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Adaro in Summary From Us to You
Running Adaro Management Report
Owning Adaro
PT ADARO ENERGY Tbk Schedule 566
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
42. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued c.
Credit Facility Agreement
On 11 July 2008, MSW and International Finance Corporation “IFC” entered into a loan agreement. Based on the agrement, IFC agreed to grant loan facilities to MSW amounting to US25,000,000 and US96,784,250, in the form of the A loan and the
B loan, respectively, with interest rate at LIBOR plus a certain percentage. The Company and PT Akraya International collectively hereinafter referred to as the “Sponsors”, act as sponsors of the
loans. The sponsors have the obligation to: •
Provide equity amounting to US5,000,000 and Mezzanine equity amounting to US35,595,000; and •
Complete the project within the time schedule and to pay for any cost overrun or provide for inability of MSW to pay its loan. The obligation to cover the deficiency shall not exceed a maximum amount of US15,000,000.
As at 31 December 2008, MSW had not made any withdrawal of the loans.
d. Management services
On 14 February 2007, MSW entered into an agreement for management services with PT Akraya International. MSW shall pay a management fee and project manager fee of US168,000 and US84,000 per annum excluding VAT, respectively, on
a quarterly basis. The effective date of this agreement is from the time the agreement is signed until the expiration of the electricity supply agreement between MSW and Adaro on 1 October 2022. The agreement was amended on 15 July 2008 with
effect from 1 July 2008 whereby the management fee was amended to US350,000 annually excluding VAT and the project management fee was amended to nil.
e. Litigation
Dianlia is currently involved in a litigation with Beckkett Pte Ltd “Beckkett” relating to a foreclosure sale of 40 of the shares in Adaro and IBT the “Pledged Shares” by Deutsche Bank AG, Singapore branch “Deutsche Bank” to Dianlia in 2002
following a default on a loan to a subsidiary of Beckkett in 1998. In 2001, Deutsche Bank obtained rulings from the South Jakarta District Court affirming the validity of its enforcing of the
security over the Pledged Shares by selling the Pledged Shares to Dianlia. In 2005, Beckkett obtained rulings from the Jakarta High Court to annul, on procedural grounds, the rulings obtained by Deutsche Bank from the South Jakarta District Court in
2001. The rulings from the Jakarta High Court did not contain any judgement on the validity of the enforced sale of the Pledged Shares. On 3 March 2006, the Indonesian Supreme Cour t issued a letter the “Supreme Court Letter” addressed to,
among others, legal counsels for the respective parties stipulating, among other things, that the Jakarta High Court rulings given in 2005 to annul the rulings of the South Jakarta District Court given in 2001 be upheld. However, the same Supreme
Court Letter also expressly stipulates that this does not have any legal consequence with respect to the legal deeds, facts or actions arising from the South Jakarta District Court rulings given in 2001 that occurred prior to such annulment by the Jakarta
High Court in 2005, because the Jakarta High Court did not and is not authorised to determine such legal consequences.
Indonesian counsel to Adaro and IBT has confirmed that, until a final and binding Indonesian court decision is obtained on any and all legal actions or consequences relating to or arising from the South Jakarta District Court rulings given in 2001
including among others the foreclosure sale mentioned above, those legal actions or consequences will continue to be legal, valid and effective.
In 2004, Beckkett sued Deutsche Bank in Singapore for damages alleging, among other things, that Deutsche Bank failed to obtain the best price for the Pledged Shares pursuant to the foreclosure sale the “Suit”. In early 2005, Beckkett applied to the
Singapore High Court to add Dianlia as an additional defendant to the Suit and sought restoration of the Pledged Shares or damages if the foreclosure sale was validated.
On 21 September 2007, the Singapore High Court rejected all Beckkett’s claims on Dianlia. Beckkett submitted an appeal against the Singapore High Court and the case is still under examination by the Singapore Supreme Court.
Dianlia has been advised by its Singaporean counsel and its Indonesian counsel that the litigation discussed above should not materially and adversely affect the present security arrangements of their existing financiers nor prevent any dealings
connected to its pledged shares. However, there is no assurance that e xisting claims by Beckkett, or other claims of a similar or different nature, will not continue to be pursued, or new claims commenced at any time, against any party, which could,
where a court was to find in favour of Beckkett result in a change of control of Adaro andor IBT.
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Contact Us Governing Adaro
Financial Report Corporate Social Responsibility
PT ADARO ENERGY Tbk Schedule 567
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
42. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued f.
Royalty Claim
In May 2006, the Department of Energy and Mineral Resources “DEMR” alleged that Adaro had underpaid the royalties due from coal sales for the period from 2001 and demanded payment. Adaro strongly rejected the allegation because it had
discharged its obligation to pay such royalties by way of an offset against the Government’s obligation to reimburse Adaro for its VAT payment as prescribed under the CCA. In May 2006, Adaro filed an objection with the Jakarta Administrative Court
against DEMR. Upon Adaro’s application, in May 2006, the Jakarta Administrative Court granted an order restricting DEMR in taking any further administrative steps on the issue until a final and binding judgment was delivered. In September 2006, the
Jakarta Administrative Court issued a decision in favour of Adaro. The Jakarta High Administrative Court concurred with the Jakarta Administrative Court in February 2007. On 26 September 2008, the Indonesian Supreme Court has concurred with
the decision of the Jakarta High Administrative Court and the decision of the Indonesian Supreme Court is final and binding.
In June 2006, DEMR granted authority to the Committee for State Claim Affairs the “Committee” to pursue alleged underpayment on its behalf. In July 2007, the Committee issued a demand for payment to Adaro. As this is an industry -wide
problem, similar demands have been made by the Committee to other first- generation companies. In September 2007, Adaro filed an objection with the Jakarta Administrative Court against the Committee. Upon Adaro’s
application, in September 2007 the Jakarta Administrative Court granted an order restricting the Committee from taking any further administrative steps on the issue until a final and binding judgment was delivered. On 15 February 2008, the Jakarta
Administrative Court issued a decision in favour of Adaro. The Jakarta High Administrative Court concurred with the Jakarta Admistrative Court on 1 July 2008. Proceedings are currently pending in the Indonesian Supreme Court.
As management believes that Adaro has strong grounds supporting the case and there is the fact that the recent court decision is in favour of Adaro, no provision has been booked to the consolidated financial statements.
g. No significant commitments for capital expenditures exist that are not reflected in the consolidated financial statements for the
year ended 31 December 2008.
h. On 5 September 2007, Adaro entered a bank facility agreement with HSBC to issue a bank guarantee with a total limit of
US15,000,000 which includes standby documentary credit amounting to US15,000,000, a performance bond amounting to US5,000,000 and a tender bond amounting to US5,000,000. This agreement will expire on 31 July 2009. This facility is not
bound by any collateral.
On 20 August 2008, Adaro entered into a banking facility amendment agreement with DBS for a banking facility in the form of a bank guarantee, bid bond, performance bond and stand-by letter of credit, with total limit of US15,000,000. This agreement
will expire on 11 July 2009. This facility is not bound by any collateral. For banking facilities obtained from HSBC and DBS, Adaro is required to maintain time deposits refer to Note 6.
As at 31 December 2008, the total bank facilities used by Adaro which were obtained from HSBC and DBS and from other financial institutions obtained without any facility in various currencies were equal to US18,929,538 2007: US16,211,716.
Those facilities had been issued in relation to sales contracts and reclamation guarantees.
2008 2007
Malaysian Ringgit RM 22,587,497
RM 9,857,687
US Dollars US
1,560,000 US
6,671,750 Indonesian Rupiah
Rp 49,524
Rp 61,975
Euro EUR 4,500,000
EUR -
i. From time to time, the Group is involved in various legal proceedings as a normal incident to the Group’s business. The Group
is of the opinion that adverse decisions in any pending or threatened proceeding or that any amounts it may be required to pay by reason thereof will not have a material adverse effect on its financial condition or results of operations.
j. As at 31 December 2008, Adaro has commitments to deliver coal at fixed prices to certain customers. The total quant ity to be
delivered up to 2012 is 45,460,000 tonnes 2007: 70,834,000 tonnes.
k. Forestry expenses
Based on Government Regulation No. 2 dated 4 February 2008, all companies that have activities in production and protected forest areas but not related to forestry will have an obligation to pay a forestry fee ranging from Rp 1,200,000 full amount to
Rp 3,000,000 full amount per hectare. This fee is effective from 2008. The Group has recognised this fee on an accrual basis.
