Adaro plans $1bn float in Indonesia

Adaro Indonesia, one of the world’s largest producers of thermal coal, hopes to raise up to $1bn by selling shares in its holding company in what would be the country’s biggest initial public offering, a source close to the deal said on Monday.

At $1bn, the float of part of Alam Tri Abadi, the holding consortium, would be more than double the size of the country’s previous biggest IPO for Bank Rakyat Indonesia, which netted Rp4,170bn ($463m) in 2003.

Adaro estimates that production this year will be 36m tonnes. That is nearly 60 per cent of the amount produced by Bumi Resources, which is worth $5bn.

Analysts say Adaro is a much better quality asset than Bumi and so Alam Tri Abadi might offer less than 30 per cent of its shares.

The IPO is likely to take place early next year provided a legal dispute that dates back to the Asian financial crisis is resolved. Judges are expected to deliver their verdict in the next two months.

“As long as they can deal with the issues of ownership, I think it will get global attention, because coal is so hot at the moment,” said Michael Chambers of CLSA in Jakarta.

If the flotation goes ahead, Alam Tri Abadi is expected to use proceeds from the deal to restructure debt and expand into activities outside the energy sector.

Adaro began mining coal in South Kalimantan, Borneo, in 1991 and has 3bn tonnes of resources, according to its website.

The company claims the coal is some of the world’s cleanest, with 0.1 per cent sulphur and 1.2 per cent ash levels.

Thermal coal prices soared to $70.88 a tonne at the Australian port of Newcastle – the world’s largest export centre – on June 29, according to the global Coal Newc index, an increase of 72 per cent this year.

Reduced Chinese exports and increasing Indian demand have been two of the main drivers of the price.

Indonesia’s coal production has more than doubled since 2001 to 193m tonnes last year, according to the country’s coal mining association.

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