CP on CLSA Conference 10 14 September 2012 in Hongkong

(1)

1 PT Toba Bara Sejahtra Tbk ( Toba )

Company Presentation

(2)

Disclaimer

These materials have been prepared by PT Toba Bara Sejahtra (the “Company”) and have not been

independently verified. No representation or warranty, expressed or implied, is made and no reliance

should be placed on the accuracy, fairness or completeness of the information presented or contained in

these materials. The Company or any of its affiliates, advisers or representatives accepts no liability

whatsoever for any loss howsoever arising from any information presented or contained in these materials.

The information presented or contained in these materials is subject to change without notice and its

accuracy is not guaranteed.

These materials contain statements that constitute forward-looking statements. These statements include

descriptions regarding the intent, belief or current expectations of the Company or its officers with respect

to the consolidated results of operations and financial condition of the Company. These statements can be

recognized by the use of words such as “expects,” “plan,” “will,” “estimates,” “projects,” “intends,” or words

of similar meaning. Such forward-looking statements are not guarantees of future performance and involve

risks and uncertainties, and actual results may differ from those in the forward-looking statements as a

result of various factors and assumptions. The Company has no obligation and does not undertake to

revise forward-looking statements to reflect future events or circumstances.

These materials are for information purposes only and do not constitute or form part of an offer, solicitation

or invitation of any offer to buy or subscribe for any securities of the Company, in any jurisdiction, nor

should it or any part of it form the basis of, or be relied upon in any connection with, any contract,

commitment or investment decision whatsoever. Any decision to purchase or subscribe for any securities

of the Company should be made after seeking appropriate professional advice.

(3)

3 Content

Marketing & Financial Highlights

4

1 Corporate Profile & Updates

2 Industry Updates

3 Operational Highlights & Planning

CSR & Environmental Highlights

(4)

Corporate Profile & Updates

(5)

5

ABN 66.1% IM 15.7% TMU 18.2%

Toba comprises three coal companies, Adimitra Baratama Nusantara (ABN), Indomining (IM) and Trisensa

Mineral Utama (TMU), which hold adjacent concession areas located in East Kalimantan, Indonesia

Toba in Brief

• Substantial and diversified thermal coal

reserves and resources

o

JORC-compliant proved and probable reserves of

147 MM tonnes and measured, indicated and

inferred resources of 236 MM tonnes

o

4 coal brands with calorific values ranging from

4,700 - 5,800 Kcal / kg GAR

ABN 79.6% IM 15.0% TMU 5.4%

Reserves

• Strong growth profile

o

Produced 5.2 MM tonnes of coal in 2011 and is forecasted

to produce around 5.7 MM tonnes of coal in 2012

o

Prime location provides the operational cost edge to

grow as a logistical & operational center for the area

o

Continued exploration effort to increase our Reserves and

Resources. Current reserves only account for 52% of our

total area has been explored

June 2012 Revenue

June 2012 Net Income

Resources

Total: 147 MM Tonnes

Total: US$ 202.7 MM Total: US$ 20 MM Total: 236 MM Tonnes

ABN 71% IM 27% TMU 2% ABN 67% IM 33%

(6)

6 Toba’s Ownership Structure

• 20-year Production Operation Mining Permit ( IUPOP ) expiring in December 2029

– IUPOP was converted from a Kuasa Pertambangan ( KP ) in 2009

• IUPOP expiring in June 2013

– IUPOP was converted from a KP in 2010

• In the process of renewing its IUPOP – Expects to receive renewal of 10-year

IUPOP by end 2012

• 13-year IUPOP expiring in December 2023

– IUPOP was converted from a KP in 2010

• 2,990 ha • 683 ha • 3,414 ha

License

Area

Davit Togar Panjaitan (1) _{PT Bara Makmur Abadi}

PT Toba Sejahtra ( TS ) PT Sinergi Sukses Utama Roby Budi Prakoso

73.8% 0.8% 6.2% 5.1%

PT Toba Bumi Energi ( TBE )

99.99% (2)

3.6%

ABN Minorities 49.0%

51.0% 99.92% (2)

Public 10.5%

(7)

7 Toba’s Majority Shareholder

Toba believes it benefits from Toba Sejahtra

’

s experience in the Indonesian coal sector as well as its

leadership and experience

Controlling Shareholder with Established Track Record…

… Helmed by an Experienced Leader

• A privately owned group founded in 2004 with interests in energy and plantations

• Its business segments are as follow:

–Energy: Owns 5 coal mining concessions through Toba and PT Kutai Energi. All of TS' mines are characterized by low production costs and favorable proximity to ports

–Oil & Gas: In the exploration phase of the 4,567 sq miles South East Madura Block through subsidiary E&P company PT Energi Mineral Langgeng

–Power Plant: Operates a 30 MW coal-fired power plant in Palu, Central Sulawesi and is developing a 120 MW greenfield power plant in Senipah, East Kalimantan

–Agribusiness: A 25% stake in a 12,000 ha palm oil plantation in East Kalimantan

• General (Ret.) Luhut B. Pandjaitan is the key shareholder and founder of Toba Sejahtra group. He is currently the chairman of TS • Mr. Luhut had a long and illustrious career in the civic service

before turning to the commercial sector. Over the course of thirty years in the Army Special Forces, Mr. Luhut rose to become a four-star general

– In 1999, Mr. Luhut retired from the military service to serve as Ambassador for the Republic of Indonesia to Singapore

– In 2000, he was appointed Minister of Industry and Trade of the Republic of Indonesia

• Thereafter, Mr. Luhut applied his knowledge and leadership skills to establish TS in 2004, building it from the ground up into a major business group with interests in energy oil and gas, power and agribusiness

(8)

Further integrate

ABN, Indomining and

TMU to maximize

efficiency and cost

competitiveness

• Recent restructuring will align IM and TMU shareholders’ interests

and facilitate further integration of

operations across the three concessions

• Benchmarking and sharing of best practices between departments and functions

• Optimize and coordinate mine planning and logistics

• Centrally coordinate and streamline corporate finance, legal, human resource and CSR functions

1 Increase coal reserve

and resource base

through additional

exploration and

potential acquisitions

• Continue exploration activities to increase proven and probable reserves as only 52% of total concession area of 7,087 hectares has been explored to JORC standard

• Consider opportunities to acquire coal

concessions with significant reserves

3 Strengthen existing

and develop new

customer

relationships

• Supply a higher proportion of sales volume to end users, while maintaining relationships with existing coal traders

• Target customers in Japan, Taiwan, South Korea, China and Hong Kong, South East Asia and India

4 Continue to focus on

health and safety,

environmental track

record and

commitment to CSR

• Maintain and enhance high international operating standards, utilize automated mining methods to minimize accidents and enhance safety

• Foster community ties through development programs as well as job creation

5 Organically increase

coal production levels

• Expand coal production through increased production and mine development activities

• Strengthen

relationships with third party mining

contractors and work closely with them to improve their productivity

2

(9)

9 Toba’s Initial Public Offering

Listed on IDX

06 July 2012

Number of shares offered

210.681.000 shares or 10.47%

IPO Proceed

IDR 400,293,900,000

Anchor Investor

Barings Private Equity (8% at IPO)

(10)

Competitive cost producer of coal in Indonesia

Substantial reserves and resources to support significant production expansion

Solid operating track record and visible earnings growth

Well-positioned to capture growth opportunities in thermal coal markets

Why Invest in Toba

Wide range of coal quality grades to meet customers

’

requirements

Strong relationships with multinational customers

(11)

11 2007

• IM commenced

production

2011

• TMU commenced

production

• Toba production

hits 5m tons

2008

• ABN commenced

production

• Operational

adjustment due to

a drop in coal

market

2010

• TS acquired the remaining share

for IM from minority shareholder

• Toba acquired 51.0% of ABN,

52.5% of TBE (IM

’

s shareholding

company) and 51.0% of TMU

• Toba production hits 4m tons

Key Milestones

Strong track record of acquisitions, development of greenfield mines, rapid production ramp-up and

experience to adjust operation in a downmarket

2007

2008

2009

2010

2011

2012

• Toba acquired the

minorities

’

shares in

TBE and TMU

• IPO/Listed on IDX,

6 _{July 2012}

2009

• ABN & IM production

reached 2m tons

(12)

Industry Updates

(13)

13 Price of Newcastle Index Price dropped in

Q2…

80

110

140 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

$/

to

n

Impact of Global Economy Coal Industry

… due to the concerns over global

economic slowdown

IMF GDP Forecast for 2012

Sep 2011 (Updated)

Apr 2012 (Updated)

1.8%

2.1%

1.4%

0.0%

9.0%

8.2%

2.3%

2.0%

7.5%

6.9%

• The Newcastle Thermal Coal Price Index went from

US$108.88 in April 2012 to US$101.21 in May 2012.

Then to US$91.73 in June 2012.

• The Index Price are typically used as a basis for Spot

and Index Linked Long Term contract sales, before

discounts

Source: World Bank

Source: IMF

• Concerns regarding the instability over Greece, Spain,

and the EU were highlighted given the surprise of

Greece election result

• European countries are the biggest trading partner for

China

• The US economy, even though improving, used cheap

shale gas for electricity

(14)

However, thermal seaborne coal price may

have seen the floor…

Response by the Coal Industry

… as the price of imported coal became

cheaper than domestic coal in China...

… and coal producers limits production

growth..

“ITMG lowers coal production target in 2012” – Kontan,

Aug 24, 2012

“Indonesia Adaro cuts 2012 Thermal coal output target

to 48-51 million mt” – Platts, Aug 1, 2012

“Output cuts help steady China’s coal prices, outlook” –

80

110

140 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12

$/

to

n

Source:Globalcoal

Source: CLSA Asia-Pacific Market, CEIC, CCTD, globalCoal

-100 -75 -50 -25 0 25 50

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 (US$/tonne)

Export

Import Spread (Domestic -…

Toba remains profitable and set to

grow given the price support in the

market, despite the subdued global

economic condition

(15)

15 Operational Highlights & Planning

(16)

2.0

3.9

5.2

2.5

3.2 2009

2010

2011

2012

Actual Est

Production

Historical

MM Tonnes

Consolidated Production Performance

Samarinda Mahakam River ABN Jetty Muara Jawa Muara Berau Makassar Strait Major City Jetty Transshipment Point IM Jetty NDM Jetty

Kutai Energi Jetty

ABN

17km 4km

5km

~55 Km (total ~120 Km)

~65 Km

kilometers 0 12 24 36 48

Kutai Energy 17km TMU

Operation Focus for 2012 – 2013

• Integrate the operation of all 3 assets that are

adjacent to each other to maximize

profitability

• Update mineplans to focus on profitability

growth over volume growth given the current

price of coal

Result of H1 2012

• Despite challenging condition, we maintained

our profitability because our prime location

gives us our operational cost advantage

• This advantage provides an investment

margin of safety to our investors

• Prior experience from 2007 in a similarly

difficult market gives us the experience to

(17)

17

774

768 1,138 1,077

884 1,078

-200 400 600 800 1,000 1,200

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

Production & Stripping Ratio

Thousand Tonnes

ABN Operational Update

Major Quarterly Updates

1. The production level is higher compared to H1 2011

but is behind the expected target due to higher SR,

and higher rainfall delay compared to plan

2. ABN have been making adjustment to its mineplan to

lower its SR

11.1x

16.8x 13.9x

14.3x

17.6x

17.1x

- F 5.0x 10.0x 15.0x 20.0x

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

(18)

18 ABN Operational Advantages and Focus

Barge Loading Jetty Under Pass Coal Hauling

Short coal hauling

distance 4km

Crusher Capacity

High Built Cap

10 MM TPY

Loading Speed of

(19)

19 IM Operational Update

Major Quarterly Updates

1. IM Operations was impacted from higher mining SR

and lower level of equipment productivity from

contractor

2. IM have worked on reducing the SR and began

negotiation with the contractor to improve equipment

productivity

291

394

378

347

161

236

-50 100 150 200 250 300 350 400 450 500

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

Production & Stripping Ratio

Thousand Tonnes

10.1x 8.6x 8.8x

8.1x

16.4x

14.5x

- F 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x

(20)

20 IM Operational Advantage and Focus

Coal Hauling

Overland Conveyor

Crusher Capacity

Short coal hauling

distance < 5km

CPP Ramp up to

6MM TPY

Conveyor for TMU

& Others

Joint Operation

Integrate Mining

with ABN

(21)

21 TMU Operational Update

Major Quarterly Updates

1. Mining performance was lower as the slippery road

condition due to high level of rainfall and higher

stripping ratio

2. Adjustment to the mineplan was made that would

lower the mining SR

39 ₂₃

59

-20 40 60 80 100 120

4Q11

1Q12

2Q12

Production & Stripping Ratio

Thousand Tonnes

24.5x

45.5x

14.4x

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x 50.0x

(22)

22 TMU Operational Advantage and Focus

Hauling Road

Build 16km Road

to ABN

Samarinda Mahakam River

Muara Berau

Makassar Strait Kutai Energi Jetty

ABN

~55 Km (total ~120 Km)

kilometers 0 12 24 36 48

T M U

Develop clients

for Infrastructure

Exploration in

_{2500+ ha}

Exploration

Integrate CPP

Ops with IM

(23)

23 Marketing & Financial Highlights

(24)

Toba’s has a wide range of coal

products…

TM

Ash

TS

Calorific Value

_(kcal/kg)

(% GAR) (% GAD) (% GAD)

GAR

GAD

ABN

ABN 52

25

7

0.8 5,200

5,800

ABN 58

19

6

0.8 5,800

6,250

IM

Indomining

19

8

0.9 5,700

6,200

TMU

Trisensa-47

28

5

0.4 4,700

5,400

Coal Products

Marketing Highlight

Location of End Users

HONG KONG

MALAYSIA

TAIWAN

JAPAN

SINGAPORE

SOUTH KOREA CHINA

INDIA

INDONESIA THAILAND

… that continue to be in demand in the

major export markets in the region

(25)

25 Marketing Highlight

Major Customers

DRAGON ENERGY GROUP

Major customers provide the stable

business support for Toba’s marketing…

…at zero external cost because Toba

handles our marketing internally

Toba’s Marketing Operations



Central Marketing Operations of all 3

subsidiaries



Internally developed customer based that

allows Toba to have low marketing cost



Balance mix of long term contract, short

term and spot



Active participation in reputable

conference and trade shows to promote

the Toba brand



Marketing development to sell directly to

(26)

26

481

274

101 2009

2010

2011

Notes:

1. USD/IDR exchange rate of 1:9,400, 8,991 and 9,068 as of December 31, 2009, 2010 and 2011, respectively (Source: Bank Indonesia)

TBS has achieved significant revenue and earnings growth driven by strong growth in production and ASP

combined with its competitive cost position

Revenue

(1)

US$ MM

EBITDA

(1)(2)

_{and Margin}

US$ MM

Net Income

(1)(4)

_{and Margin}

US$ MM

13

81

160 13%

33%

30%

2009

2010

2011

10

58

114 10%

21%

24%

2009

2010

2011

Toba Financial Summary – Key Financials

The Company's audited financial statements are presented in Indonesian Rupiah. The Company has not historically prepared U.S. dollar financial statements but has begin to prepare U. S. Dollar financial statements in 2012. The Company is currently considering and may transition to using the U.S. dollar as its reporting currency. Solely for the convenience of the reader, this presentation contains translations of certain Indonesian Rupiah amounts into U.S. dollars at the following rates as of and for the periods specified, being the middle exchange rate announced by Bank Indonesian of 1:9,400 with respect to financial information as of and for the year ended December 31, 2009; 1:8,991 with respect to financial information as of and for the year ended December 31, 2010; 1:9,068 with respect to financial information as of and for the year ended December 31, 2011; and 1:9,180 with respect to financial information as of and for the quarter ended March 31, 2012. Such translations should not be construed as representations that the Indonesian Rupiah or U.S. dollar amounts referred to could have been, or could be converted into Rupiah or U.S. dollars, as the case may be at that or any other rate or at all. The reader should not place undue reliance on these translated amounts, which are unaudited.

(27)

27 Toba Financial Summary – Key Financials (June)

Revenue

US$ MM

Net Income

US$ MM

EBITDA

US$ MM

• Toba’s strengths in operation was proven as revenue continue to grow. This is further highlighted given

the subdued market condition

• Improvement and adjustments actions are being taken to return future EBITDA and Net Income to the

similar previous level

66

26 H1 2011

H1 2012

H1 2011 H1 2012

194 203

(28)

Revenue Drivers

ASP Drivers

Pricing Mechanism:

Index-linked vs. Spot

Contract Type:

Long-term vs. Short-term vs. Spot

Coal Quality

Export vs. Domestic Mix

Premium vs. High-growth Markets

Customer Type:

End-users vs. Coal-traders

Toba

Historical ASPs

US$ / Tonne

50,1

65,5

93,9

2009

2010

2011

95,0

82,0

H12011

H12012

Benefit from lower discount to Newcastle Thermal Coal

Index compared to other similar quality coal

(29)

29 Cash Margins

(1)

US$ / Tonne

TBS

ABN

Indomining

40.4

40.6

47.7

54.6

30.6

14.7

102.2

71.3

55.2 2009

2010

2011

35.8

40.2

56.5

33.7

23.3

10.6

90.2

63.6

46.3 2009

2010

2011

FOB Cash Cost

Margin

ASP

37.7

40.3

54.2

39.7

25.2

12.4

93.9

65.5

50.1 2009

2010

2011

Note:

1. Cash margin equals ASP minus FOB cash cost including royalties

(30)

Cash Cost Analysis and Drivers

Toba FOB Vessel Cash Cost

(1)

Toba FOB Vessel Cash Cost per Tonne

US$ / Tonne Sold

2009 2010 2011 H1 2012 2009 – H1 2012

OB Removal 23.2 25.7 38.6 43.4 +20.2

Barging &

Floating Crane 7.4 5.0 5.7 5.7 (1.7)

Royalty 3.2 4.0 6.0 4.8 +1.6

Coal Extraction

& Hauling 1.5 2.8 2.3 2.8 +1.3

Fuel 0.3 0.4 1.1 2.9 +2.6

Other 2.1 2.4 0.4 7.3 +5.2

Total 37.7 40.3 54.2 66.8 29.1

OB

Removal

65%

Barging &

Floating

Crane

9%

Royalty

7%

Coal

Extraction

& Hauling

4%

Fuel

4%

Other

11%

Cost Management



Lower Production SR & Contractor rate



Increase Integration to lower Hauling, Crushing,

and Barging



Lower Marketing cost through centralize

(31)

31 CSR & Environmental Highlights

(32)

• Toba is continuously developing and implementing its corporate social responsibility programs

– Creating educational opportunities for local communities including renovating schools, training teachers,

providing post-graduate educational assistance and creating a literacy program for adults and a scholarship

program for school-aged children

– Providing health services to the local communities

– Helping groups of farmers plant crops of vegetables and bamboo and assisting with land rehabilitation

– Creating local employment opportunities by sourcing some of the Company’s site workforce from the

neighboring areas

Helping Farmers Plant Crops

Creating Educational Opportunities

Providing Health Services

Toba is Committed to Being a Responsible

Corporate Citizen

(33)

33 Awards

Ernst & Young Social

Entrepreneur of the

Year 2011

East Kalimantan Green

Proper Mining Award

ABN

East Kalimantan Blue

Proper Mining Award

(1)

Revenue Drivers

ASP Drivers

Pricing Mechanism: Index-linked vs. Spot

Contract Type:

Long-term vs. Short-term vs. Spot Coal Quality

Export vs. Domestic Mix

Premium vs. High-growth Markets Customer Type:

End-users vs. Coal-traders

Toba

Historical ASPs

US$ / Tonne

50,1

65,5

93,9

2009 2010 2011

95,0

82,0

H12011 H12012

Benefit from lower discount to Newcastle Thermal Coal

Index compared to other similar quality coal

(2)

Cash Margins (1)

US$ / Tonne

TBS ABN Indomining

40.4 40.6 47.7

54.6 30.6 14.7 102.2 71.3 55.2

2009 2010 2011

35.8 40.2 56.5 33.7 23.3 10.6 90.2 63.6 46.3

2009 2010 2011

FOB Cash Cost Margin ASP

37.7 40.3 54.2 39.7 25.2 12.4 93.9 65.5 50.1

2009 2010 2011

(3)

Cash Cost Analysis and Drivers

Toba FOB Vessel Cash Cost (1)

% Toba FOB Vessel Cash Cost per Tonne US$ / Tonne Sold

2009 2010 2011 H1 2012 2009 – H1 2012

OB Removal 23.2 25.7 38.6 43.4 +20.2

Barging &

Floating Crane 7.4 5.0 5.7 5.7 (1.7)

Royalty 3.2 4.0 6.0 4.8 +1.6

Coal Extraction

& Hauling 1.5 2.8 2.3 2.8 +1.3

Fuel 0.3 0.4 1.1 2.9 +2.6

Other 2.1 2.4 0.4 7.3 +5.2

Total 37.7 40.3 54.2 66.8 29.1

OB Removal 65% Barging & Floating Crane 9% Royalty 7% Coal Extraction & Hauling 4% Fuel 4% Other 11% Cost Management



Lower Production SR & Contractor rate



Increase Integration to lower Hauling, Crushing,

and Barging



Lower Marketing cost through centralize

marketing

(4)

CSR & Environmental Highlights

(5)

32 • Toba is continuously developing and implementing its corporate social responsibility programs

– Creating educational opportunities for local communities including renovating schools, training teachers, providing post-graduate educational assistance and creating a literacy program for adults and a scholarship program for school-aged children

– Providing health services to the local communities

– Helping groups of farmers plant crops of vegetables and bamboo and assisting with land rehabilitation – Creating local employment opportunities by sourcing some of the Company’s site workforce from the