53.1 PT. Bayan Resources Tbk - Prospectus

While demand growth over 2008-2010 is expected to be robust, it is not expected to be as strong as the growth over the previous four years. Global import demand is projected to increase at a compound annual growth rate “CAGR” of 4.5 between 2007 and 2010F. This compares with a 5.8 CAGR from 2004 to 2007. Globally, thermal coal demand is driven primarily by coal-fired power generation demand. Coal is the major fuel source for power generation and in 2007 accounted for approximately 43 of total power generation. Regionally, the independent power projects “IPP” are a priority for governments and deregulation is continuing throughout the Asian market. IPPs in countries such as India, Malaysia, the Philippines, and Thailand contribute significantly to thermal coal demand. On a delivered basis, coal has consistently been a lower cost fuel for power generation than either gas or oil. The risk of fuel substitution from coal to gas, oil, hydro, nuclear or renewable power generation is expected to be limited in the short-term given the significant capital investment required to change fuel sources for power generation infrastructure. Furthermore, coal prices historically have been less volatile than petroleum-based fuels and hence the cost of coal-fired power generation has provided greater certainty for energy planners. 2005 World Electricity Generation by Fuel 1,954 909 721 379 298 500 1,000 1,500 2,000 2,500 Mtoe Data Sources: International Energy Agency and AME Nuclear Oil Renewables Gas Coal Import thermal coal demand has been dominated by the three major North Asian economies — Japan, South Korea and Taiwan. These markets have been the driving force behind the growth in international thermal coal trade in the last 10 to 15 years, currently accounting for more than 65.6 of Asian demand and 37.8 of the world’s thermal coal imports in 2007. Between 2001 and 2004, it is estimated that Japan added almost 9.5 gigawatts “GW” of coal-fired generation capacity. Japan is forecast to remain the largest importer of thermal coal until 2010F. South Korea is expected to increase annual thermal coal imports to 72.1 million tonnes in 2008F from 67.8 million tonnes in 2007 with four new coal-fired power stations, which were commissioned in 2007, and at least another two scheduled to come on-line in 2008F. Taiwan’s Ministry of Economic Affairs Bureau of Energy plans to lift electricity generation capacity by approximately 8.6GW over the period 2005 to 2012F, with coal and gas accounting for approximately 5GW of the incremental increase. The highest rates of import demand growth in the Asian region are expected to come from China, Malaysia, the Philippines, Thailand and India. Malaysia intends to add additional coal-fired capacity from 3.7GW in 2003 to 7.9GW by 2009F, India has improved access to imported coal under a lower tariff structure and Thailand is moving to decrease its reliance on gas as fuel for electricity generation. India faced a power deficit of around 9 in total energy terms and a 13 capacity deficit under peak load conditions in 2006 resulting in widespread interruptions to electricity supply. India’s Ministry of Power’s 10th and 11th Plans intend for Indian power generation capacity to increase from the 2007 level of 137GW to 206GW by 2012F. In late 2007, 34.4GW of thermal generation capacity was under construction under the 10th and 11th Plans. This is forecasted to increase coal’s share of domestic power generation in India to approximately 57 by 2012F from approximately 54 in 2007 and lead to annual coal imports increasing to approximately 45.0 million tonnes by 2010F. Coal imports are expected to increase because domestic coal supply is largely unsuitable for power generation uses due to domestic coal supplies having low energy content, high ash content and long transportation distances up to 1,800 km to coastal power generation centers. 100