“We are proud that the Company managed to turn things around in 2021. As of end 2021, the Company booked USD1,008.2 million in revenue, an increase of 27.6% from USD790.4 million in 2020.”

Dear Shareholders and Stakeholders,

We are grateful to see how the Company successfully cruised through 2021 with satisfactory results. Throughout the year, we took a number of tactical and systematic improvement measures in order for the Company to accelerate its performance faster. Please allow us on this occasion to convey our oversight results on the performance of both the Company and its Board of Directors throughout 2021.
 

Economic Review

Based on the release of the Central Berau of Statistics (BPS), Indonesia managed to rebound with a growth of 3.69% in 2021 after a rather severe contraction of 2.07% in 2020. Thanks to several factors, including the Government’s successful control over the pandemic, a recovering economic activity, and a gradual re-vibrancy in public mobility.

Overall, the recovery began to occur in nearly all sectors. In particular, the coal industry experienced a spectacular growth compared to previous years. Throughout 2021, the Indonesia Coal Price Benchmark (HBA) continued to rise, and set a record high during the past decade, amounted USD215.01 per tonne in November 2021. In December 2021, the HBA touched USD159.79 per tonne, increase by 167.88% compared to the corresponding figure in December 2020 at USD59.65 per tonne. The increase blew some tail wind for coal companies to boost their performance after stagnation they had experienced in the past few years.

The Ministry of Energy and Mineral Resources (ESDM) noted that Indonesia’s coal production reached 614 million tons in 2021, 98.24% of the stated target of 625 million tons. However, compared 565.69 million tons in 2020, it was a rather a sharp increase of 8%. Coal exports in 2021 were recorded at 435 million tons, an increase from 433.8 million tons in 2020.

Based on our monitoring results, the Company executed its strategy effectively and on target during 2021. This is reflected in the Company’s improved overall operational and financial performances.
 

Assessment of the Performance of the Board of Directors

In our view, the Board of Directors has demonstrated solid leadership in managing the Company in the midst of an unstable situation. In addition to that, one of the challenges the Company had to meet was an extreme weather. Despite all the challenges, the Company grew positively, with a total production reaching 78.8 million tons; 56.4 tons from our KCP facility, and 22.4 tons from Arutmin. We would like to appreciate the Board of Directors for their success in meeting the Company’s obligations to the State while remaining in full compliance with all regulatory provisions.

We are proud that the Company managed to turn things around in 2021. As of end 2021, the Company booked USD1,008.2 million in revenue, an increase of 27.6% from USD790.4 million in 2020. With such a significant increase, the Company earned a comprehensive income for the year of USD223.4 million, from the comprehensive loss of USD337.4 million it suffered in 2020. This achievement was due to hard work and dedication of all parties under the strong leadership of the Board of Directors.
 

Supervision of the Company’s Strategy Implementation 

The Company has a mapping of plans in the short, medium and long terms in formulating the right strategy. Since the initial planning process, we had continued to give assistance and input for more careful consideration prior to the strategy implementation. We also attended very closely to various issues that required our attention, and followed them up with more in-depth review, especially on business risks, the latest external conditions, and other related matters. Through internal meetings and joint meetings with the Board of Directors, we ensure that the Company was on the right track to implement its stated goals.

During the COVID-19 pandemic, we continued to oversee the implementation of the Company’s health and safety protocols. The Company has set up procedures and policies that have to be applied when an employee is confirmed to be positive COVID-19. The Company also provides various health facilities and equipments to support the smooth operational activities, both for the work-from-office and work-from-home schemes.

Based on our monitoring results, the Company executed its strategy effectively and on target during 2021. This is reflected in the Company’s improved overall operational and financial performances. We have done our part in monitoring the follow-ups and results of the implemented strategies to keep them consistent with the predetermined plans and targets.

View on the Company’s Business Prospects

As we are about to embark on 2022, we’ve learnt that coal will be one of the commodities that offers very promising returns. One of the main contributors is HBA which is predicted to continue to skyrocket in the coming year. The increase in HBA mainly stemmed from the decision made by the Chinese Government to set up a higher top price compared to the previous year. 

The escalated tension between Russia and Ukraine, which has waged war between the two countries in Q1 of 2022, has dragged out the energy crisis in Europe. With gas supply disruption and energy crisis, the public and businesses switched to coal consumption. The increase in global coal production is expected to be contributed by increased production in a number of countries, such as India with an estimated increase of 11.7%, followed by China with 7.4%, Indonesia with 6.2%, the US with 6.6%, and Australia with 10.2%, among others.

On a domestic scale, the Ministry of Energy and Mineral Resources has set a target of 663 million tons in production and 165.7 million tons in consumption for 2022. The increase will be contributed by the planned construction of 7 (seven) smelters in 2022, adding to the 21 smelters realized by the end of 2021. In line with the projected domestic increase, the Company is also targeting an 83-89 million ton coal production in 2022, considering that the weather is less extreme.

We are grateful that our KPC facility has received approval for the extension of the IUPK in 2022, under the Decree of the Minister of Investment/Head of the Investment Coordinating Board of the Republic of Indonesia No. 90/1/ IUP/PMA/2021 on Approval for Granting Special Mining Business Permits as Continuation of Contract/Agreement Operations to PT Kaltim Prima Coal. The permit will have a positive impact on the continuity of the Company’s business as well as for state revenues.

We consider that the Company has as strong business outlook in the upcoming year. In the midst of this growth momentum, we would like to remind the Board of Directors to optimally explore this opportunity and meet the Company’s obligations to the state. Therefore, it is essential for the Company have solid cooperation with its subsidiaries, business units and all related parties in realizing sustainable growth.

Views on Governance Implementation

In order to accelerate performance with optimum results, the Company must implement good governance seriously and with discipline. In our scope of duties, we did oversight intensively on the development and implementation of good governance that apply to all lines of business. In this, we are assisted by the Audit Committee, the Nomination and Remuneration Committee, and the Company’s Risk Management Committee.

For the Company, compliance is one of the most important aspects of governance. We always ensure that the Company continues to comply with industry regulations and other regulatory provision that apply. During 2021, the Company remain in compliance all applicable regulations, including the DMO obligations set by the Government. We are proud that the Company was able to meet the obligations properly, so our two subsidiaries, KPC and Arutmin, were given permission by the Government to export after the revocation of the export ban policy by the Ministry of Energy and Mineral Resources in early January 2022.

In each of our joint meetings with the committees and also the Board of Directors, we discussed the challenges that emerged throughout 2021. Of course, we had respond to the challenges and manage them strategically to prevent them from having negative impacts on the Company. Therefore, we provided views and input to the Board of Directors to ensure that risk management and internal control systems were run systematically and prudently.
 

Changes in the Composition of the Board of Commissioners

On August 31, 2021, the Annual GMS decided to appoint me, Sharif Cicip Sutardjo as the Company’s President Commissioner and Independent Commissioner, replacing Mr. Rosan Perkasa Roeslani who had served for the same position in the previous period. The entire Board of Commissioners would like to thank him for his dedication and contribution to the Company during his tenure. I am therefore have committed myself to continuing his good performance and making further contribution to the Company.

In addition, the Annual GMS also appointed Mr. Adhika Andrayudha Bakrie as a new Commissioner of the Company. We welcome him, and hope that he can fulfill the mandate entrusted to him during his term of office. Accordingly, the composition of the Company’s Board of Commissioners as of 31 December 2021 is as follows:
 

Appreciation

On behalf of the Board of Commissioners, allow me to express my deep gratitude to the shareholders and all stakeholders for their continued support and trust in the Company. We would also like to thank the entire members of the Board of Directors, the Management team, subsidiaries and all employees, for their passion to overcome various challenges during 2021. With better governance and strategic business management, the Company will continue to focus on further exploring its potential and achieve rapid growth in the future.
 

On behalf of the Board of Commissioners,

Sharif Cicip Sutardjo
President Commissioner and Independent Commissioner