ENERGY FOR CHANGE

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September 2017
Key questions:

• What is the outlook of the coal industry?

• How was Adaro Energy’s performance in 1H17 and
what is the view for FY17?
• What is the progress of Adaro Energy’s projects?
• What is Adaro Energy’s strategy and future plans?

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 Supply control to continue
Coal Production (Mt) • Supply reform in China is expected to
2,500 -10% continue, targeting up to 1 Bt of excess
capacity cut.

FY15 • Indonesia is expected to maintain a

2,000 relatively flat production, and as its domestic
FY16 requirement increase, its export will decline.
• Australia is constrained by infrastructure
1,500 capability.
• Overall coal supply continues to be sticky
due to:
1,000
-0.2% - Higher cost structure as a result of
high-grading during the downturn.
500 - Limited funding availability.
- Some miners are focusing on
restructuring previous debts.
0
Indonesia China • Coal supply data continues to indicate that
Source: Adaro’s research, IHS Energy, WoodMackenzie
supply discipline is prevalent.

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 Coal price gaining back momentum
120 750

110 700

100 650

90 600

RMB
US$

80 550

70 500

60 450

50 400

40 350

30 300
Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17

Global Coal Newcastle (US$) QHD 5500 NAR (RMB)

• Despite a better price outlook in 2017 vs 2016, uncertainties remain in the coal market.
• Higher summer demand and supply shortage due to unfavorable weather in Indonesia have
helped maintain a robust price for seaborne coal.
• Domestic coal price in China has been persistently higher than China’s price bracket.
• Coal prices are expected to remain fairly strong through the remainder of 2017.
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Long term coal demand outlook
remains robust…
Seaborne coal demand by country (Mt)

Note: JKT (Japan, Korea, Taiwan); SEA (Southeast Asia); RoW (rest of the world)

Source: Wood Mackenzie Thermal Trade H1 2017 Long-term Outlook

• China’s share in seaborne market to decline.

• Increased potential from Southeast Asia, Indo-China, and India.
• Electrification in the developing world continues to drive coal demand. Despite
progress in renewables, coal will still be preferred due to its affordability. 5
…especially from Southeast Asia
Coal capacity additions inSoutheast Asia Southeast Asia coal demand
per annum
Total
600 Mt
Total 73
360 Mt
Total
259
214 Mt
97

80 132
268
78 131
56
2013 2020 2030
Domestic Consumption (Non-Indonesia)
Domestic Consumption (Indonesia)
Imports
Source: Adaro’s Research
Source: WoodMackenzie Energy Market Service

• Coal remains as the fuel of choice for developing economies in Southeast Asia.
– Affordable and abundant.
• 2016-2017: additional ~10GW in coal fired capacity in SEA.
• SEA countries imported 75 Mt of coal in 2016, a y-o-y increase of 13 Mt.
• Wood Mackenzie estimates that in 2017, SEA countries will import 88 Mt of coal. 6
Quick look on Indonesia
Indonesia’s Coal Sales (Mt) • While Indonesia’s coal production in 2016 was
relatively flat y-o-y and its export decreased ~2%
400 y-o-y…
300 • …domestic coal demand in 2016 increased
~11% y-o-y.
200

100

0
Export Domestic

FY15 FY16

Indonesia’s Electricity Generation by Source

• Coal accounted for 58% of Indonesia’s electricity
100%
10% 8% generation in 2016.
8% 8%
80%
26% 26% • Despite expected increase from gas and
60% renewables, coal remains as key energy source
for power generation in Indonesia.
40%
56% 58%
20%

0%
2015 2016

Coal Natural Gas Diesel Renewables

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Source: MoEMR, PLN
Performance of Adaro Energy
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Resilient operational and financial
results
OPERATIONAL 1H17 1H16 % Change
Production (Mt) 25.13 25.86 -3%

Sales (Mt) 25.27 27.13 -7%

OB removal (Mbcm) 111.78 111.23 0%

FINANCIAL (US$ millions, unless indicated) 1H17 1H16 % Change

Net Revenue 1,549 1,176 32%
Core Earnings 299 170 76%
Operational EBITDA 626 397 58%
Cash 1,236 828 49%
Net Debt to Equity (x) 0.04 0.20 -

Net Debt to Last 12 months Operational EBITDA (x) 0.14 0.94 -

Free Cash Flow 405 178 128%

Cash from Operations to Capex (x) 15.78 5.12 -

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Solid balance sheet and strong
cash generation
Net Debt Position and Leverage Ratios Cash and Free Cash Flow (million US$)
1200

2,500 2.0
1000

2,000 1.6
800

1,500 1.2
600

1,000 0.8
400

500 0.4
200

- -
2012 2013 2014 2015 2016 1H17 0
2012 2013 2014 2015 2016
Net Debt (million US$) Net Debt to Equity (x)
Cash (million US$) Free cash flow (million US$)
Net Debt to EBITDA (x)

• Healthy balance sheet, strong capital structure and cash preservation.

• Investment grade rating (BBB-) from Japan Credit Rating Agency with a POSITIVE
outlook.
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Cost control – key in delivering
strong performance
Adaro’s estimated coal cash cost
Operational EBITDA margin
breakdown (1H17)

45%
Fixed
overhead, 40%
5% Mining, 35%
35% - 40%
Coal 30%
processing,
10% 25%

20%

15%
Freight &
handling, 10%
20%
5%

0%

Adaro

PTBA

ITMG

Harum
Shenhua

Fuel, 25% -
30% Source: Bloomberg, based on trailing 12M EBITDA

• Adaro has one of the highest operational

EBITDA margin among thermal coal peers

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Delivering return to shareholder
150 60%

50%
120

40%
90

30%

60
20%

30
10%

0 0%
2012 2013 2014 2015 2016

Dividend (million US$) Payout Ratio

• Adaro has continued to pay dividend through the cyclical downturn.

• Dividend payout ratio since IPO in 2008 averages ~38% and in total we have paid
US$965 million in dividend.

• Total dividend for 2016 was US$101.1 million.

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Snapshot of Adaro Energy 13
Who is Adaro Energy
• Among the largest single-concession coal  2014A: 56.2 Mt
producers in the southern hemisphere. Production  2015A: 51.5 Mt
 2016A: 52.6 Mt
• Top 5 thermal coal exporter globally.
 Sub-bituminous, medium

• Major supplier to Indonesia’s domestic calorific value, ultra-low

markets. Envirocoal pollutants
 Trademark registered in

• One of the world’s lowest-cost coal producers. many jurisdictions

 More than 50 customers
• Envirocoal is an environmentally friendly coal.
Customers
in 12 countries
 Blue-chip power generation
• Vertically integrated business model. utilities
 Based on fixed negotiation
• Strong credit profile.
Pricing and index-linked
 Adjustment for heat content
• High visibility of future earnings.
 Reserves: 1.2 Bt as of
• Reputable and experienced management and JORC YE2016
controlling shareholders. reserves /  Resources: 13.5 Bt
resources (includes option to control
7.9 Bt) as of YE2016
 South, East and Central
Location
Kalimantan, South Sumatra
Credit  BBB- (JCR) with Positive
Rating outlook

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Business model that creates
sustainable value
Three pillars of growth integrating pit-to-power
PT Adaro Energy, Tbk (AE) *Simplified Corporate Structure

Coal Mining Assets Mining Services and Logistics Power

Adaro Indonesia (AI) 88.5% Saptaindra Sejati 100% Maritim Barito 100% Makmur Sejahtera 100%
Coal mining, S Kalimantan (SIS) Perkasa (MBP) Wisesa (MSW)
Balangan Coal Coal mining and hauling Barging & shiploading Operator of 2x30MW
75%
Coal mining, S Kalimantan contractor mine-mouth power
Sarana Daya 51.2% plant in S. Kalimantan
Mustika Indah Permai Jasapower Indonesia 100% Mandiri (SDM)
75% Dredging & maintenance
(MIP) (JPI) Bhimasena Power
Coal mining, S Sumatra Operator of overburden in Barito River mouth
(BPI) 34%
crusher and conveyor Partner in 2x1000MW
Bukit Enim Energi (BEE) Indonesia Multi 100% power generation
61% Adaro Eksplorasi Purpose Terminal
Coal mining, S Sumatra project in Central
Indonesia (AEI) 100% (IMPT) Java
Mining exploration Port management &
Adaro MetCoal (AMC), 100%
Coal mining, C Kalimantan terminal operator Tanjung Power
Adaro Mining 100%
E Kalimantan Indonesia (TPI) 65%
Technologies (AMT) 100% Indonesia Bulk
Partner in 2x100MW
Bhakti Energi Coal research & Terminal (IBT)
10.2% power plant project in
Persada (BEP) development Coal terminal & fuel
S. Kalimantan
Coal mining, E Kalimantan storage

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Adaro Coal Mining
Assets

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Diversified Coal Assets Across Indonesia 5
Deepening Coal Product Portfolio and Set to Capitalize Assets to
Support Indonesia’s Development 6

1
2
3 4
Adaro has more than 13.5 billion tonnes (Bt)
of coal resources (including option to acquire
7.9 Bt) and 1.2 Bt of coal reserves.

1 2 3 4 5 6
Adaro Balangan MIP: 75% BEE: 61.04% BEP: 10.22% Adaro
Indonesia: Coal stake stake S stake with MetCoal
88.5% Companies: S Sumatra Sumatra option to Companies
Existing, S Kalimantan sub- sub- acquire 90% Central and
S Kalimantan sub- bituminous bituminous E Kalimantan East
sub- bituminous Resources Geological sub- Kalimantan
bituminous Resources 288Mt study phase bituminous Metallurgical
Resources: 333Mt Reserves 254 Resources coal
5.4Bt Reserves Mt 7.9Bt Resources
Reserves 184Mt 1.27Bt
980Mt

Note: Reserves and Resources numbers above

Indonesian Coal are before taking into account AE’s equity
ownership
Resources : 124.8 Bt
Reserves : 28.0 Bt

Source: Bureau of Geology, 2015

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Over two decades of solid
production performance
60 350
2017 2016 2015
Units
Guidance Actual Actual
Production 300
50 Mt 52 - 54 52.5 51.5
volume
Strip ratio bcm/tonne 4.85 4.45 5.19 250

Overburden removal (Mbcm)

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Production (Mt)

200
30
150

20
100

10
50

0 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Tutupan Wara Paringin Balangan AMC Overburden Removal

• Produce low to medium heat value coal with low pollutant content, ideal for power
generation.
• Control over supply chain ensures timely delivery to customers.
• Continued focus on productivity, safety and sustainability will support value creation
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for shareholder.
Strong customer base with focus
on Indonesia
Geographical breakdown of
Customer type by % volume (1H17)
customers (1H17)
USA, 4% Others, 6%
10% Spain, 4%
Indonesia,
23%

India, 6%

Hong Kong,
7%
Malaysia,
14%

Power Taiwan, 7%
China, 11%
Others 90% South
Korea, 8% Japan, 10%
* Others include cement, pulp & paper, and industrial * Others include The Philippines, Vietnam , Singapore and the Netherlands.

• Most customers are sovereign backed power companies, with over 50% have had a
relationship of more than a decade
• Average length of coal supply agreement is 3 to 5 years.
• Many of our contracts are reset annually, with a combination of negotiated, fixed and
index-linked pricing.
• Strong relationship with many blue-chip investment-grade clients mitigates risk
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Snapshot of Adaro MetCoal
Companies (AMC)
• Adaro Energy completed the
acquisition of AMC from BHP
Billiton for 7 CCOWs in Central and
East Kalimantan.
• The transaction value was $120
million for 75% of the properties.
Adaro now owns 100% of the asset.
• First coal production has started at
the Haju mine which has a
production capacity of 1 million
tonnes a year. Coal is mined and
hauled to a barge loading site at
Muara Tuhup on the Barito river.

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Adaro Mining
Services and
Logistics

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 Ensuring operational excellence
Strengthens Adaro’s Earnings Profile as Contribution to Parent Co Increases

• Key part of our vertical integration.

• Ensures operational excellence,
productivity improvement and timely
reliable delivery to customers.
• Non coal mining business accounted
for 31% of Adaro Energy EBITDA in
2016. This contribution is expected to
grow going forward.
• Actively pursue third-party revenue
growth from these businesses.

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Adaro Power

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Building the foundation of
Adaro’s future
Bhimasena Power Indonesia Tanjung Power Indonesia

Capacity 2x1000 MW 2x100 MW

Stake
34% 65%
Acquired
Partner(s) J-Power (34%), Itochu (32%) Korea EWP (35%)
Location Central Java South Kalimantan
• Signed 25 years PPA with PLN • Signed PPA with PLN
• Total Capex: US$4.2 billion • Total Capex: $545 million
Development
• Concluded financing close on June 6th, 2016. • Concluded financing close in Jan 2017
Progress
• Expected COD: 2020 • Expected COD: 2019
• Expected coal requirement: 7 Mtpa • Expected coal requirement: 1 Mtpa
Non-recourse project debt financing. Non-recourse project debt financing.
Financing
Combination of ECA and commercial loan Combination of ECA and commercial loan
Expected
Debt vs. 80:20 75:25
Equity
• Commercially and financially attractive with solid IRR and low-cost long-term project financing.
• Creates captive demand for Adaro’s coal and helps meet our domestic market obligation.
• Provides a stable revenue stream and helps to lessen volatility in Adaro’s business model.
• Contributes to the development of Indonesia’s energy needs.
• Extending beyond coal to gas and renewables to replicate Indonesia’s energy mix.
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Adaro Energy 2017 guidance
Coal production (Mt) Consolidated planned strip ratio (bcm/t)

56.2
7

52.3 52 - 54 5.6 5.7

52.5 5.2
51.5 4.85
4.5

47.2

2012A 2013A 2014A 2015A 2016A 2017F 2012A 2013A 2014A 2015A 2016A 2017F

Operational EBITDA (US$ billions) Capital expenditure (US$ million)

1.1
0.9 – 1.1 490
0.9 0.9
0.8
0.7

200 - 250
185 165 146
98

2012A 2013A 2014A 2015A 2016A 2017F 2012A 2013A 2014A 2015A 2016A 2017F

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Conclusions and takeaways
• Coal market is poised to reach supply and demand balance.
• Indonesia to lessen coal export and focus on the domestic market.
• Coal production capped to 400 Mtpa in 2019.
• Long term fundamental for coal remains promising.
- Indonesia, Southeast Asia and India will be the main drivers.
• Our resilient business model is geared up to take the opportunity.
- Multiple opportunities across the value chain.
- Each engine of growth is expected to grow along with the
growth of coal fired power generations in Indonesia and
Southeast Asia.
• Adaro’s financials is the strongest in its history.

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 Thank you

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This presentation is also available at http://www.adaro.com/pages/read/10/45/Presentation