Adaro Energy Indonesia (Adaro) is a coal mining company with no credible plans to diversify and transition away from coal.
Adaro’s “green” transition pathway does not mention a cap or reduction of overall coal production. The recently released “Decarbonization” pathway of Adaro involves building an aluminium smelter in North Kalimantan, which enables a new 1.1 GW coal-fired power plant and expanding its metallurgical (coking) coal production. At the same time, Adaro continues ramping up its overall coal production.
The new coal-fired coal plant controversy has led to financial institutions propping up Adaro exiting the company, with recent examples Singaporean banks DBS and OCBC and UK’s Standard Chartered Bank both advising that they would no longer be funding Adaro.
The remaining financial institutions must commit to providing no further financial support to Adaro unless Adaro produces plans to transition away from coal in a manner consistent with the Paris Agreement goals and net zero by 2050.
Adaro’s business plan bets on catastrophic climate change
Adaro increased its coal production by 19%, from 52.7 million tonnes in 2021 to 62.8 million tonnes in 2022, and ramped up its 2023 coal production target to 62-64 million tonnes. Adaro derived 98% of its 2022 revenue from coal. Despite the statement from the International Energy Agency (IEA) that no new coal mines or coal mine extensions are necessary, Adaro has three new (greenfield) metallurgical coal mining areas yet to operate and produce coal.
These are the financial institutions propping up Adaro
Banks that have provided loans to Adaro
In April 2021, a group of 14 banks loaned a total US$400 million to Adaro’s largest subsidiary in thermal coal mining, Adaro Indonesia.
In July 2022, a group of 7 banks – CIMB, UOB, Mandiri, Permata, Bank of China, CTBC, and Qatar National Bank – continues to support Adaro and provided a US$350 million loan for a unit of Adaro Energy Indonesia, Saptaindra Sejati.
In May 2023, a group of five Indonesian domestic banks – Mandiri Bank, Bank Negara Indonesia (BNI), Bank Central Asia (BCA), Bank Rakyat Indonesia (BRI), Permata Bank – provided a total of IDR2.5 trillion and US$1.5 billion loans to Adaro’s smelter and coal power plant subsidiaries. Kalimantan Aluminium Industry (KAI), and Kaltara Power Indonesia (KPI).
These banks are enabling Adaro’s expansionary coal business, construction of a new coal-fired power plant, and backing a company whose plans undermine the 1.5°C goal of the Paris Agreement.
Adaro’s banks
| Bank | Amount loaned since 2021 | Ruled out Adaro and smelter project? |
|---|---|---|
| Bank Mandiri | 781million | No |
| Bank Rakyat Indonesia | US$465million | No |
| Bank Negara Indonesia (BNI) | US$399million | No |
| Bank Central Asia (BCA) | US$270million | No |
| CIMB Bank | US$153million | No |
| Bank Permata | US$133million | No |
| United Overseas Bank | US$103million | No |
| Maybank | US$75million | No |
| Standard Chartered Bank | US$33million | Yes |
| Qatar National Bank | US$33million | No |
| Sumitomo Mitsui Banking Corporation | US$20million | No |
| CTBC Bank | US$19.6million | No |
| Bank of China | US$15million | No |
| HSBC | US$10million | Yes |
| Citibank | US$8million | No |
| Bank Danamon | US$8million | No |
Adaro’s international shareholders and bondholders
| Asset Manager | Bondholder | Shareholder |
|---|---|---|
| AllianceBernstein L.P. | Yes | Yes |
| BlackRock | Yes | Yes |
| Credit Suisse | Yes | Yes |
| Dimensional Fund Advisors, L.P. | No | Yes |
| Fidelity International | Yes | Yes |
| Goldman Sachs Asset Management | No | Yes |
| HSBC Global Asset Management | Yes | Yes |
| Invesco | Yes | Yes |
| JP Morgan Asset Management | Yes | Yes |
| Manulife | Yes | Yes |
| Maybank Asset Management Singapore | Yes | No |
| Mitsubishi UFJ Kokusai Asset Management | No | Yes |
| UBS Asset Management | Yes | Yes |
| Vanguard | No | Yes |
Banks and institutional investors must commit to providing no further financial support to Adaro unless Adaro produces time-bound plans to transition away from coal, and halt the construction of the new coal-fired power plants, consistent with the climate goals of the Paris Agreement and IEA Net Zero 2050 pathway.
Adaro’s mining destroys local communities
The Wonorejo village, which was once occupied by transmigrants from Java, has now become part of Adaro’s mining complex. Since 2006, Adaro has systematically bought up the land to support its mining area expansion. Some villagers willingly sold their land, there were others who resisted and finally relented after they were intimidated into selling their land to Adaro. These villagers were eventually evicted to accommodate Adaro’s mining area expansion.
Adaro’s mining activities are linked with deadly flooding in Kalimantan. In January 2021, South Kalimantan region of Indonesia was hit by a massive flood that killed 21 people, displaced 63,000 people from their homes and affected at least 340,000 people. Apart from extreme rainfall, the floods have been linked with degraded land due to coal mining in the water catchment area.
Adaro operates the largest single-site coal mine in South Kalimantan and is one of the mining companies that has caused the degradation of the Barito river’s water catchment areas. There are nine flooded areas around Adaro’s concession.
In the North Kalimantan region, Adaro’s new coal plant could contribute to threatening the livelihood of local fishermen
The site for Adaro’s new aluminium smelter and new coal-fired power plant in North Kalimantan is projected to contribute to a host of environmental impacts. The project is located inside the North Kalimantan Industrial Park in the province of North Kalimantan.
Activities from the industrial park, could result in the effects of hot water waste contamination, coal-fired power plant fly ash, rising air temperatures, project smoke, noise, sea dredging, and spilt coal/fuel spills will cause the sea to become murky, which will cause tourism (industry) to decrease and the quality and quantity of (fish) catches to significantly decrease.
“The mining company came to our village in 2006. We had a peaceful life before 2006. Back then I believed that our village would become prosperous. But our life was shattered when the miners came. The land that we owned, without us knowing, was sold to Adaro. It suddenly belonged to them.”
– Former Wonorejo Resident
Company details
Adaro plans to ramp up its coal production and has no intention to reduce its coal business in the future. It has set a production target of 62 – 64 million tonnes for 2023, an increase from 2022 production at 62.8 million tonnes.
Despite Adaro’s Decarbonization statement, it has no time-bound plans and targets to reduce its thermal coal business. Adaro plans to achieve its 50% revenue target from non-thermal coal business by expanding downstreaming of mineral products – which partly reliant on coal energy, and growing its metallurgical coal business.
A credible transition plan must include how Adaro, a pure-play coal mining, plans to shift away from the coal business. This must include a clear timeline for when it will stop all coal production in a manner consistent with the Paris Agreement goals and net zero by 2050.
Adaro has greenfield coal mining areas covering around 34,000 hectares with estimated coal resources of 3.3 billion tonnes, “making it one of the largest undeveloped deposits of low calorific value coal” according to its 2022 Annual Report
The map below is a screenshot taken from the Indonesian Ministry of Environment and Mineral Resources official concession map. The area outlined in red shows where Adaro’s mine exceeds its official licence area.
