Bukit Asam Secures 10-Year Coal Supply Contract With PLN

State-controlled coal miner Bukit Asam has secured a 10-year contract to supply coal for Indonesia Power, a subsidiary of state utility firm Perusahaan Listrik Negara. Bukit Asam agreed to supply 51.8 million metric tons of coal in total, equal to between 5 million and 6 million tons of coal a year, for the Suralaya coal-fired power plant in Merak, Banten. Eight units operate at the Suralaya compound with a combined capacity of more than 4,800 megawatts.

Bukit Asam said the coal price will be based on the government’s monthly benchmark, which currently stands at $90.09 per ton. The contract will boost the partnership between Bukit Asam and PLN. As of last year, Bukit Asam was the biggest coal supplier for PLN, feeding some 5.7 million tons of coal to PLN’s facilities across the country.

The deal represents the second coal-sales contract for Bukit Asam in a year. The company inked a 30-year contract to supply 68.6 million tons of coal for state-owned fertilized producer Pupuk Indonesia in December last year. At the coal miner, in which a 65 percent stake is held by the government, net income fell 6 percent to Rp 2.9 trillion ($299 million) last year as sluggish demand from China and India put pressure on global coal prices. The income drop occurred despite a 10 percent increase in revenue.

Bukit Asam’s sales volume was 15.3 million tons last year, a slight increase from 13.5 million tons a year earlier, 53 percent of which went to local buyers. The company is seeking a sales volume of 20.68 million tons this year, a 35 percent increase from 2012.

Last year’s price drop prompted coal miners to seek more value-added processes, exploring opportunities in the power-generation business. Bukit Asam was among the most aggressive in this area. It has laid out plans to develop two mine-mouth coal-fired power plants in Sumatra with a combined capacity of 1,460 megawatts. Bukit Asama has also signed a memorandum of understanding with PLN and a Malaysian utility firm to develop a 1,200-megawatt coal-fired power plant, which will produce electricity for exporting to Malaysia.