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Indonesia caps domestic coal price for power stations, could hit miners

Reuters  |  JAKARTA 

By Asmarini and Jensen

JAKARTA (Reuters) - has capped the price of domestic coal for power stations at $70 per tonne for two years, in new rules issued this week, a said on Friday.

The Southeast Asian nation is the world's biggest exporter of the dirty fuel and the rules could hit miners currently enjoying coal prices at their highest level in five years.

With elections looming in 2019, the government plans to keep unchanged this year and next, and the cap on thermal coal for power is intended to shield state-owned utility (PLN) from price fluctuations.

"The (maximum) price of coal ... for power stations is $70, fixed," ministry spokesman told reporters on Friday at a conference on the step and other new rules.

That price is based on coal with a calorific value of 6,322 kilocalories, the same specification as in the Benchmark Price (HBA).

The rule will be applied retroactively to Jan. 1, 2018, and will be reviewed in December, 2019.

Where the HBA drops below $70 per tonne, the domestic thermal coal price for power stations will revert to HBA, Pribadi said.

The monthly Benchmark Price (HBA) was set last week at $101.86 per tonne for the month of March, its highest since May, 2012.

The new rule allows coal miners supplying PLN to apply for an increase to their approved production quota for the year of up to 10 percent.


"and Mineral Resources emphasises this setting of coal prices for power stations is so that can be maintained, to protect people's purchasing power and competitive industries," Pribadi said.

The rules are expected to generate savings of 18 trillion rupiah ($1.31 billion) for PLN if the HBA stays above $100 this year, PLN told reporters.

Under the new rules, PLN, which uses coal with a calorific value of between 4,200 and 4,500 kcal, will pay around $37 per tonne for coal while the HBA remains above $70, Santoso said.

At the current HBA price, PLN pays around $55 per tonne, he added. PLN expects its coal demand to climb 18 percent this year to 90 million tonnes.

The government has been working on plans to regulate domestic coal prices since late 2017, under pressure from PLN, and the discussions have knocked back some coal miners' share prices.

Over the past three months, the Indonesian mining share index has gained more than 22 percent, outperforming all other asset classes, and is up around 33 percent over the past year. But, in the past five days, the sector has fallen over 6 percent - more than any other.

"We are still studying the impact (of the new rules). We want market prices," said Coal Mining

According to Suherman, for PT Bukit Asam, "the impact of the new price is not really significant on our target revenue and bottom line".

A for Adaro Energy, Indonesia's second-biggest by output, declined to comment.

Adaro shares were down just over 3 percent at 0715 GMT.

The government has said national coal output could reach 485 million tonnes in 2018, up from a realised output of 461 million tonnes in 2017. About a quarter of this - 118 million tonnes - is to be for domestic coal consumption, with the rest exported.

($1 = 13,783 rupiah)

(Reporting by Asmarini; Additional reporting by Cindy Silviana; Writing by Jensen; Editing by and Joseph Radford)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, March 09 2018. 13:06 IST