Indonesia’s Coal-Export Ban May Deter Investments, Mulyono Says

Indonesia’s plan to ban exports of low-quality grade thermal coal may discourage new investment in the world’s biggest exporter of the power-station fuel, said a production company executive. 

A ban may also hurt India and China, which seek coal with a heating value of as much as 4,500 kilocalories a kilogram for blending with higher-grade domestic output, said Jeffrey Mulyono, president director of PT Bhakti Energi Persada. 

“Banks may stop funding low-rank coal producers as they will see that the companies are not feasible anymore in the longer term if the ban is imposed,” Mulyono said by telephone from Jakarta today. “How can we expand and run our business if we cannot get financial support from banks?” 

Indonesia plans to ban overseas sales of coal with energy of less than 5,100 kilocalories a kilogram, requiring miners to upgrade the burning value if they want to export, according to a draft of a ministerial decree posted on the Directorate General of Coal and Minerals’ website. The government had earlier proposed halting sales of grades with a value below 5,600 kilocalories. 

The price of coal for sale this month with an energy value below 5,100 kilocalories was between $61.04 and $83.54 a metric ton, according to government prices. That compares with $118.24 a ton for benchmark coal with a heating value of 6,322 kilocalories a kilogram. 

Bhakti Energi and its affiliate PT Pesona Khatulistiwa Nusantara produce coal with a heating value of 3,400 kilocalories a kilogram from mines in East Kalimantan province, said Mulyono, who is also president director of Pesona. 

Pesona is estimated to produce 1.5 million tons of coal this year and will boost output to 6 million tons in 2014, he said.

Upgrading Technology

Low- and medium-grade coal accounts for about 60 percent of Indonesia’s production, Mulyono said. The country’s output may rise 19 percent to 326.65 million tons this year, the energy ministry said in January. 

“The main issue for the plan is the upgrading technology,” Mulyono said. “There are some small projects but none of them are commercially proven for larger scale.” 

Investment in coal industry infrastructure such as railways and ports may also be canceled because of the ban, Mulyono said. “Investors won’t risk spending billions of dollars if they see it won’t support their mining business,” he said. Source: Bloomberg