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IMPORTANT: You must read the following disclaimer before
continuing. The following disclaimerapplies to the attached
offering circular (the offering circular). You are advised to read
this disclaimer carefullybefore accessing, reading or making any
other use of the attached offering circular. In accessing the
attachedoffering circular, you agree to be bound by the following
terms and conditions, including any modifications tothem from time
to time, each time you receive any information from Berau Capital
Resources Pte. Ltd. (theissuer) as a result of such access.
Confirmation of Your Representation: You have accessed the
attached offering circular on the basis thatyou have confirmed your
representation to Credit Suisse (Singapore) Limited and Deutsche
Bank AG, SingaporeBranch (the initial purchasers) that (1) (i) you
are not resident in the United States and, to the extent
youpurchase the securities described in the attached offering
circular, you will be doing so in an offshore transactionpursuant
to Regulation S under the U.S. Securities Act of 1933, as amended
(the U.S. Securities Act), or (ii)you are acting on behalf of, or
you are, a qualified institutional buyer, as defined in Rule 144A
under the U.S.Securities Act, and (2) that you consent to delivery
of the attached offering circular and any amendments orsupplements
thereto by electronic transmission.
The attached offering circular has been made available to you in
electronic form. You are reminded thatdocuments transmitted via
this medium may be altered or changed during the process of
transmission andconsequently none of the issuer, the guarantors (as
defined in the attached offering circular), the initial
purchasersor any of their respective affiliates, directors,
officers, employees, representatives and agents, nor any
otherperson controlling the issuer, any guarantor, the initial
purchasers or any of their respective affiliates accepts
anyliability or responsibility with respect to any discrepancies
between the offering circular distributed to you inelectronic
format and the hard copy version. The issuer will provide a hard
copy version of the offering circularto you upon request.
Restrictions: The attached offering circular is being furnished
in connection with an offering exempt fromregistration under the
U.S. Securities Act solely for the purpose of enabling prospective
investors an opportunityto consider the purchase of the securities
described therein.
The notes and the guarantees (each as defined in the attached
offering circular) have not been, andwill not be, registered under
the U.S. Securities Act, or the securities laws of any other
jurisdiction, andmay not be offered or sold within the United
States unless registered under the U.S. Securities Act oroffered or
sold pursuant to an exemption from such registration.
You are not authorized to and you may not forward or deliver the
attached offering circular,electronically or otherwise, to any
other person or reproduce such offering circular in any
mannerwhatsoever. Any forwarding, distribution or reproduction of
this document and the attached offeringcircular in whole or in part
is unauthorized. Failure to comply with this directive may result
in a violationof the U.S. Securities Act or the applicable laws of
other jurisdictions.
The materials relating to this offering of the notes and
guarantees do not constitute, and may not be used inconnection
with, an offer or solicitation in any jurisdiction where offers or
solicitations are not permitted by law.If a jurisdiction requires
that this offering be made by a licensed broker or dealer, and any
initial purchaser or anaffiliate of the initial purchasers is a
licensed broker or dealer in that jurisdiction, this offering shall
be deemed tobe made by such initial purchaser or such affiliate on
behalf of the issuer and the guarantors in such jurisdiction.
You are reminded that you have accessed the attached offering
circular on the basis that you are a personinto whose possession
this offering circular may be lawfully delivered in accordance with
the laws of thejurisdiction in which you are located and you may
not nor are you authorized to deliver this offering
circular,electronically or otherwise, to any other person. If you
have gained access to this transmission contrary to theforegoing
restrictions, you will be unable to purchase any of the notes and
guarantees described therein.
If you receive this offering circular by e-mail, you should not
reply by e-mail to this announcement, and youmay not purchase any
of the notes and guarantees by doing so. Any reply e-mail
communications, includingthose you generate by using the Reply
function on your e-mail software, will be ignored or rejected. If
youreceive this offering circular by e-mail, your use of this
e-mail is at your own risk and it is your responsibility totake
precautions to ensure that it is free from viruses and other items
of a destructive nature.
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Berau Capital Resources Pte. Ltd.(incorporated as a private
company limited by shares in Singapore)
US$100,000,00012.5% Guaranteed Senior Secured Notes due 2015
Unconditionally and irrevocably guaranteed by
PT Berau Coal Energy Tbk(incorporated with limited liability in
Indonesia)
The notes will mature on July 8, 2015. Interest will accrue from
July 8, 2010 and be payable semi-annually in arrears onJanuary 8
and July 8 of each year, commencing on January 8, 2011. The notes
will be unconditionally and irrevocably guaranteedby the issuers
parent company, PT Berau Coal Energy Tbk, and certain of PT Berau
Coal Energy Tbks subsidiaries, including itsmain operating
subsidiary, PT Berau Coal.
The notes offered hereby will be issued as additional notes
under the indenture pursuant to which, on July 8, 2010, the
issuerissued US$350,000,000 principal amount of its 12.5%
Guaranteed Senior Secured Notes due 2015 (the existing notes).
Thenotes offered hereby will be treated as a single series with the
existing notes under the indenture and will have the same terms
asthe existing notes. Holders of the notes offered hereby and the
existing notes will vote as one class under the indenture.
The issuer may redeem up to 35% of the notes using the proceeds
of certain equity offerings of the issuer or the parentguarantor
completed before July 8, 2013. The issuer may redeem some or all of
the notes at any time on or after July 8, 2013. Theredemption
prices are set forth in this offering circular. The issuer may
redeem some or all of the notes prior to July 8, 2013, at aprice
equal to 100% of the principal amount of the notes plus a
make-whole premium. If the issuer or the parent
guarantorexperiences specific kinds of changes in control, the
issuer must offer to purchase the notes at a price equal to 101% of
theirprincipal amount plus unpaid and accrued interest. The issuer
may redeem all but not less than all of the notes at the
principalamount plus accrued interest upon certain changes in tax
law.
The notes are general obligations of the issuer, secured by the
collateral described in this offering circular, and will
otherwiserank pari passu in right of payment with all other
unsecured, unsubordinated indebtedness of the issuer. The
guarantees are generalobligations of the guarantors, secured by the
collateral described in this offering circular, and will otherwise
rank pari passu in rightof payment with all other unsecured,
unsubordinated indebtedness of the guarantors.
The notes are rated B2 by Moodys Investors Service, Inc. and B+
by Standard & Poors Ratings Group. A security ratingis not a
recommendation to buy, sell or hold securities and may be subject
to suspension, reduction, or withdrawal at any time bythe assigning
rating agency.
Investing in the notes involves risks. See Risk Factors on page
22.
Price: 103.5%plus accrued interest from July 8, 2010.
We have received approval-in-principle for the listing of the
notes on the Singapore Exchange Securities Trading Limited
(theSGX-ST). The SGX-ST assumes no responsibility for the
correctness of any of the statements made or opinions or
reportscontained in this offering circular. Admission of the notes
to the Official List of the SGX-ST is not to be taken as an
indication ofthe merits of the issuer, the guarantors or the
notes.
Delivery of the notes in book-entry form will be made on or
about July 29, 2010.
The notes and the guarantees have not been registered under the
U.S. Securities Act of 1933 or the securities laws of anyother
jurisdiction. The notes and the guarantees may not be offered or
sold within the United States or to U.S. persons, except
toqualified institutional buyers in reliance on the exemption from
registration provided by Rule 144A and to certain persons in
offshoretransactions in reliance on Regulation S. You are hereby
notified that sellers of the notes and the guarantees may be
relying on theexemption from the provisions of Section 5 of the
U.S. Securities Act provided by Rule 144A.
Sole Global Coordinator
Credit SuisseJoint Lead Managers and Joint Bookrunners
Credit Suisse Deutsche BankThe date of this confidential
offering circular is July 26, 2010.
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TABLE OF CONTENTS
Page
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 1RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 22USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . .
. . . . . 61EXCHANGE RATES AND EXCHANGE
CONTROLS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 62CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . .
. . . 63SELECTED FINANCIAL INFORMATION AND
OTHER DATA . . . . . . . . . . . . . . . . . . . . . . . . . . .
64MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 72
COAL INDUSTRY OVERVIEW . . . . . . . . . . . . . . . .
99BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 105DESCRIPTION OF MATERIAL AGREEMENTS. . . .
132DESCRIPTION OF OTHER MATERIAL
INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . .
141MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 142PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . .
148
Page
RELATED PARTY TRANSACTIONS . . . . . . . . . . . . 150THE ISSUER
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151REGULATION OF THE INDONESIAN COALMINING INDUSTRY. . . . . . . .
. . . . . . . . . . . . . . . 152
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . .
163TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 227PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . .
. . 237TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . .
242LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . .
. 244INDEPENDENT PUBLIC ACCOUNTANTS. . . . . . . . 244INDEPENDENT
MINE CONSULTANT. . . . . . . . . . . 244SUMMARY OF CERTAIN
PRINCIPALDIFFERENCES BETWEEN INDONESIANGAAP AND U.S. GAAP . . . . .
. . . . . . . . . . . . . 245
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 258INDEX TO FINANCIAL STATEMENTS . . . . . . . . . .
F-1APPENDIX A-STATEMENT OF OPEN-CUT COALRESOURCES AND RESERVES . .
. . . . . . . . . . . . A-1
NOTICE TO INVESTORS
You should rely only on the information in this offering
circular or to which we have referred you.We have not authorized
anyone to provide you with different information. This offering
circular may onlybe used where it is legal to sell these
securities. The information in this offering circular may be
accurateonly on the date of this offering circular.
We are relying on an exemption from registration under the U.S.
Securities Act and Section 274 and/orSection 275 of the Securities
and Futures Act, Chapter 289 of Singapore (the SFA) for offers and
sales ofsecurities that do not involve a public offering. By
purchasing the notes, you will be deemed to have made
theacknowledgments, representations, warranties and agreements
described in Transfer Restrictions. You will berequired to bear the
financial risks of your investment which may be for an indefinite
period of time.
This offering circular has been submitted confidentially to a
limited number of institutional investors so thatthey can consider
a purchase of the notes. We have not authorized its use for any
other purpose. This offeringcircular may not be copied or
reproduced in whole or in part. It may be distributed and its
contents disclosed onlyto the prospective investors to whom it is
provided. By accepting delivery of this offering circular, you
agree tothese restrictions.
Credit Suisse (Singapore) Limited (Credit Suisse) and Deutsche
Bank AG, Singapore Branch (DeutscheBank and together with Credit
Suisse, the initial purchasers) have not verified, and make no
representation orwarranty, express or implied, as to the accuracy
or completeness of, the information in this offering circular.
Inmaking an investment decision, you must rely on your own
examination of us and the terms of the offering,including the
merits and risks involved. By accepting delivery of this offering
circular, you acknowledge that youhave not relied on the initial
purchasers or any of their affiliates in connection with your
investigation of theaccuracy of the information in this offering
circular or your investment decision.
i
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Neither we nor the initial purchasers is making any
representation to any purchaser of the notes regardingthe legality
of an investment in the notes by such purchaser under any legal
investment or similar laws orregulations. You should not consider
any information in this offering circular to be legal, business,
financial ortax advice. You should consult your own attorney,
business advisor and tax advisor for legal, business, financialand
tax advice regarding an investment in the notes.
The distribution and possession of this offering circular and
the purchase, offer and sale of the notes incertain jurisdictions
may be restricted by law. Each purchaser of the notes must comply
with all applicable lawsin each jurisdiction in which it purchases,
offers or sells the notes or possesses this offering circular and
neitherwe nor the initial purchasers shall have any responsibility
therefor. See Plan of Distribution.
The notes have not been approved or disapproved by the U.S.
Securities and Exchange Commission (theSEC), the Monetary Authority
of Singapore (MAS), the SGX-ST or any state or foreign
securitiescommission or regulatory authority. The foregoing
authorities have not confirmed the accuracy or determined
theadequacy of this offering circular. Any representation to the
contrary is a criminal offense in the United States.
In connection with this offering, certain persons participating
in the offering may engage intransactions that stabilize, maintain
or otherwise affect the price of the notes. Specifically, the
initialpurchasers may bid for and purchase notes in the open market
to stabilize the price of the notes. Theinitial purchasers may also
over allot the offering, creating a syndicate short position. In
addition, theinitial purchasers may bid for and may stabilize or
maintain the market price of the notes above marketlevels that
might otherwise prevail. The initial purchasers are not required to
engage in these activities,and may end these activities at any
time. These activities will be undertaken solely for the account of
theinitial purchasers, and not for and on behalf of the issuer.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION
FOR ALICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW
HAMPSHIRE REVISEDSTATUTES ANNOTATED (RSA 421-B) WITH THE STATE OF
NEW HAMPSHIRE NOR THEFACT THAT A SECURITY IS EFFECTIVELY REGISTERED
OR A PERSON IS LICENSED IN THESTATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THATANY DOCUMENT FILED UNDER RSA
421-B IS TRUE, COMPLETE AND NOT MISLEADING.NEITHER ANY SUCH FACT
NOR THE FACT THAT AN EXEMPTION OR EXCEPTION ISAVAILABLE FOR A
SECURITY OR A TRANSACTIONMEANS THAT THE SECRETARY OFSTATE HAS
PASSED IN ANYWAY UPON THE MERITS OR QUALIFICATION OF, ORRECOMMENDED
OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. ITIS
UNLAWFUL TOMAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
PURCHASER,CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENTWITH
THE PROVISIONS OFTHIS PARAGRAPH.
CERTAIN DEFINED TERMS AND CONVENTIONS
We have prepared this offering circular using a number of
conventions, which you should consider whenreading information
contained herein.
All references to Berau Coal Energy are references to PT Berau
Coal Energy Tbk. All references toArmadian are to PT Armadian
Tritunggal, our direct subsidiary in which we have an interest of
99.99%. Allreferences to Berau Coal are to PT Berau Coal, our
indirect subsidiary in which we have an effective interest of90%.
All references to the Group are references to Berau Coal Energy and
its subsidiaries taken as a whole.
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All references to we, us or our are references to Berau Coal
Energy or the Berau Coal Energy Group as awhole, depending on the
context. All references to the issuer are references to Berau
Capital Resources Pte.Ltd., our wholly-owned subsidiary.
Unless otherwise indicated or otherwise required by the context,
all references to Rupiah or Rp. are toIndonesian Rupiah. All
references to U.S. dollars or US$ are to United States dollars.
All references to ton are to a metric ton. A metric ton is a
unit of mass equal to 1,000 kilograms, orapproximately 2,204.6
pounds. A hectare is a unit of area equal to 10,000 square meters,
or approximately2.471 acres.
All references to calorific values are to calorific values on a
gross as received basis, unless otherwise stated.
Certain other terms are defined in the Glossary contained
elsewhere in this offering circular.
Unless otherwise indicated, all amounts in relation to the Group
are presented on a consolidated basis.
Rounding adjustments have been made in calculating some of the
data included in this offering circular. Asa result, the totals in
some tables may not be exact arithmetic aggregations of the figures
that precede them.
PRESENTATION OF FINANCIAL INFORMATION
Berau Coal Energys financial statements are prepared in Rupiah
and Berau Coals financial statements areprepared in U.S. dollars.
Solely for the convenience of the reader, unless otherwise
indicated, Rupiah amounts asof December 31, 2009 have been
translated to U.S. dollars based on the middle exchange rate
announced byBank Indonesia as of December 31, 2009, which was Rp.
9,400 = US$1.00. Rupiah amounts as of March 31,2010 have been
translated to U.S. dollars based on the middle exchange announced
by Bank Indonesia as ofMarch 31, 2010, which was Rp. 9,115 =
US$1.00. On July 22, 2010, Bank Indonesias middle exchange rate
wasRp. 9,069 = US$1.00. We make no representation that the Rupiah
or U.S. dollar amounts in this offering circularcould have been or
could be converted into U.S. dollars or Rupiah, as the case may be,
at any particular rate or atall. See Exchange Rates and Exchange
Controls.
The financial statements of Berau Coal Energy and Berau Coal are
prepared in accordance with generallyaccepted accounting principles
in Indonesia (Indonesian GAAP), which differ in significant
respects fromgenerally accepted accounting principles in the United
States (U.S. GAAP). For a summary of certaindifferences between
Indonesian GAAP and U.S. GAAP, see Summary of Certain Principal
Differences BetweenIndonesian GAAP and U.S. GAAP.
Our financial statements as of and for the year ended December
31, 2007 have been restated. The figures asof and for the year
ended December 31, 2007 included in this offering circular are the
restated figures. See Note41 to our financial statements as of and
for the year ended December 31, 2007, 2008 and 2009
includedelsewhere in this offering circular.
INDUSTRY ANDMARKET DATA
This offering circular includes market share and industry data
and forecasts that we have obtained fromindustry publications and
surveys, reports of governmental agencies and internal company
surveys. Industrypublications and surveys and forecasts generally
state that the information contained therein has been obtainedfrom
sources we believe to be reliable, but there can be no assurance as
to the accuracy or completeness ofincluded information. While we
have taken reasonable actions to ensure that the information is
extractedaccurately and in its proper context, none of us or the
initial purchasers have independently verified any of thedata from
third party sources or ascertained the underlying economic
assumptions they relied upon. References tothermal coal refer to
bituminous thermal coal, not sub-bituminous thermal coal, unless
specified.
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RESOURCES AND RESERVES STATEMENTS
Berau Coal reports its coal resources and reserves in accordance
with the Australasian Code for Reportingof Exploration Results,
Mineral Resources and Ore Reserves (2004 edition) (the 2004 JORC
Code), publishedby the Joint Ore Reserves Committee of The
Australasian Institute of Mining and Metallurgy and theAustralasian
Institute of Geoscientists and Minerals Council of Australia (the
JORC).
Under the 2004 JORC Code, the term coal resource refers to a
concentration or occurrence of coal ofintrinsic economic interest
in or on the earths crust in such form, quality and quantity that
there are reasonableprospects for eventual economic extraction. The
location, quantity, grade, geological characteristics andcontinuity
of a coal resource are known, estimated or interpreted from
specific geological evidence andknowledge. Coal resources are
subdivided, in order of increasing geological confidence, into
inferred,indicated and measured categories.
The term coal reserve is defined in the 2004 JORC Code as the
economically mineable part of a measuredand/or indicated coal
resource. It includes diluting materials and allowances for losses
which may occur when thecoal is mined. Appropriate assessments have
been carried out, and include consideration of and modification
byrealistically assumed mining, metallurgical, economic, marketing,
legal, environmental, social and governmentalfactors. These
assessments demonstrate at the time of reporting that extraction
could reasonably be justified. Coalreserves are subdivided in order
of increasing confidence into probable coal reserves and proved
coalreserves. The choice of the appropriate category of reserve is
determined primarily by the relevant level ofconfidence in the coal
resource and after considering any uncertainties in the modifying
factors. Pursuant to the2004 JORC Code, allocation of the
appropriate category must be made by the competent person or
competentpersons preparing the reserves statements.
The term marketable coal reserves, representing beneficiated or
otherwise enhanced coal product wheremodifications due to mining,
dilution and processing have been considered, may, pursuant to the
2004 JORCCode, be used in public reports for companies in
conjunction with, but not instead of, reports of coal reserves.The
basis of the predicted yield to achieve marketable coal reserves
should be stated.
Coal Resource and Reserve Statement
Information in this offering circular relating to Berau Coals
proved and probable reserves was derived from theStatement of
Open-Cut Coal Resources and Reserves of The Berau Coal Deposits as
of December 31, 2009 (theReserve Statement) attached as Appendix A
to this offering circular. The Reserve Statement has been prepared
byPT. Runge Indonesia (PTRI) and issued under the
Minarco-MineConsult (MMC) name. MMC is an associatedentity of PTRI
and is an independent mine consultant. See Independent Mine
Consultant. The Appendices to theReserve Statement have not been
included in this offering circular and are available upon request
at Berau Coalsregistered office at Menara Karya 11th Floor, Jl. HR.
Rasuna Said Block X-5 Kav. 1-2, Jakarta 12950, Indonesia.
Estimates of coal resources, reserves, recoveries and operating
costs are largely dependent on theinterpretation of geological data
obtained from drill holes and other sampling techniques, and
feasibility studieswhich derive estimates of operating costs based
on anticipated tonnage, expected recovery rates, equipmentoperating
costs and other factors. No assurance can be given that the
resources and reserves presented in thisoffering circular will be
recovered at the quality or yield presented. In addition, investors
should not assume thatthe resource estimates are capable of being
directly reclassified as reserves under the 2004 JORC Code.
Investorsshould also note that coal resources are reported
inclusive of coal reserves (that is, coal reserves are
notadditional to coal resources). The inclusion of resource
estimates should not be regarded as a representation thatthese
amounts can be economically exploited, particularly inferred
resources, and you are cautioned not to placeundue reliance on
those estimates.
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Assumptions Underlying Berau Coals Coal Reserve Estimates
Berau Coal estimates its coal reserves using various assumptions
regarding its mining costs and the price ofcoal. For more
information regarding the cost and revenue factors used to estimate
Berau Coals coal reservespresented in this offering circular, see
the Reserve Statement under the heading Cost and Revenue
Factors.
Cautionary Note to U.S. Investors Concerning Estimates of
Measured, Indicated and Inferred Resources
There are differences between reporting regimes for reserve
estimates in the United States and in Australia.A key difference
between the reporting regimes in Australia under the 2004 JORC Code
and in the United Statesunder the requirements as adopted by the
SEC in its Industry Guide 7Description of Property by
IssuersEngaged or to be Engaged in Significant Mining Operations
(Industry Guide 7) is the absence in the UnitedStates of any
provision for the reporting of estimates other than proved
(measured) or probable (indicated)reserves. There is, therefore, no
equivalent for resources under the SECs Industry Guide 7.
The SEC has applied the following reporting definitions to
reserves under Industry Guide 7:
A reserve is that part of a mineral deposit which could be
economically and legally extracted orproduced at the time of the
reserve determination. Reserves are customarily stated in terms of
ore whendealing with metalliferous minerals; when other materials
such as coal, oil, shale, tar, sands, limestone,etc. are involved,
an appropriate term such as recoverable coal may be
substituted.
Proven (measured) reserves are reserves for which:
(a) quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; gradeand/or quality are computed
from the results of detailed sampling; and
(b) the sites for inspection, sampling and measurement are
spaced so closely and the geologic characteris so well defined that
size, shape, depth and mineral content of reserves are
well-established.
Probable (indicated) reserves are reserves for which quantity
and grade and/or quality are computedfrom information similar to
that used for proven (measured) reserves, but the sites for
inspection,sampling, and measurement are farther apart or are
otherwise less adequately spaced. The degree ofassurance, although
lower than that for proven (measured) reserves, is high enough to
assume continuitybetween points of observation.
This offering circular uses the terms measured, indicated and
inferred resources. United Statesinvestors are advised that while
some investors recognize such terms, the SEC does not recognize
them. Inferredresources have a great amount of uncertainty as to
their existence and great uncertainty as to their economic andlegal
feasibility. It cannot be assumed that all or any part of an
inferred resource will ever be upgraded to a highercategory. Under
SEC rules, estimates of inferred mineral resources may not form the
basis of feasibility or othereconomic studies. You should not
assume that all or any part of measured or indicated resources will
everbe converted into reserves. You are also cautioned not to
assume that all or any part of an inferredresource exists or is
economically or legally mineable.
AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with resales
of the notes, we will furnish, upon requestof a holder of the notes
and a prospective purchaser designated by a holder, the information
required to bedelivered under Rule 144A(d)(4) if at the time of
such request we are neither a reporting company underSection 13 or
Section 15(d) of the U.S. Securities Exchange Act of 1934 (the U.S.
Exchange Act) nor exemptfrom reporting pursuant to Rule 12g3-2(b)
under the U.S. Exchange Act. So long as any of the notes
remainoutstanding, we will provide the trustee our annual and
quarterly financial statements for forwarding to theholders of the
notes.
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ENFORCEABILITY OF FOREIGN JUDGMENTS
The issuer is incorporated in Singapore, Berau Coal Energy,
Berau Coal and Armadian are incorporated inIndonesia and the other
guarantors are incorporated in other jurisdictions outside the
United States. All of thecommissioners, directors and executive
officers, as applicable, of the issuer and the guarantors and
certainexperts named in this offering circular reside outside the
United States. Substantially all of the assets of theissuer, the
guarantors and these other persons are located outside the United
States. As a result, it may be difficultfor investors to effect
service of process upon such persons within the United States, or
to enforce against us orthese persons in courts, judgments obtained
in U.S. courts, including judgments predicated upon the civil
liabilityprovisions of the federal securities laws of the United
States.
Our Indonesian legal advisor, Assegaf Hamzah & Partners, has
advised us that judgments of courts outsideIndonesia are not
enforceable in Indonesian courts. A foreign court judgment could be
offered and accepted intoevidence in a proceeding on the underlying
claim in an Indonesian court and may be given such
evidentiaryweight as the Indonesian court may deem appropriate in
its sole discretion. A claimant may be required to pursueclaims in
Indonesian courts on the basis of Indonesian law.
The issuer is incorporated as a private company with limited
liability under the laws of Singapore. All of thedirectors of the
issuer reside outside Singapore and substantially all the assets of
the issuer and the guarantors arelocated outside Singapore. As a
result, it may be difficult for investors to enforce against the
issuer judgmentsobtained in non-Singapore courts. Purchasers of the
notes may not be able to enforce against the issuer
judgmentsobtained in the United States based upon certain of the
civil liability provisions of the securities laws of theUnited
States or any state thereof in Singapore courts and Singapore
courts may not enter judgments in originalactions brought in
Singapore courts based solely upon the civil liability provisions
of the securities laws of theUnited States or any state
thereof.
ENFORCEABILITY OF THE NOTES AND THE GUARANTEES UNDER INDONESIAN
LAW
Several Indonesian companies that have defaulted on debt
incurred through offshore financing entities(using structures
similar to that used in this offering) have sued their creditors in
Indonesian courts to invalidatetheir debt obligations and have
sought damages from creditors exceeding the original proceeds of
the debt issued.In some of these cases, the courts have ruled for
the Indonesian companies. Court reports of some of thesedecisions
are not available, and those that are available do not provide a
clear factual basis or legal rationale forthese judgments. The
Indonesian legal system does not recognize the concept of precedent
recognized in thecommon law system but does acknowledge the concept
of jurisprudence, which means that these cases may havepersuasive
force in future cases. Accordingly, an Indonesian court could take
a similar approach in any disputeregarding the notes or the
guarantees of Berau Coal Energy, Armadian and Berau Coal and
declare themunenforceable and may award us damages from purchasers
of the notes.
Under the Indonesian Civil Code, a guarantor may waive its right
to require an obligee to exhaust its legalremedies against an
obligors assets on a guaranteed obligation prior to the obligee
exercising its rights under therelated guarantee. The guarantees
contains a waiver of this obligation. Nonetheless, Berau Coal
Energy,Armadian and Berau Coal could successfully petition a court
to require the trustee and noteholders to exhausttheir remedies
against the issuer before acting against Berau Coal Energy,
Armadian and Berau Coal. If a courtgrants such a request, Berau
Coal Energy, Armadian and Berau Coal may not be required to comply
with theirobligations under their guarantees until the trustee and
noteholders have exhausted all legal remedies against theissuer.
This could increase the costs of pursuing a claim and the time
required to obtain relief.
For more information on these risks, see Risk FactorsRisks
Relating to the Offering Structure.
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FORWARD-LOOKING STATEMENTS
This offering circular contains forward-looking statements that
relate to future events which are, by theirnature, subject to
significant risks and uncertainties. Statements regarding our
forecast production volumes,future financial position and results
of operations, strategy, targets and future developments in the
markets wherewe participate, including forecast supply and demand
in the coal industry, and statements that include the wordsbelieve,
expect, aim, intend, will, may, project, estimate, forecast,
anticipate, predict,seek, should or similar words or expressions,
are forward-looking statements.
The future events referred to in these forward-looking
statements involve known and unknown risks,uncertainties and other
factors, many of which are beyond our control, which may cause the
actual results to bematerially different from those expressed or
implied by the forward-looking statements. These
forward-lookingstatements are based on numerous assumptions
regarding our present and future business strategies and
theenvironment in which we operate and are not a guarantee of
future performance. Important factors that couldcause the actual
results to differ materially from those in the forward-looking
statements include the following:
the price of coal, including factors influencing the price of
coal, such as domestic, regional and globalsupply and demand;
changes in economic growth of Indonesia and other Asian
countries and their demand for coal;
changes in laws or governmental policies affecting the
Indonesian, regional or global coal miningindustries;
the inherent difficulty of predicting the presence, yield or
quality of coal reserves;
unforeseen difficulties in extracting, processing or
transporting coal on an economical basis;
technological changes that affect the extraction, processing,
transportation or combustion of coal;
our ability to successfully implement our plans to increase coal
production;
accidents, natural disasters or inclement weather at our mines
and other facilities;
increasing costs of, or difficulty in obtaining, fuel, raw
materials or equipment from suppliers;
loss of, or reductions of purchases by, major customers;
the ability of our contractors to perform in accordance with
contractual terms;
increasing inflation in Indonesia; and
depreciation of the Rupiah against the U.S. dollar.
Additional factors that could affect our results include those
discussed under Risk Factors. When relyingon forward-looking
statements, you should carefully consider the foregoing factors and
other uncertainties andevents, especially in light of the
political, economic, social and legal environment in which we
operate. Suchforward-looking statements speak only as of the date
on which they are made. We are not obligated to update orrevise any
of them, whether as a result of new information, future events or
otherwise. We do not make anyrepresentation, warranty or prediction
that the results anticipated by such forward-looking statements
will beachieved, and such forward-looking statements represent, in
each case, only one of many possible scenarios andshould not be
viewed as the most likely or standard scenario. Accordingly, you
should not place undue relianceon any forward-looking
statements.
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SUMMARY
This summary does not contain all the information that may be
important to you in deciding to invest in thenotes. You should read
the entire offering circular, including the section entitled Risk
Factors and thefinancial statements and related notes thereto
included elsewhere in this offering circular, before making
aninvestment decision.
Overview
Berau Coal Energy is a holding company that indirectly owns 90%
of Berau Coal, the fifth largest coalproducer in Indonesia in terms
of production volume in 2009, according to the Annual Coal
Production Reportdated December 2009 by Indonesias Ministry of
Energy and Mineral Resources. Berau Coal engages inopen-cut mining
of coal in its concession area in East Kalimantan, Indonesia, where
it holds coal mining rightsuntil April 26, 2025. Berau Coal
operates three mining areas in Lati, Binungan and Sambarata, where
reserveswere estimated to be 346 million tons as of December 31,
2009, of which 146 million tons are of the provedcategory and 200
million tons are of the probable category, according to MMC. Berau
Coals concession area ofapproximately 118,400 hectares also
contains three other reserve locations, namely Kelai, Gurimbang and
Punan.
Berau Coal supplies coal, both directly and through marketing
agents, to customers in Indonesia andelsewhere in Asia. Its
customers are mainly utility companies and coal trading companies
that purchase coal fromit for resale. In recent years, Berau Coal
has derived approximately 40% of its total sales revenues from
domesticsales and approximately 60% of its total sales revenues
from international sales. Berau Coal exports to customersin China,
Hong Kong, India, Japan, South Korea, Taiwan and Thailand.
Berau Coal produces thermal coal at its three mining locations
and blends them in order to adjust the overallquality grade of the
coal. It markets the coal under four brand namesMahoni, Mahoni-B,
Agathis andSungkai, with calorific values ranging from 5,000
kcal/kg to 5,600 kcal/kg (on a gross as received basis)
andappropriate levels of ash and sulfur for use in coal-fired power
plants in Indonesia and many other Asiancountries.
In 2007, 2008, 2009 and the three months ended March 31, 2010,
Berau Coal produced 11.8 million tons,13.1 million tons, 14.3
million tons and 3.7 million tons of coal, respectively. As of July
1, 2010, Berau Coal hadcontracts with aggregate commitments to
purchase coal totaling 17.0 million tons in 2010, all of which was
at anagreed price.
Berau Coal began producing coal commercially from the Lati and
Binungan mines in 1995 and theSambarata mine in 2001. Lati is the
largest of its three active mining areas and accounted for 56.8% of
itsproduction in 2009. Sambarata has the highest quality coal of
all three mining areas in terms of calorific value.The three mining
areas are similar in their operations but are independent, with
their own separate coal terminalsand barge lines. Berau Coal
expects to commence commercial coal production in Gurimbang in 2012
and Kelaiin 2013.
Berau Coal subcontracts all of its mining, barging and drilling
and blasting operations, which allows it tominimize capital
expenditures and working capital requirements and focus on
exploration, mine planning,supervision and sales and marketing.
Berau Coal works closely with its two mining contractors, PT
BukitMakmur Mandiri Utama (BUMA) and PT Saptaindra Sejati (SIS),
each of which undertakes land clearing,overburden removal, coal
excavation, hauling activities and road maintenance. However,
pursuant to Indonesiasnew mineral and coal mining law and one of
its implementing regulations, by September 29, 2012, Berau Coalwill
need to amend its existing contracts with its mining contractors
and conduct its own coal mining andprocessing activities, as mining
services companies will only be allowed to perform overburden
removal andtransportation of coal in the mining process.
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Berau Coal uses multiple contractors for each of its other
operations, such as barging, coal quality analysisand
transshipping. Once the coal is mined, crushed and stockpiled,
contractors barge the loads to a transshipmentarea at Muara Pantai
in the Sulawesi sea located approximately 50 kilometers to 100
kilometers from the ports atLati, Suaran and Sambarata. At Muara
Pantai, higher energy coal from the Sambarata mine is blended with
coalfrom the Lati or Binungan mines, depending on the quality grade
requirements of the shipment.
In 2007, 2008, 2009 and the three months ended March 31, 2010,
we had sales of Rp. 3,445.0 billion, Rp.6,110.2 billion, Rp.
8,318.6 billion and Rp. 2,041.8 billion, respectively, and net
income of Rp. 25.6 billion, Rp.170.1 billion, Rp. 853.7 billion and
Rp. 219.6 billion, respectively.
In December 2009, PT Recapital Advisors (Recapital) acquired an
effective interest of 99% in us.Recapital has brought to Berau Coal
new members for its board of commissioners, as well as a new
PresidentDirector and a new Finance Director, while maintaining the
existing personnel at the operational level with anaim to improve
production levels, increase exploration activities and expand Berau
Coals infrastructure.
Competitive Strengths
Berau Coals principal competitive strengths are the
following:
Sizable and long-standing operations with a consistent track
record of production growth.
Low cost coal producer.
Well-positioned to capture growth opportunities in thermal coal
markets in Asia.
Strong customer relationships and a high quality customer
base.
Experienced management team.
See BusinessCompetitive Strengths.
Strategy
The main elements of Berau Coals business strategy are the
following:
Increase coal production at an accelerating rate by expanding
infrastructure while managing costs.
Increase coal reserves by using internally generated cash flows
from existing mines to explore for newreserves and enhance
exploration efforts.
Maintain core customers in Berau Coals domestic and export
markets and secure orders from long-termcustomers for the majority
of Berau Coals production.
Consider strategic alliances with companies serving the
Indonesian mining sector.
Continue to strengthen relationships with local communities
through development and environmentalrehabilitation programs.
See BusinessStrategy.
The Issuer
The issuer, Berau Capital Resources Pte. Ltd., was incorporated
as a private company limited by sharesunder the laws of Singapore
on February 9, 2010. The registered office of the issuer is located
at 10 Anson Road,#03-05 International Plaza, Singapore 079903. The
issuer is a wholly-owned subsidiary of Berau Coal Energy.The
principal activities of the issuer are to issue the notes, lend the
proceeds of that issuance to companies in theGroup and undertake
administrative functions associated with servicing the notes.
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Organizational Structure
Our organizational structure is set forth in the chart
below:
Sojitz Corporation(2)
(Japan)
PT Bentara Energi Asia Utama (Indonesia)
PT Bukit Mutiara (Indonesia)
Berau Coal Energy (Indonesia)
Regulus International Pte. Ltd.
(Singapore)
Maple Holdings Limited (Labuan)
Berau Coal (Indonesia)
Empire CapitalResources Pte. Ltd.
(Singapore)
Winchester InvestmentHoldings PLC(Seychelles)
Aries Investments Limited (Malta)
99.6%(1)
100%
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Recent Developments
Guaranteed Senior Secured Notes
On July 8, 2010, we issued $350 million aggregate principal
amount of guaranteed senior secured notes due2015 (the existing
notes). The notes offered hereby will be additional notes under the
indenture pursuant towhich we issued the existing notes. See
Description of the Notes.
Senior Secured Credit Facility
On July 23, 2010, we entered into a US$400 million senior
secured credit facility (the Senior SecuredCredit Facility) and
drew down the entire US$400 million available thereunder.
Berau Coal Energy is the borrower under this facility and its
obligations under this facility rank pari passuwith its obligations
under its guarantees of the notes. The facility comprises two
tranches: (i) tranche A in aprincipal amount of US$300 million and
(ii) tranche B in a principal amount of US$100 million. The term
loansunder tranche A have a final maturity of four years and the
term loans under tranche B have a final maturity of 57months. Both
tranches will amortize. The facility has the benefit of guarantees
from Berau Coal and othersubsidiaries of Berau Coal Energy that
rank pari passu with the guarantees by such entities in favor of
the notesand shares with the notes on a pari passu basis in the
Common Security (as defined in Description of theNotes). For more
information on this facility, including financial and other
covenants that we are required tocomply with, events of defaults,
and other provisions, see Description of Other Material
Indebtedness.
Proposed Acquisition of Maple Holdings Limited
Seacoast Offshore Inc., a wholly-owned special purpose company
of Berau Coal Energy, has entered into aconditional share sale and
purchase agreement dated May 21, 2010 with Regulus International
Pte. Ltd., awholly-owned subsidiary of our parent, PT Bukit
Mutiara, to acquire Maple Holdings Limited (Maple), one ofBerau
Coals marketing agents, for US$200 million. The payment will be
made in two tranches: (i) a payment ofUS$175 million using a
portion of the proceeds from the issuance of the notes, the
existing notes and the loansunder the Senior Secured Credit
Facility and (ii) a payment of US$25 million using a portion of the
proceedsfrom a contemplated initial public offering of Berau Coal
Energy, as discussed below. Berau Coal Energy willnot own any
shares of Maple until the closing of the share sale and purchase
agreement, which is conditional onand will follow the contemplated
initial public offering of Berau Coal Energy. See Description of
MaterialAgreementsAgreement to Acquire Maple Holdings Limited and
Risk FactorsWe might not be able tocomplete our proposed
acquisition of Maple Holdings Limited.
Repayment of Debt
On July 23, 2010, we paid (or arranged to pay) US$303 million as
repayment in full of a US$300 millioncredit facility of our finance
subsidiary Empire Capital Resources Pte. Ltd. and US$314 million as
repayment infull of a US$300 million loan from our parent, PT Bukit
Mutiara, to Berau Coal Energy.
On July 23, 2010, PT Bukit Mutiara paid (or arranged to pay)
US$314 million as repayment in full of aUS$300 million credit
facility, US$52 million as a partial repayment of a loan from PT
Bumi Resources Tbk andUS$52 million as a partial repayment of notes
it issued to the sellers of Berau Coal Energy when
Recapitalacquired us in December 2009. PT Bukit Mutiara is making
these repayments using the proceeds of therepayment of its loan to
Berau Coal Energy and the proceeds of the payment of the first
installment of theacquisition price of Maple, each as described
above.
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Settlement with Montelena Capital Limited
On July 23, 2010, we paid US$20 million to Montelena Capital
Limited as full and final settlement of itsclaims against our
subsidiary Armadian in connection with an option agreement for
shares of Berau Coal. SeeBusinessLitigation.
Proposed Initial Public Offering
Berau Coal Energy is preparing to conduct an initial public
offering. The Indonesian Stock Exchange (theIDX) has approved our
application to list Berau Coal Energys ordinary shares on the IDX,
and the IndonesianCapital Markets and Financial Institutions
Supervisory Agency (BAPEPAM-LK) is reviewing our
registrationstatement for the initial public offering. Our shares
will not be registered under the U.S. Securities Act or
thesecurities laws of any jurisdiction other than Indonesia, and
there will be no public offering of our shares outsideof
Indonesia.
The initial public offering will comprise solely a primary
offering by Berau Coal Energy of newly issuedshares. As a result of
the initial public offering, we expect that Recapital will
beneficially own at least 80.4% ofour issued and outstanding
ordinary shares (subject to any sales of our shares that PT Bukit
Mutiara makes priorto the closing of the initial public offering)
and investors in the initial public offering will own up to 18.2%,
withthe remaining 1.4% being held by nominee shareholders. See
Principal Shareholders.
We intend to use the proceeds from the initial public offering
for the final payment of US$25 million tocomplete our acquisition
of Maple, as discussed above, and the remainder for general
corporate purposes.
The initial public offering is subject to various factors,
including the approval of the BAPEPAM-LK andmarket conditions.
Accordingly, we do not know if or when we will be able to complete
the IPO.
Corporate Information
Berau Coal Energy was incorporated as a limited liability
company under the laws of Indonesia onSeptember 7, 2005. Our
registered office is located at Wisma GKBI 38th floor, Jl. Jend
Sudirman No. 28, Jakarta10210, Indonesia. The information on Berau
Coals website, www.beraucoal.co.id, does not constitute a part
ofthis offering circular.
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THE OFFERING
The following summary contains basic information about the notes
and is not intended to be complete. Itdoes not contain all the
information that is important to you. Some of the terms described
below are subject toimportant limitations and exceptions. For a
more complete understanding of the notes, see Description of
theNotes. Capitalized terms used in this section have the meanings
given in Description of the Notes.
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . Berau Capital Resources Pte. Ltd.
Parent Guarantor . . . . . . . . . . . . . . . . . . . . . PT
Berau Coal Energy Tbk.
Notes Offered . . . . . . . . . . . . . . . . . . . . . . . .
US$100,000,000 aggregate principal amount of 12.5% GuaranteedSenior
Secured Notes due 2015.
The Notes offered hereby will be issued as Additional Notes
underthe Indenture pursuant to which, on July 8, 2010, the Issuer
issuedUS$350,000,000 principal amount of its Notes (the Existing
Notes).The Notes offered hereby will be treated as a single series
with theExisting Notes under the Indenture and will have the same
terms asthe Existing Notes. Holders of the Notes offered hereby and
theExisting Notes will vote as one class under the Indenture.
Issue Price. . . . . . . . . . . . . . . . . . . . . . . . . . .
103.5% of the principal amount of the Notes plus accrued
interestfrom July 8, 2010.
Maturity Date . . . . . . . . . . . . . . . . . . . . . . . .
July 8, 2015.
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . The Notes will bear interest from and including July 8, 2010 at
a rateof 12.5% per annum, payable semi-annually in arrears.
Interest Payment Dates . . . . . . . . . . . . . . . . January 8
and July 8 of each year, commencing on January 8, 2011.
Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. The Notes will:
be general obligations of the Issuer;
be senior in right of payment to any existing and future
obligationsof the Issuer expressly subordinated in right of payment
to theNotes;
rank at least pari passu in right of payment with all
unsubordinatedIndebtedness of the Issuer (subject to any priority
rights of suchunsubordinated Indebtedness pursuant to applicable
law);
be guaranteed by the Guarantors on an unsubordinated basis;
and
be secured by first-priority Liens on the Collateral.
Parent Guarantee . . . . . . . . . . . . . . . . . . . . . The
Parent Guarantor will guarantee the due and punctual payment ofthe
principal of, premium, if any, and interest on, and all
otheramounts payable under, the Notes.
The Parent Guarantee may be released in certain circumstances.
SeeDescription of the NotesThe Parent GuaranteeRelease of theParent
Guarantee.
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Ranking of the Parent Guarantee . . . . . . . The Parent
Guarantee will:
be a general obligation of the Parent Guarantor;
be effectively subordinated to secured obligations of the
ParentGuarantor, to the extent of the value of the assets (other
than theCommon Security) serving as security therefor;
be senior in right of payment to all future obligations of the
ParentGuarantor expressly subordinated in right of payment to the
ParentGuarantee; and
rank at least pari passu in right of payment with all
unsecured,unsubordinated Indebtedness of the Parent Guarantor
(subject toany priority rights of such unsecured, unsubordinated
Indebtednesspursuant to applicable law).
Subsidiary Guarantees . . . . . . . . . . . . . . . . PT
Armadian Tritunggal, Berau Coal, Empire Capital Resources Pte.Ltd.,
Winchester Investment Holdings PLC, Aries InvestmentsLimited and
Seacoast Offshore Inc. guarantee the Existing Notes andwill
guarantee the Notes offered hereby on their issue date. Except
forBerau Coal, all of these initial Subsidiary Guarantors are
holdingcompanies, financing subsidiaries or dormant companies that
do nothave significant operations.
The Parent Guarantor will (i) cause each of its future
RestrictedSubsidiaries (other than a Finance Subsidiary),
immediately upon theParent Guarantor becoming the direct or
indirect holder of more than80% of the Voting Stock of such
Restricted Subsidiary, and (ii) use itsreasonable best efforts to
cause each of its other future RestrictedSubsidiaries (other than a
Finance Subsidiary), immediately uponbecoming a Restricted
Subsidiary, to execute and deliver to theTrustee a supplemental
indenture to the Indenture pursuant to whichsuch Restricted
Subsidiary will guarantee the payment of the Notes.
The Subsidiary Guarantee of each Subsidiary Guarantor will:
be a general obligation of such Subsidiary Guarantor;
be effectively subordinated to secured obligations of
suchSubsidiary Guarantor, to the extent of the value of the assets
(otherthan the Common Security) serving as security therefor;
be senior in right of payment to all future obligations of
suchSubsidiary Guarantor expressly subordinated in right of payment
tosuch Subsidiary Guarantee; and
rank at least pari passu in right of payment with all
unsecured,unsubordinated Indebtedness of such Subsidiary Guarantor
(subjectto any priority rights of such unsecured,
unsubordinatedIndebtedness pursuant to applicable law).
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . .
. The obligations of the Issuer and the Guarantors under the Notes,
theGuarantees and the Indenture will be secured by the Notes
Collateraland the Common Security.
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For more details on the Collateral, see Description of the
NotesSecurity.
Notes Collateral . . . . . . . . . . . . . . . . . . . . . . The
Notes Collateral consists of a security interest in the Notes
DebtService Account and the Notes Interest Reserve Account.
Common Security . . . . . . . . . . . . . . . . . . . . The
Common Security consists of the following:
Subject to the terms and conditions of the Intercreditor
Agreementdescribed under the caption Intercreditor Agreement
below,the Parent Guarantor has pledged, for the benefit of the
SecuredParties, or caused the initial Subsidiary Guarantors to
pledge theCapital Stock owned by the Parent Guarantor or such
SubsidiaryGuarantor of any Person that is a Restricted Subsidiary
(other thana Finance Subsidiary (except the Issuer)) on the date
hereof on afirst priority basis (subject to Permitted Liens) in
order to securethe obligations under the Common Secured
Indebtedness;
The Parent Guarantor has also agreed, for the benefit of
theSecured Parties, to pledge, or cause each Subsidiary Guarantor
topledge, the Capital Stock owned by the Parent Guarantor or
suchSubsidiary Guarantor of any Person that is a Restricted
Subsidiaryor becomes a Restricted Subsidiary (other than a
FinanceSubsidiary (other than the Issuer)) after the Original Issue
Date,immediately upon such Person becoming a Restricted
Subsidiary,to secure the obligations under the Common Secured
Indebtedness;
Berau Coal has executed deeds of fiduciary security
grantingsecurity interests to the Common Security Agent, for the
benefit ofthe Secured Parties, with respect to material assets
owned by it,including insurance, its rights under certain principal
agreementsand its rights to cash receivables under those principal
agreements(including coal supply agreements) and all of its
intercompanyadvances governed by Indonesian law, in each case, to
the extentpermitted by applicable law and subject to relevant third
partyconsents;
Each of the Parent Guarantor, the Issuer and the
SubsidiaryGuarantors has assigned its interest under intercompany
advances(other than those governed by Indonesian law) including
anyIntercompany Loans, to the Common Security Agent for thebenefit
of the Secured Parties;
The Issuer has executed a security document granting
securityinterests to the Common Security Agent for the benefit of
theSecured Parties, with respect to all of its property and assets
(otherthan the Notes Debt Service Account and the Notes
InterestReserve Account);
Berau Coal has executed an assignment of principal
agreements,assigning to the Common Security Agent its rights under
certainprincipal agreements, including coal supply agreements
(other thanthose governed by Indonesian law) described therein;
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Pursuant to various Common Security Documents, each of theParent
Guarantor, Berau Coal and certain other RestrictedSubsidiaries has
granted to the Common Security Agent, for thebenefit of the Secured
Parties, security interests over its respectiverights and claims
with respect to onshore accounts as provided forunder the Cash and
Accounts Management Agreement; and
Pursuant to various Common Security Documents, each of
theIssuer, the Parent Guarantor, Berau Coal and certain
otherRestricted Subsidiaries has granted to the Common Security
Agent,for the benefit of the Secured Parties, security interests
over itsrights and claims with respect to offshore accounts as
provided forunder the Cash and Accounts Management Agreement; and
BerauCoal will grant to the Common Security Agent security
interestsover its rights and claims with respect to its offshore
cashreceivables.
Cash and Accounts ManagementAgreement . . . . . . . . . . . . .
. . . . . . . . . . . On July 20, 2010, we entered into a Cash and
Accounts Management
Agreement, pursuant to which we established a series of domestic
andoffshore bank accounts with designated account banks. With
certainlimited exceptions, all of the cash receipts of Berau Coal
Energy andthe Subsidiary Guarantors, including all the coal sales
revenues ofBerau Coal, will be deposited into designated accounts
and applied tofund payment of operating expenses, taxes and capital
expenditures ofBerau Coal, to fund amounts payable to Sojitz as the
10% shareholderof Berau Coal, and to debt service and required
interest reservesunder the Notes and the Senior Secured Credit
Facility. After requiredamounts for debt service and interest
reserves for the Notes and theloans under the Senior Secured Credit
Facility are funded, 50% of theremaining funds will be deposited in
a lender reserve account fromwhich funds may only be applied to
payment, redemption orrepurchase of senior secured debt, and the
other 50% of suchremaining funds will be deposited in a reserve
account from which wewill be free to apply funds at our discretion,
subject to applicablecovenants in our indebtedness.
The Cash and Accounts Management Agreement is governed by
andconstrued in accordance with English law. For more details on
thecash and accounts management agreement, see Description
ofMaterial AgreementsCash and Accounts Management Agreement.
Intercreditor Agreement . . . . . . . . . . . . . . . On July
19, 2010, the Trustee, on behalf of the Holders, entered intoan
intercreditor agreement that governs the relationship among
theHolders, the lenders under the New Credit Facility and the
holders ofany other Permitted Pari Passu Secured Indebtedness (or
theirrepresentatives).
The Intercreditor Agreement is governed by and construed
inaccordance with English law. For more details on the
IntercreditorAgreement, see Description of the NotesIntercreditor
Agreement.
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Notes Interest Reserve Account . . . . . . . . In addition to
the amounts required to be deposited and held in theNotes Debt
Service Account under the Cash and AccountsManagement Agreement,
the Parent Guarantor shall ensure that theNotes Interest Reserve
Account has at all times on deposit an amountat least equal to the
interest and Additional Amounts, if any, due onthe next Notes
Interest Payment Date with respect to the Notes.
Optional Redemption of the Notes . . . . . . At any time and
from time to time prior to July 8, 2013, the Issuermay redeem up to
35% of the aggregate principal amount of theNotes with the Net Cash
Proceeds of one or more Equity Offerings ata redemption price of
112.5% of the principal amount of the Notes,plus accrued and unpaid
interest, if any, to the redemption date;provided that at least 65%
of the aggregate principal amount of theNotes originally issued on
the Original Issue Date remainsoutstanding after each such
redemption and any such redemptiontakes place within 60 days after
the closing of the related EquityOffering.
At any time and from time to time prior to July 8, 2013, the
Issuermay at its option redeem the Notes, in whole or in part, at
aredemption price equal to 100% of the principal amount of the
Notesplus the Applicable Premium as of, and accrued and unpaid
interest, ifany, to the redemption date.
At any time and from time to time on or after July 8, 2013, the
Issuermay redeem the Notes, in whole or in part, at a redemption
prices setforth under Description of the NotesOptional
Redemption.
Repurchase of Notes upon a Change ofControl Triggering Event. .
. . . . . . . . . . Not later than 30 days following a Change of
Control Triggering
Event, the Issuer or the Parent Guarantor will make an Offer
toPurchase all outstanding Notes (a Change of Control Offer) at
apurchase price equal to 101% of the principal amount thereof
plusaccrued and unpaid interest, if any, to the Offer to Purchase
PaymentDate. See Description of the NotesRepurchase of Notes Upon
aChange of Control Triggering Event.
Withholding Tax; AdditionalAmounts . . . . . . . . . . . . . . .
. . . . . . . . . . . Payments with respect to the Notes and the
Guarantees will be made
without withholding or deduction for taxes imposed by
thejurisdictions in which the Issuer or Guarantors are organized
orresident for tax purposes or through which payments are made,
exceptas required by law. Where such withholding or deduction is
requiredby law, the Issuer or the applicable Guarantor will make
suchdeduction or withholding and will, subject to certain
exceptions, paysuch additional amounts as will result in receipt by
the Holder of suchamounts as would have been received by such
Holder had no suchwithholding or deduction been required. See
Description of theNotesAdditional Amounts.
10
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Redemption for Taxation Reasons . . . . . . Subject to certain
exceptions, the Issuer may redeem the Notes, inwhole but not in
part, at a redemption price equal to 100% of theprincipal amount
thereof, together with accrued and unpaid interest, ifany, to the
date fixed by the Issuer for redemption, if, as a result ofcertain
changes in tax law, the Issuer or a Guarantor (as the case maybe)
would be required to pay certain additional amounts; providedthat
where the additional amounts are payable as a result of
changesaffecting Indonesian taxes, the Notes may be redeemed only
in theevent that the withholding rate exceeds 20%. See Description
of theNotesRedemption for Taxation Reasons.
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Indenture contains covenants that, among other things, limit
theability of the Issuer, the Parent Guarantor and the
RestrictedSubsidiaries to:
incur additional Indebtedness;
make investments or other specified Restricted Payments;
declare dividends on Capital Stock or purchase or redeem
CapitalStock;
enter into agreements that restrict the Restricted
Subsidiariesability to pay dividends and transfer assets or make
inter-companyloans;
issue or sell Capital Stock of Restricted Subsidiaries;
have Restricted Subsidiaries issue guarantees;
enter into transactions with equity holders or affiliates;
create any Lien;
enter into Sale and Leaseback Transactions;
sell assets;
engage in different business activities; or
effect a consolidation or merger.
These covenants are subject to a number of important
limitations,exceptions and qualifications. See Description of the
Notes.
Selling and Transfer Restrictions . . . . . . . The Notes will
not be registered under the U.S. Securities Act orunder any state
securities law of the United States and will be subjectto customary
restrictions on transfer and resale. See TransferRestrictions.
Form, Denomination and Registration. . . The Notes will be
issued only in fully registered form, withoutcoupons, in
denominations of US$100,000 and integral multiples ofUS$1,000 in
excess thereof and will be initially represented by GlobalNotes
registered in the name of a nominee of DTC.
Book-Entry Only . . . . . . . . . . . . . . . . . . . . . The
Notes will be issued in book-entry form through the facilities
ofDTC for the accounts of its participants, including Euroclear
and
11
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Clearstream. For a description of certain factors relating to
clearanceand settlement, see Description of the NotesBook-Entry;
Deliveryand Form.
Delivery of the Notes . . . . . . . . . . . . . . . . . We
expect to make delivery of the Notes, against payment insame-day
funds, on or about July 29, 2010, which we expect will bethe third
business day following the date of this offering circular,referred
to as T+3. See Plan of DistributionDelivery, Paymentand
Settlement.
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . The
Issuer will on-lend the net proceeds of this offering to
companiesin our Group, which will in turn use the funds, together
with theproceeds of the existing notes, the Senior Secured Credit
Facility andcash released from Berau Coals former cash and
accountsmanagement agreement, to repay indebtedness and make the
firstpayment for our proposed acquisition of Maple. See Use
ofProceeds.
Rule 144A Global Note . . . . . . . . . . . . . . . CUSIP
Number: 083518 AA8ISIN: US083518AA82Common Code: 052401658
Regulation S Global Note . . . . . . . . . . . . . CUSIP Number:
Y1004W AA4ISIN: USY1004WAA46Common Code: 052401267
Governing Law . . . . . . . . . . . . . . . . . . . . . . The
Notes and the Guarantees (other than the Indonesian LawGuarantees)
will be, and the Indenture is, governed by, and construedin
accordance with the laws of, the State of New York. TheIndonesian
Law Guarantees will be governed by, and construed inaccordance
with, the laws of the Republic of Indonesia.
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . HSBC Bank USA, National Association.
Principal Paying Agent, Transfer Agentand Registrar . . . . . .
. . . . . . . . . . . . . . . . HSBC Bank USA, National
Association.
Common Security Agent . . . . . . . . . . . . . . Credit Suisse
AG, Singapore Branch.
Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . We have received approval-in-principle for the listing of the
Notes onthe SGX-ST. The Notes will be traded on the SGX-ST in a
minimumboard lot size of US$200,000 for so long as the Notes are
listed on theSGX-ST.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . .
For a discussion of certain factors that should be considered
inevaluating an investment in the Notes, see Risk Factors.
12
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SUMMARY FINANCIAL INFORMATION AND OTHER DATA
You should read the following summary financial information and
other data together with the sectionentitled Managements Discussion
and Analysis of Financial Condition and Results of Operations and
thefinancial statements and related notes included elsewhere in
this offering circular.
PT Berau Coal Energy Tbk
We have derived the following summary financial information from
our financial statements as of and forthe years ended December 31,
2007, 2008 and 2009, which have been audited by KAP Tjiendradjaja
andHandoko Tomo (formerly KAP Handoko Tomo), independent public
accountants, and our unaudited financialstatements as of and for
the three months ended March 31, 2009 and 2010, all of which are
included elsewhere inthis offering circular. Our unaudited
financial statements as of and for the three months ended March 31,
2009and 2010 have been reviewed by KAP Tjiendradjaja and Handoko
Tomo and contain all adjustments that ourmanagement believes are
necessary for the fair presentation of such information. Results
for interim periods arenot necessarily indicative of results for
the full year.
Our financial statements as of and for the year ended December
31, 2007 have been restated. The figuresincluded below are the
restated figures. See Note 41 to our financial statements as of and
for the years endedDecember 31, 2007, 2008 and 2009 included
elsewhere in this offering circular.
Our financial statements are reported in Rupiah, and our
functional currency is the Rupiah. We prepare andpresent our
financial statements in accordance with Indonesian GAAP, which
differs in certain respects fromU.S. GAAP. For a description of
certain differences between Indonesian GAAP and U.S. GAAP, see
Summaryof Certain Principal Differences Between Indonesian GAAP and
U.S. GAAP.
Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009(1) 2009 2010 2010(2)
(Rp. in billions and US$ in millions)Statement of
IncomeData:
Sales . . . . . . . . . . . . . . . . . . Rp.3,445.0 Rp.6,110.2
Rp.8,318.6 US$885.0 Rp.1,721.1 Rp.2,041.8 US$224.0Cost of goods
sold . . . . . . 2,658.4 4,458.8 4,921.4 523.6 1,036.9 1,473.2
161.6
Gross profit . . . . . . . . . . . . 786.6 1,651.4 3,397.2 361.4
684.2 568.6 62.4Operating expenses:
General andadministrative . . . 120.3 179.4 270.2 28.7 39.5
125.3 13.8
Selling andmarketing . . . . . . . 39.1 64.0 101.4 10.8 22.2
29.0 3.2
Total operatingexpenses . . . . . . . . . . . . 159.4 243.4
371.6 39.5 61.7 154.3 17.0
Operating income. . . . . . . 627.2 1,408.0 3,025.6 321.9 622.5
414.3 45.4
13
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Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009(1) 2009 2010 2010(2)
(Rp. in billions and US$ in millions)Other income (charges):
Interest income . . . . . . 225.4 243.2 259.7 27.6 71.8 5.1
0.6Foreign exchange gain(loss) net. . . . . . . . (39.1) (155.7)
175.9 18.7 (78.6) 236.1 25.9
Realization ofdifference in valuefrom restructuringtransactions
ofentities undercommon control . . . 8.0 0.8
Interest expenses. . . . . (300.6) (294.4) (280.4) (29.8) (81.7)
(100.9) (11.1)Loss from earlyredemption ofsenior notes . . . . . .
. (156.3) (16.6)
Amortization ofdeferred financingcharges. . . . . . . . . . .
(19.9) (21.1) (67.6) (7.2) (6.3) (34.1) (3.7)
Amortization ofgoodwill. . . . . . . . . . (49.3) (49.3) (38.6)
(4.1) (12.3) (30.7) (3.4)
Others net . . . . . . . . . 4.8 4.9 4.9 0.5 0.4 (0.2)
Other income (charges) net . . . . . . . . . . . . . . . . . . .
(178.7) (272.4) (94.4) (10.1) (106.7) 75.3 8.3
Income before income taxexpense . . . . . . . . . . . . . . .
448.5 1,135.6 2,931.2 311.8 515.8 489.6 53.7
Income tax expense. . . . . . . (256.6) (597.4) (1,291.7)
(137.4) (261.6) (239.9) (26.3)
Income before minorityinterest in net income
ofconsolidatedsubsidiaries . . . . . . . . . . . 191.9 538.2
1,639.5 174.4 254.2 249.7 27.4
Minority interest in netincome of consolidatedsubsidiaries . . .
. . . . . . . . (166.3) (368.1) (785.8) (83.6) (159.4) (30.1)
(3.3)
Net income . . . . . . . . . . . . . . Rp. 25.6 Rp. 170.1 Rp.
853.7 US$ 90.8 Rp. 94.8 Rp. 219.6 US$ 24.1
Notes:(1) Converted into U.S. dollars at the rate of Rp. 9,400 =
US$1.00, which was the exchange rate as of
December 31, 2009.(2) Converted into U.S. dollars at the rate of
Rp. 9,115 = US$1.00, which was the exchange rate as of March
31,
2010.
14
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As of December 31, As of March 31,
2007 2008 2009 2009(1) 2009 2010 2010(2)
(Rp. in billions and US$ in millions)
Balance Sheet Data:Total current assets . . . Rp.1,462.9
Rp.2,820.8 Rp. 4,448.2 US$ 473.2 Rp.3,336.7 Rp. 4,734.6 US$
519.4Total non-currentassets(3) . . . . . . . . . . . 3,378.5
4,078.6 7,832.6 833.3 4,484.4 7,618.2 835.8
Total assets . . . . . . . . . . 4,841.4 6,899.4 12,280.8
1,306.5 7,821.1 12,352.8 1,355.2
Total currentliabilities(3) . . . . . . . . 1,344.9 2,383.4
5,482.1 583.2 2,840.5 5,590.6 613.3
Total non-currentliabilities(3) . . . . . . . . 2,904.7 3,113.9
2,968.6 315.8 3,206.6 2,863.5 314.2
Total liabilities . . . . . . . 4,249.6 5,497.3 8,450.7 899.0
6,047.1 8,454.1 927.5
Minority interest in netassets ofconsolidatedsubsidiaries . . .
. . . . . 523.1 1,024.5 324.5 34.5 1,241.6 344.2 37.8
Total equity . . . . . . . . . . 68.7 377.6 3,505.6 373.0 532.4
3,554.5 389.9
Total liabilities andequity . . . . . . . . . . . . . Rp.4,841.4
Rp.6,899.4 Rp.12,280.8 US$1,306.5 Rp.7,821.1 Rp.12,352.8
US$1,355.2
Notes:(1) Converted into U.S. dollars at the rate of Rp. 9,400 =
US$1.00, which was the exchange rate as of
December 31, 2009.(2) Converted into U.S. dollars at the rate of
Rp. 9,115 = US$1.00, which was the exchange rate as of March
31,
2010.(3) Deferred financing charges were offset with short-term
loans as of December 31, 2009 and senior notes as
of December 31, 2007 and 2008 to conform to the March 31, 2010
consolidated financial statementspresentation.
15
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Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009(1) 2009 2010 2010(2)
(Rp. in billions and US$ in millions)
Statement of Cash FlowData:
Net cash flows fromoperating activities(3). . . . . Rp. 281.2
Rp.1,048.5 Rp. 2,372.4 US$ 252.4 Rp. 444.2 Rp. 505.9 US$ 55.5
Net cash flows provided by(used in) investingactivities . . . .
. . . . . . . . . . . (264.0) (201.4) (3,697.7) (393.4) 78.8
(342.9) (37.6)
Net cash flows provided by(used in) financingactivities . . . .
. . . . . . . . . . . (6.4) (266.0) 2,115.9 225.1 (82.4) (2.1)
(0.3)
Effect of exchange ratechanges(3) . . . . . . . . . . . . . .
1.8 (88.0) (13.1) (1.4) (14.1) (4.0) (0.4)
Net increase in cash andcash equivalents. . . . . . . . . 12.6
493.1 777.5 82.7 426.5 156.9 17.2
Cash and cash equivalents atthe beginning of theperiod. . . . .
. . . . . . . . . . . . . 520.7 533.3 1,026.4 109.2 1,026.4 1,803.9
197.9
Cash and cash equivalents atthe end of the period . . . . . Rp.
533.3 Rp.1,026.4 Rp. 1,803.9 US$ 191.9 Rp.1,452.9 Rp.1,960.8
US$215.1
Notes:(1) Converted into U.S. dollars at the rate of Rp. 9,400 =
US$1.00, which was the exchange rate as of
December 31, 2009.(2) Converted into U.S. dollars at the rate of
Rp. 9,115 = US$1.00, which was the exchange rate as of March
31,
2010.(3) Effect of exchange rate changes on cash and cash
equivalents are presented separately from cash flows from
operating activities.
Non-GAAP financial measures are set out below:
Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009(1) 2009 2010 2010(2)
(Rp. in billions and US$ in millions, except for ratios)
Non-GAAP FinancialMeasures:
EBITDA(3) . . . . . . . . . . . . . . . . Rp.705.3 Rp.1,484.4
Rp.3,111.9 US$331.1 Rp. 645.0 Rp. 523.0 US$ 57.3Interest expenses .
. . . . . . . . . . 300.6 294.4 280.4 29.8 81.7 100.9 11.1Total
debt(4) . . . . . . . . . . . . . . . 2,987.7 3,214.9 5,539.5 589.3
3,332.1 5,396.1 592.0Total debt/EBITDA(5) . . . . . . . 4.2 2.2 1.8
1.8 1.3 2.6 2.6EBITDA/interest expenses . . 2.3 5.0 11.1 11.1 7.9
5.2 5.2
Notes:(1) Converted into U.S. dollars at the rate of Rp. 9,400 =
US$1.00, which was the exchange rate as of
December 31, 2009.(2) Converted into U.S. dollars at the rate of
Rp. 9,115 = US$1.00, which was the exchange rate as of March
31,
2010.(3) We calculate EBITDA by adding depreciation and
amortization, foreign exchange losses, interest expense,
loss from early redemption of senior notes, minority interest in
the net income of subsidiaries and incometax expenses and
subtracting interest income, foreign exchange gains, realization in
value from restructuring
16
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transactions of entities under common control and income tax
benefit from net income as calculated underIndonesian GAAP. EBITDA
is a supplemental measure of our performance that is not required
by, orpresented in accordance with, Indonesian GAAP or U.S. GAAP.
EBITDA is not a measurement of financialperformance or liquidity
under Indonesian GAAP or U.S. GAAP and should not be considered as
analternative to net income, operating income or any other
performance measures derived in accordance withIndonesian GAAP or
U.S. GAAP or an alternative to cash flows from operating activities
as a measure ofliquidity. Our presentation of EBITDA may not be
comparable to similarly titled measures presented byother companies
or Consolidated EBITDA as defined in the notes or our Senior
Secured Credit Facility.You should not compare our EBITDA with
EBITDA presented by other companies because not allcompanies use
the same definition. We have included EBITDA because we believe it
is an indicativemeasure of our operating performance and is used by
investors and analysts to evaluate companies in ourindustry. See
Managements Discussion and Analysis of Financial Condition and
Results of OperationsEBITDA. The following table reconciles our net
income under Indonesian GAAP to our definition ofEBITDA for the
periods indicated:
Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009(a) 2009 2010 2010(b)
(Rp. in billions and US$ in millions)Net income . . . . . . . .
. . . . . . . . . . . . . Rp. 25.6 Rp.170.1 Rp. 853.7 US$ 90.8 Rp.
94.8 Rp. 219.6 US$ 24.1Adjustments:
Interest expenses (net ofinterest income) . . . . . . . . . .
75.2 51.2 20.7 2.2 9.9 95.8 10.5
Income tax expense . . . . . . . . . 256.6 597.4 1,291.7 137.4
261.6 239.9 26.3Depreciation andamortization(c) . . . . . . . . . .
. . 73.3 71.5 81.4 8.7 22.1 20.1 2.2
Amortization of deferredfinancing charges . . . . . . . . . 19.9
21.1 67.6 7.2 6.3 34.1 3.7
Amortization of goodwill . . . . 49.3 49.3 38.6 4.1 12.3 30.7
3.4Amortization of coalresources . . . . . . . . . . . . . . . .
88.8 9.7
Foreign exchange loss (gain) net . . . . . . . . . . . . . . . .
. . . . 39.1 155.7 (175.9) (18.7) 78.6 (236.1) (25.9)
Realization in value fromrestructuring transactions ofentities
under commoncontrol . . . . . . . . . . . . . . . . . . (8.0)
(0.8)
Loss from early redemption ofsenior notes . . . . . . . . . . .
. . . 156.3 16.6
Minority interest in netincome of consolidatedsubsidiaries . . .
. . . . . . . . . . . 166.3 368.1 785.8 83.6 159.4 30.1 3.3
EBITDA . . . . . . . . . . . . . . . . . . . . . . . Rp.705.3
Rp.1,484.4 Rp.3,111.9 US$331.1 Rp.645.0 Rp. 523.0 US$ 57.3
(a) Converted into U.S. dollars at the rate of Rp. 9,400 =
US$1.00, which was the exchange rate as ofDecember 31, 2009.
(b) Converted into U.S. dollars at the rate of Rp. 9,115 =
US$1.00, which was the exchange rate as ofMarch 31, 2010.
(c) Depreciation represents depreciation of fixed assets, and
amortization represents amortization ofdeferred exploration and
development costs.
(4) Total debt includes long-term debt (net of current
maturities), short-term debt and current maturities of long-term
debt.
(5) EBITDA for the three months ended March 31, 2009 and 2010
are annualized for the purpose of presentingtotal debt/EBITDA.
17
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PT Berau Coal
We have derived the following summary financial information from
Berau Coals financial statements as of andfor the year ended
December 31, 2007, which have been audited by KAP Jimmy Budhi &
Rekan, independent publicaccountants, its financial statements as
of and for the years ended December 31, 2008 and 2009, which have
beenaudited by KAP Tjiendradjaja and Handoko Tomo (formerly KAP
Handoko Tomo), independent public accountants,and its unaudited
financial statements as of and for the three months ended March 31,
2009 and 2010, all of which havebeen included elsewhere in this
offering circular. Berau Coals unaudited financial statements as of
and for the threemonths ended March 31, 2009 and 2010 have been
reviewed by KAP Tjiendradjaja and Handoko Tomo and containall
adjustments that Berau Coals management believes are necessary for
the fair presentation of such information.Results for interim
periods are not necessarily indicative of results for the full
year.
Berau Coals financial statements are reported in U.S. dollars,
and its functional currency is the U.S. dollar.Berau Coal prepares
and presents its financial statements in accordance with Indonesian
GAAP, which differs incertain respects from U.S. GAAP. For a
description of certain differences between Indonesian GAAP and
U.S.GAAP, see Summary of Certain Principal Differences Between
Indonesian GAAP and U.S. GAAP.
Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009 2010
(US$ in millions)
Statement of Income Data:Sales . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . US$384.2 US$631.2 US$ 800.0
US$148.0 US$220.5Cost of goods sold . . . . . . . . . . . . . . . .
. . . . . . . 296.1 460.6 473.3 89.2 149.5
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 88.1 170.6 326.7 58.8 71.0Operating expenses:
Selling and marketing . . . . . . . . . . . . . . . . 4.3 6.6
9.7 1.9 3.1General and administrative . . . . . . . . . . . 13.4
18.3 23.6 3.4 13.5
Total operating expenses . . . . . . . . . . . . . . . . . .
17.7 24.9 33.3 5.3 16.6
Operating income . . . . . . . . . . . . . . . . . . . . . . . .
70.4 145.7 293.4 53.5 54.4Other income (expenses):
Interest income . . . . . . . . . . . . . . . . . . . . . . 32.1
30.4 28.7 7.3 7.2Gain (loss) on foreign exchangenet . . (1.5) (4.6)
4.3 (2.8) 4.7Amortization of deferred financingcharges. . . . . . .
. . . . . . . . . . . . . . . . . . . . (2.2) (2.2) (6.5) (0.5)
(3.7)
Interest expenses . . . . . . . . . . . . . . . . . . . . (33.8)
(30.4) (26.9) (7.0) (4.2)Loss from early redemption of seniornotes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . (15.0)
Othersnet . . . . . . . . . . . . . . . . . . . . . . . . . 0.8
0.4 0.4 0.0 (0.0)
Other income (charges)net . . . . . . . . . . . . . . (4.6)
(6.4) (15.0) (3.0) 4.0
Income before income tax expense . . . . . . . . . 65.8 139.3
278.4 50.5 58.4Income tax expense . . . . . . . . . . . . . . . . .
. . . . . (28.7) (61.7) (124.2) (22.5) (25.9)
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . US$ 37.1 US$ 77.6 US$ 154.2 US$ 28.0 US$ 32.5
18
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As of December 31, As of March 31,
2007 2008 2009 2009 2010
(US$ in millions)
Balance Sheet Data:Total current assets . . . . . . . . . . . .
. . . . . . . . . . . US$152.8 US$255.3 US$473.2 US$285.9 US$
519.1Total non-current assets(1). . . . . . . . . . . . . . . . . .
411.0 437.7 470.8 455.4 485.1
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 563.8 693.0 944.0 741.3 1,004.2
Total current liabilities(1). . . . . . . . . . . . . . . . . .
. 142.6 217.4 583.0 245.4 612.4Total non-current liabilities(1) . .
. . . . . . . . . . . . 307.9 284.6 15.8 277.0 14.2
Total liabilities . . . . . . . . . . . . . . . . . . . . . . .
. . . . 450.5 502.0 598.8 522.4 626.6
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 113.3 191.0 345.2 218.9 377.6
Total liabilities and equity . . . . . . . . . . . . . . . . .
US$563.8 US$693.0 US$944.0 US$741.3 US$1,004.2
Note:(1) Deferred financing charges were offset with short-term
loans as of December 31, 2009 and senior notes as
of December 31, 2008 and 2007 to conform to the March 31, 2010
consolidated financial statementspresentation.
Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009 2010
(US$ in millions)
Statement of Cash Flow Data:Net cash flows provided by
operatingactivities . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . US$ 59.7 US$ 97.8 US$249.4 US$ 30.6 US$ 74.6
Net cash flows provided by (used in) investingactivities . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . (25.1)
(4.5) (97.2) 8.9 (40.6)
Net cash flows used in financing activities . . . . . (34.5)
(56.2) (52.0) (7.7) (11.1)Net increase in cash and cash
equivalents. . . . . . 0.1 37.1 100.2 31.8 22.9Cash and cash
equivalents at the beginning ofthe period . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 54.5 54.6 91.7 91.7 191.9
Cash and cash equivalents at the end of theperiod. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . US$ 54.6 US$
91.7 US$191.9 US$123.5 US$214.8
19
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Non-GAAP financial measures are set out below:
Year Ended December 31, Three Months Ended March 31,
2007 2008 2009 2009 2010
(US$ in millions, except for ratios)
Non-GAAP Financial Measures:EBITDA(1) . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . US$ 79.3 US$153.5 US$301.6 US$
55.4 US$ 56.6Interest expenses . . . . . . . . . . . . . . . . . .
. . . . . . . 33.8 30.4 26.9 7.0 4.2Total debt(2) . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 317.2 293.6 289.3 287.9
292.0Total debt/EBITDA(3) . . . . . . . . . . . . . . . . . . . . .
4.0 1.9 1.0 1.3 1.3EBITDA/Interest expenses. . . . . . . . . . . .
. . . . . 2.3 5.0 11.2 7.9 13.5