Derivative financial instruments and hedging activities

Adaro Energy Annual Report 2009 153 www.adaro.com PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 515 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2009 AND 2008 Expressed in million Rupiah, unless otherwise stated

3. ACQUISITIONS, DISPOSALS, AND LIQUIDATION OF SUBSIDIARIES

a. Acquisition of PT Saptaindra Sejati

On 31 March 2008, SIS increased its issued and paid in capital through the issuance of 56,679 new shares for the conversion of all convertible bonds issued to JCI, and the difference between the converted bonds and par value was recorded as additional paid-in capital. As a result of this new share issue, the Company’s interest in SIS decreased from 71.78 to 61.68. On 3 April 2008, the Company increased its ownership in SIS through the acquisition of the shares of PT Persada Capital Investama “PCI”, PT Saratoga Investama Sedaya “SRIS”, and PT Cipta Sejahtera Persada “CSP”, amounting to 39,036 shares, 39,035 shares and 19,517 shares, respectively, with a total acquisition amount of Rp 158,776. From these transactions, the Company’s interest in SIS increased from 61.68 to 85.92. The restructuring transactions on 3 April 2008 between the Company, PCI and SRIS, were accounted for using the pooling-of- interests method as required under Statement of Financial Accounting Standards “SFAS” No. 38 Revised 2004, since the Company, PCI and SRIS are entities under common control. The details of the book value of the net assets acquired and the difference arising from the restructuring transaction of entities under common control are as follows: 2008 Purchase consideration through cash payment 127,022 Book value of net assets acquired 115,407 Difference in value from restructuring transactions of entities under common control 11,615 Difference in value from restructuring transactions of entities under common control - 2007 62,985 Difference in value from restructuring transactions of entities under common control - 2008 11,615 Difference in value from restructuring transactions of entities under common control 51,370 The details of net assets acquired from the transaction with CSP and the adjustment to fixed assets acquired are as follows: 2008 Purchase consideration through cash payment 31,754 Book value of net assets acquired 28,850 Adjustment to fixed assets 2,904 Goodwill - On 9 November 2009, ATA acquired a 80 interest in JCI for US40,000,000. JCI owns 14.08 interest in SIS. From this transaction, the Company’s direct and indirect interest in SIS and SMP increased from 85.92 to 97.18. The details of the net assets acquired and goodwill are as follows: 2009 Purchase consideration through cash payment 381,800 Fair value of net assets acquired 62,187 Goodwill 319,613 Details of the assets and liabilities arising from the acquisition are as follows: 2009 Investment in equity securities 95,450 Net assets 95,450 Interest acquired 80 Net assets acquired 76,360 Adjustment to the net assets acquired due to recognition of carrying value of investment using equity method 14,173 Goodwill 319,613 Purchase consideration through cash payment 381,800 Cash and cash equivalents in JCI - Net cash outflow from acquisition of subsidiary 381,800 From this transaction, Group recognised pre-acquisition income amounting to Rp 18,667.