Bakrie Says Bumi’s London Move to Cut Coal Miner’s Debt Costs
Bringing Bumi Plc to London will get the Indonesian miner the financing it needs to almost double output by 2013 and make it the world’s biggest exporter of power station coal, said Indra Bakrie, who will chair the company.
“The reason to be in London is also that it’s going to be a lot easier for Bumi to start growing organically,” Bakrie, whose family will control 43 percent of the company, said in an interview yesterday. “In 10 years from now we should be able to be the biggest coal producer. We are not going to stay quiet and do everything only in Indonesia.”
Being in London will allow the company to refinance its $4.2 billion in debt at lower interest rates, freeing up cash flow to invest in expansion, he said.
Nathaniel Rothschild’s Vallar Plc this week agreed to invest $3 billion in two Indonesian coal companies, including PT Bumi Resources. After the deal, Vallar will be renamed Bumi Plc and Bakrie Group will be the largest shareholder. Bakrie is the first major Indonesian business to tap the U.K. equity market, home to mining stocks with a total market value of more than $250 billion.
Bumi will seek to tap surging demand for power station coal in China by expanding output of its mines in Indonesia as well as seeking new operations abroad. China’s demand for imports is estimated to grow as much as sevenfold within four years, according to James Campbell, a Vallar executive who will be head of business development and strategy for Bumi.
“The big growth story in the coal space has been Indonesia,” Campbell, 60, said in an interview. “The growth of Indonesian coal has gone from zero to hero in the last 10 years.”
Indonesia, which overtook Australia as the largest exporter of power-station coal in 2005, is closer to Asia’s largest markets than competitors, making the cost of shipping lower. Global trade will grow 4 percent next year to 651 million tons as Indian imports increase 17 percent and China’s by 9 percent, according to shipbroker Clarkson Plc.
“What we need to do is to be able to be the biggest supplier of coal in the world and to be able to do that, we have a way now,” Bakrie said in London. “It was a dream only before. Before we met Vallar.”
Indra and his family control Bakrie Group, a palm oil-to- property empire founded by his father in Sumatra in 1942. Rothschild, whose ancestor helped bankroll Britain’s war against Napoleonic France, will join Bakrie as co-chairman of the board.
Asian benchmark prices at Newcastle, Australia, have gained 22 percent to $113 a ton this year, according to data compiled by Bloomberg. China, the world’s biggest coal user, will import record amounts of the fuel in November and December, according to Commodore Research.
Under this week’s accord, Bumi Plc will acquire 25 percent of PT Bumi Resources and a 75 percent holding in PT Berau Coal Energy, the country’s fifth-largest miner. Together the companies’ mines will produce about 78 million tons this year.
Bumi Plc will seek to almost double production from mines in Indonesia to 140 million metric tons of coal by 2013 at an estimated cost of $1.2 billion, excluding infrastructure related expenses, Campbell said. The deal to bring Bumi to London is expected to be completed by April next year.
“For me, personally it’s just like getting your first bike when you’re a kid,” Bakrie said. “This Bumi Plc will be the coal champion in London. It’s very exciting, very exciting.”
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