ENERGY FOR CHANGE March 2018 1 Key questions: What is Adaro - PowerPoint PPT Presentation

ENERGY FOR CHANGE March 2018 1

Key questions: • What is Adaro Energy guidance for 2018? • What is the outlook for coal industry? • What is the progress of Adaro Energy’s projects? • What is Adaro Energy’s strategy and future plans? 2

Adaro Energy 2018 guidance Coal production (Mt) Consolidated planned strip ratio (bcm/t) 56.2 5.6 5.7 5.2 54 - 56 4.9 4.6 4.5 52.5 52.3 51.8 51.5 2013A 2014A 2015A 2016A 2017A 2018F 2013A 2014A 2015A 2016A 2017A 2018F Operational EBITDA (US$ billions) Capital expenditure (US$ million) 750 – 900 1.3 – 1.5 1.3 0.9 0.9 0.8 0.7 229 185 165 146 98 2013A 2014A 2015A 2016A 2017A 2018F 2013A 2014A 2015A 2016A 2017A 2018F 3

Strong price momentum has continued 120 750 110 700 100 650 90 600 80 550 US$ RMB 70 500 60 450 50 400 40 350 30 300 Global Coal Newcastle (US$) QHD 5500 NAR (RMB) • Coal price remains resilient supported by supply tightness and firm coal demand. • Seaborne thermal coal demand increased by 3% y-o-y in 2017 to ~919 Mt (Wood Mackenzie). • Supply is expected to remain tight due to continued supply reform in China as well as funding and operational constraints. • Domestic thermal coal price in China has been persistently higher than China’s guided price band. 4

Long term coal demand outlook remains robust… Seaborne thermal coal demand by country (Mt) • As China’s dominant role in the seaborne market gradually cedes, Southeast Asia and India will become the key drivers. • Electrification in the developing world continues to drive coal demand. Despite renewable energy push, coal will still be preferred due to its affordability. • Wood Mackenzie estimates modest growth in global seaborne thermal coal demand to reach 1.1 Bt by 2035. − The main risk is domestic policy in China and India. • IHS Markit estimates 300 GW of new coal plants are under Note: JKT (Japan, Korea, Taiwan); SEA (Southeast Asia); RoW (rest of the world) construction in Asia today. Source: Wood Mackenzie Thermal Trade H1 2017 Long-term Outlook 5

…especially from Southeast Asia • Coal remains as the fuel of choice Coal capacity additions inSoutheast Asia per annum for developing economies in Southeast Asia. – Affordable and abundant. • Between 2018-2020 there will be ~13GW of coal fired capacity commissioning in SEA. • Total SEA coal import in 2017 reached 87 Mt, 16% increase y-o-y. • Wood Mackenzie expects long term import demand growth of 125 Mtpa from SEA and India between 2017 and 2035. • Coal’s share in SEA power market will increase to approximately 50% from currently 32%. • Electricity demand in SEA has grown at an average rate of 6% per annum. Source: WoodMackenzie Energy Market Service 6

Quick look on Indonesia • Indonesia generation-mix and exports (TWh, Mt) Indonesia will need to constantly balance its export and domestic market, especially in the near term when exports remain high. » With nearly 50 GW of coal capacity additions and domestic demand growing 2.5 times between now to 2035 • Despite expected increase from gas and renewables, coal remains as key energy source for power generation in Indonesia. • Exports are expected to remain strong in the near term, staying around 350-360 Mt until 2020. 7

Performance of Adaro Energy 8

Resilient operational and financial results OPERATIONAL 2017 2016 % Change 51.79 52.64 -2% Production (Mt) 51.82 54.09 -4% Sales (Mt) 238.70 234.13 2% OB removal (Mbcm) FINANCIAL (US$ millions, unless indicated) 2017 2016 % Change Net Revenue 3,258 2,524 29% Core Earnings 646 398 62% Operational EBITDA 1,315 893 47% Cash 1,207 1,077 12% Net Debt (Cash) net cash 373 - Net Debt to Equity (x) net cash 0.10 - Net Debt to Last 12 months Operational EBITDA (x) net cash 0.42 - Free Cash Flow 782 479 63% Cash from Operations to Capex (x) 4.74 6.18 - 9

Solid balance sheet and strong cash generation Strong cash balance and free cash flow Reduced debt and achieved net cash generation 2,500 2.0 1400 2,000 1.6 1200 1,500 1.2 1000 1,000 0.8 800 500 0.4 600 0 0.0 400 2012 2013 2014 2015 2016 2017 -500 -0.4 200 Net debt (cash) (million US$) Net debt to equity (x) 0 Net debt to EBITDA (x) 2012 2013 2014 2015 2016 2017 Cash (million US$) Free cash flow (million US$) • Discipline debt repayment, combined with higher operating cash flow enabled us to achieve net cash position. • Investment grade rating (BBB-) from Japan Credit Rating Agency with a POSITIVE outlook. 10

Cost control – key in delivering strong performance Adaro’s estimated coal cash cost Operational EBITDA margin 45% breakdown (2017) 40% 35% Fixed overhead, Mining, 30% 35% - 40% 5% 25% Coal 20% processing, 10% 15% 10% Freight & 5% handling, 20% 0% Shenhua Adaro ITMG PTBA Harum Fuel, 25% - Source: Bloomberg, based on trailing 12M EBITDA 30% • Adaro has one of the highest operational EBITDA margin among thermal coal peers 11

Delivering return to shareholder 150 60% 50% 120 40% 90 30% 60 20% 30 10% 0 0% 2012 2013 2014 2015 2016 Dividend (million US$) Payout Ratio • Adaro has continued to pay dividend through the cyclical downturn. • Dividend payout ratio since IPO in 2008 averages ~38% and in total we have paid US$1.07 billion in dividend. • In January 2018, we distributed interim dividend of US$101 million. 12

Snapshot of Adaro Energy 13

Business model that creates sustainable value PT Adaro Energy, Tbk (AE) *Simplified Corporate Structure Adaro Mining Adaro Mining Adaro Logistics Power Services Maritim Barito 100% 88.5% Adaro Indonesia (AI) Saptaindra Sejati 100% Makmur Sejahtera 100% Perkasa (MBP) Coal mining, S Kalimantan (SIS) Wisesa (MSW) Barging & shiploading Coal mining and hauling Operator of 2x30MW Balangan Coal 75% mine-mouth power contractor Coal mining, S Kalimantan Sarana Daya 51.2% plant in S. Kalimantan Mandiri (SDM) 100% Jasapower Indonesia Mustika Indah Permai 75% Dredging & maintenance (MIP) (JPI) Bhimasena Power in Barito River mouth Coal mining, S Sumatra Operator of overburden (BPI) 34% crusher and conveyor Partner in 2x1000MW Indonesia Multi 100% power generation Bukit Enim Energi (BEE) 61% Adaro Eksplorasi Purpose Terminal project in Central Coal mining, S Sumatra 100% Indonesia (AEI) (IMPT) Java Mining exploration Port management & Adaro MetCoal (AMC), 100% terminal operator Tanjung Power Coal mining, C Kalimantan Adaro Mining 100% E Kalimantan Indonesia (TPI) 65% Technologies (AMT) 100% Indonesia Bulk Partner in 2x100MW Coal research & Terminal (IBT) Bhakti Energi power plant project in 10.2% development Coal terminal & fuel Persada (BEP) S. Kalimantan storage Coal mining, E Kalimantan 14

Adaro Mining 15

Diversified Coal Assets Across Indonesia 5 Deepening Coal Product Portfolio and Set to Capitalize Assets to Support Indonesia’s Development 6 1 2 3 4 Adaro has more than 13.5 billion tonnes (Bt) of coal resources (including option to acquire 7.9 Bt) and 1.2 Bt of coal reserves. 1 6 2 3 4 5 Adaro BEP: 10.22% Adaro Balangan MIP: 75% BEE: 61.04% Indonesia: stake with MetCoal Coal stake stake S 88.5% option to Companies Companies: Sumatra S Sumatra Existing, acquire 90% S Kalimantan Central and sub- sub- S Kalimantan sub- E Kalimantan East bituminous bituminous sub- bituminous sub- Kalimantan Resources Geological bituminous Resources bituminous Metallurgical 288Mt study phase Resources: Resources coal 333Mt Reserves 254 5.4Bt 7.9Bt Resources Reserves Mt Reserves 1.27Bt 184Mt 980Mt Note: Reserves and Resources numbers above Indonesian Coal are before taking into account AE’s equity ownership Resources : 124.8 Bt Reserves : 28.0 Bt 16 Source: Bureau of Geology, 2015

Over two decades of solid production performance Adaro’s historical production 60 350 2018 2017 2016 Units Guidance Actual Actual 300 Production 50 51.8 Mt 54 – 56 52.6 volume Overburden Removal (Mbcm) Strip ratio bcm/tonne 4.9 4.61 4.45 250 40 Production (Mt) 200 30 150 20 100 10 50 0 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Tutupan Wara Paringin Balangan AMC Overburden Removal • Produce low to medium heat value coal with low pollutant content, ideal for power generation. • Control over supply chain ensures timely delivery to customers. • Continued focus on productivity, safety and sustainability will support value 17 creation for shareholder.