IPO Adaro - Coal Mining in Indonesia

Coal firm Adaro's IPO swamped by international investors

The Jakarta Post, Jakarta

Shares offered by PT Adaro Energy, the country's second-biggest coal producer, in a book building process that ran from May 26 to June 5 were oversubscribed by 6.57 times, with 81.3 percent of the investment coming from overseas.

"The strong enthusiasm shown by various groups of investor candidates indicates strong confidence in the performance and potential of Adaro," Houston Jusuf, managing director of Adaro's lead underwriter PT Danatama Makmur, said in a statement released Sunday.

Adaro is expecting to receive a statement legitimizing the Initial Public Offering from Capital Market & Financial Institution Supervisory Agency on June 20.

The shares, priced at Rp 1,100 (11 US cents) each, are scheduled to go on sale from June 24-28, and will be listed on the Indonesia Stock Exchange in early July.

Based on the final offering price, the total amount of proceeds will reach Rp 12.3 trillion ($1.31 billion), or 34.83 percent of the total number of shares owned by the company.

"This will be the largest Initial Public Offering in Indonesia's capital market," company president director Boy Garibaldi Thohir said.

The majority of the proceeds will be used to purchase indirect ownership of 33 percent of shares in PT Adaro Indonesia, 33 percent in coal infrastructure and logistics firm PT Indonesia Bulk Terminal and 36 percent in coal trader PT Coal Trade.

Adaro will also use some of the proceeds to repay subsidiary debts of $100 million, fund the expansion of its subsidiaries and implement an overall consolidation of its other companies' strategic business units.

Adaro is 36 percent owned by a group of foreign investors, including Goldman Sachs, Citigroup, Farallon Capital, the Government of Singapore Investment Corporation and the Kuok Group.

Teddy P. Rachmat, one of Indonesia's wealthiest businessmen, and Saratoga Capital, each own 32 percent.

Adaro's total coal reserves is estimated to be 928 tons, and its coal production capacity stands at 40 million tons per year, although the company plans to achieve 80 million tons per year within the next five years.