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Economy

Indonesia's Adaro Energy embraces 'self-disruption'

Coal miner is taking chances on new ventures even as its core business thrives

Adaro Energy President Director and CEO Garibaldi Thohir

Major Indonesian coal miner Adaro Energy, which in recent years has entered the domestic power plant business, is now looking to build power plants in neighboring countries in Southeast Asia.

Garibaldi Thohir, the company's president director and CEO, said that following a successful deal late last year with Electricity Generating Authority of Thailand in which Adaro will supply coal for more than 20 years, he realized the company's ability to commit to a long-term supply agreement for coal-fired power plants could give it an advantage in the sector.

"We are looking [into] projects in the Philippines, Myanmar and other places outside Indonesia -- especially in Southeast Asia," Thohir told the Nikkei Asian Review. "[I've seen] more and more similar opportunities."

Over the past few years, Adaro has been expanding into the power plant business. It has a portfolio of 2,260 megawatts in three coal-fired power-plant projects in Indonesia.

Adaro has been exporting 80% of its coal output, but it is now looking to invest in coal-fired power plants overseas.

Building power plants not only helps secure long-term contracts for coal supply, it also serves as one of Adaro's efforts to diversify its business.

Adaro has begun to move into a "second phase of development" of its power business. Thohir said the company "is ready" to invest in renewable energy, having developed a small solar power plant for its own use "for learning" and is looking into bidding for five or six renewable energy projects offered by the Indonesian government.

Adaro started its diversification efforts in 2008 with an eye toward becoming an "integrated energy producer." The cyclical nature of the commodity business, he added, makes diversification necessary for mining companies to survive.

"I call it 'self-disruption.' I have to disrupt the business in order for us to survive," Thohir said. "I know one day all this solar power [and] wind power will come whether we like it or not. So I have to be ready for the next move."

Despite its drive to diversify and efforts by some regional governments -- including Indonesia -- to embrace renewable energy, Thohir still believes the future of coal will be promising in emerging Asia because of countries' huge needs to expand their power capacity to fuel growth.

Thohir said total recoverable reserves of coal around the world are estimated at 1.083 billion tons -- enough to last approximately 210 years at 2004 consumption levels -- making coal "the most reliable, most cost-efficient" energy source to support growth.

"Disruptive innovation is crucial for us not only to survive, but to grow even bigger and stronger," Thohir said.

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