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235
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 575
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012
Expressed in thousands of
S Dollars, unless otherwise stated
41. RECLAMATION GUARANTEE continued
The Group, other than Adaro, has also received letters confirming the required amount of reclamation guarantee for its IUP mining areas as follows:
No Number
Date Issued by
Company Reclamation
period 1
No.540992Pertamb2009 18 July 2009
Regent of Lahat PT Mustika Indah Permai
2009-2013 2
No. 540351Distamben-PUIII2012 14 March 2012
Regent of Kutai Timur PT Telen Eco Coal
2014-2018 3
No 540349Distamben-PUIII2012 14 March 2012
Regent of Kutai Timur PT Bumi Murau Coal
2014-2018 4
No 540350Distamben-PUIII2012 14 March 2012
Regent of Kutai Timur PT Persada Multi Bara
2014-2018 5
No 5401053Distamben-PUVII2012 26 July 2012
Regent of Kutai Timur PT Khazana Bumi Kaliman
2014-2018 6
No 5401054Distamben-PUVII2012 26 July 2012
Regent of Kutai Timur PT Bumi Kaliman Sejahtera
2014-2018 7
No 540492Distamben-PUIV2013 22 April 2013
Regent of Kutai Timur PT Birawa Pandu Selaras
2015-2019 8
No 540490Distamben-PUIV2013 22 April 2013
Regent of Kutai Timur PT Tri Panuntun Persada
2015-2019
As at 31 December 2013, MIP had placed reclamation guarantees in the form of a joint account at a state-owned bank amounting to Rp1.8 billion 2012: Rp1.2 billion.
42. FINANCIAL ASSETS AND LIABILITIES
As at 31 December 2013, the Company and its subsidiaries classified its cash and cash equivalents, trade receivables, other receivables, loans to third parties, loans to a related party, restricted cash and time deposits, other current assets
and other non-current assets amounting to US1,058,227 2012: US1,077,585 as loans and receivables and its derivative financial instruments amounting to US1,379 2012: USnil as financial assets at fair value through profit or loss.
As at 31 December 2013, the Company and its subsidiaries classified its trade payables, dividend payable, accrued expenses, other liabilities, non-trade related party payables, finance lease payables, long term bank loans and senior
notes amounting to US2,652,111 2012: US2,874,146 as financial liabilities carried at amortised cost and its derivative financial instruments amounting to USnil 2012: US2,446 as financial liabilities at fair value through profit or loss.
43. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk including the effects of foreign currency exchange rates risk, commodity prices risk and interest rates risk, credit risk and liquidity risk. The objectives of the
Group’s risk management are to identify, measure, monitor and manage basic risks in order to safeguard the Groups long-term business continuity and to minimise potential adverse effects on the financial performance of the consolidated
Group.
a. Market risk
i Foreign exchange risk
The financing and the majority of revenue and operating expenditure of the operating subsidiaries of the Company are denominated in US Dollars, which indirectly represents a natural hedge on exposure to
fluctuations in foreign exchange rates. However, the Group is exposed to foreign exchange risk arising from Rupiah dividend payments to the shareholders and other operation expenses. Management has set up a policy
to require companies within the Group to manage their foreign exchange risk against their functional currency.
As at 31 December 2013, if the Rupiah currency had weakenedstrengthened by 3 against the US Dollars with all other variables held constant, the post-tax profit for the year would have been US2,103 lower or US2,233
higher 2012: US8,858 lower or US9,406 higher, respectively, mainly as a result of foreign exchange gainslosses on the translation of cash and cash equivalents, trade receivables, prepaid taxes, trade payables,
accrued expenses and taxes payable.
236
IABlE, STrong, EFFICIEnT
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 576
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012
Expressed in thousands of
S Dollars, unless otherwise stated
43. FINANCIAL RISK MANAGEMENT continued
a. Market risk continued
ii Price risk The Group is exposed to commodity price risk because coal is a commodity product traded in the world coal
markets. Prices for Adaro’s coal “Envirocoal” are based on global coal prices, which tend to be highly cyclical and subject to significant fluctuations. As a commodity product, global coal prices are principally dependent on
the supply and demand dynamics of coal in the world export market. The Group did not engage in trading coal contracts and has not entered into long term coal pricing agreements to hedge its exposure to fluctuations in
the coal price but may do so in the future. Instead, the Group entered into one-year fixed price coal contracts with some of its customers to safeguard a portion of its revenue for each year.
The Group is also exposed to commodity price risk relating to purchases of fuel necessary to run its coal mining operations. The Group enters into fuel hedge contracts to hedge against the fluctuations in fuel prices
for part of the estimated annual fuel usage. Besides this, for mining services provided to its customers, in order to manage price risk, the Group entered into long-term contracts with its customers maximum five
years which also allow for price adjustments when the fuel price increases.
At 31 December 2013, other than the derivative financial instruments, there were no financial assets or liabilities with
carrying amounts directly linked to market commodity prices or commodity derivative contracts.
iii Interest rate risk The Group’s interest rate risk arises from long-term borrowing denominated in US Dollars. The interest rate
risk from cash is not significant and all other financial instruments are not interest bearing. Borrowing issued at variable rates exposes the Group to cash flow interest rate risk. Borrowing issued at fixed rates exposes the
Group to fair value interest risk.
The Group manages its cash flow interest rate risk using floating-to-fixed interest rate swaps. These interest rate swaps have the economic effect of converting borrowing from floating rates to fixed rates. Generally, the
Group raises long-term borrowing at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with
other parties to exchange, at specified intervals primarily quarterly, the difference between fixed contract rates and floating-rate interest amounts calculated with reference to the agreed notional amounts. As at 31
December 2013, the Group does not have any interest rate swaps.
As at 31 Decemer 2013, if interest rates on long-term borrowings had been ten basis points higherlower with all other variables held constant, the post-tax profit for the year would have been US961 2012: US1,115
lowerhigher.
b. Credit risk
