Banjarsari will cost $239 million. Further down the road, in 2017, Milawarma hopes to have Bukit Asam open a massive 1,240 MW plant in a $1.5 billion joint venture with China Huadian Corp.

    While it's not unusual for coal miners to venture into power plants, Bukit Asam's foray into coal bed methane is less common. As methane is often a byproduct of coal mining, this extension of the business is a natural one. Bukit Asam estimates there is potential gas in place (GIP) of 0.8 trillion cubic feet (TCF) in its Tanjung Enim site and 1 TCF in a second site in Ombilin. To exploit the coal bed methane in Tanjung Enim, Bukit Asam will work with state energy firm Pertamina in a $15 million venture.

    Milwarma is also not neglecting the firm's core business of mining, a business that goes back to 1938, when Tanjung Enim was opened as its first mine by the Dutch colonial authorities. Bukit Asam has four large mines and produced about 15 million tonnes, or about 4% of total national output of 386 million tonnes last year, which was up 11% from 13.5 million tonnes in 2011. This year Milwarma aims to sell 21 million tonnes, a rise of 47%. Most of that output will be sold within Indonesia, which makes Bukit Asam somewhat unique, as most other big miners sell much of their output to international buyers. The company forecasts to have Rp 15 trillion in revenues this year, up 29% from last year's Rp 12 trillion.

    In order to boost 2013 production, Bukit Asam and state rail operator Kereta Api Indonesia (KAI) are now upgrading their 570 kilometer railway by adding lines, locomotives and carriages, with a Rp 8 trillion investment. By 2017, Milwarma hopes to have a second railway completed, the Bukit Asam Transpacific Railway (BATR). This railway is a joint venture with the Rajawali group, and will stretch a length of 280 km and cost around Rp 20 trillion. It will be designed to transport 25 million tonnes of coal per year, with construction starting next year. When both railways are completed, Milawarma is optimistic that sales can reach 48 million tonnes. “We need infrastructure to carry coal from the mine to the port. That's why we are building roads, railways and ports,” says Milawarma. The port expansion to 25 meters should also be ready by next year. With this expansion, Bukit Asam's jetty can accommodate vessels up to 150,000 dead weight tonnes (DWT) per annum, higher than the previous capacity of 80,000 DWT.