Adaro Energy Indonesia (Adaro) is a thermal coal mining company with no plans to reduce its dependency on polluting coal.

The financial institutions propping up Adaro are exiting the company, with recent examples Singaporean DBS Bank 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 time-bound plans to transition away from coal, consistent with the Paris Agreement goals.

Adaro’s business plan bets on catastrophic climate change

Adaro is a pure-play coal company without any plans to reduce coal reliance anytime soon. In 2021, it derived 96% of its revenue from coal while the remaining revenue was derived from coal logistics and services. Despite evidence from the International Energy Agency (IEA) and other experts that the decline and eventual phase-out of coal by 2050 are necessary to meet climate goals, and a recent IEA study which cast doubt on the long-term prospects of Indonesian coal exports, Adaro insists that global coal demand will be sustained at least until 2050.

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.

Kalimantan flood

Image: A woman holds an umbrella as she waits with her family to be evacuated by the rescue team on a bamboo raft in front of her flooded house in South Kalimantan, Indonesia. The flooding has been linked to massive land clearing for palm oil plantations and coal mining activities in South Kalimantan. © Putra / Greenpeace.

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.

How Adaro is driving climate change

As recently as 2021, Adaro was still exploring for new coal. The greenfield coal mining areas cover around 34,000 hectares with estimated coal resources of 3.3 billion tonnes.

The potential emissions of Adaro’s coal reserves is 2.18 GtCO2-e, almost equivalent to the annual emissions of India[1]Potential emissions from coal use are estimated using Australian National Greenhouse Accounts Factors
.

(Assuming all Adaro’s thermal coal reserves are combusted and all metallurgical coal reserves are used in the steel industry)

Adaro plans to increase its production by 14% from 52.7 million tonnes in 2021 to 60 million tonnes in 2022.

“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

“Yeah, it was forced eviction. I wasn’t compensated. Not even for a nail. Some of us stayed in the rubber plantation that had not been demolished. But Adaro could come at us at any time. Adaro evicted us, they evicted everyone.”

Former Wonorejo Resident

Company details

In its 2021 annual report, Adaro claims that coal remains in the DNA of the company. The annual report also states that Adaro has a coal reserve of 1.1 billion tonnes.

Adaro plans to ramp up its coal production and has no intention to reduce its coal business in the future. It set the 2022 production target at 60 million tonnes, an increase from 2021 production of 52.7 million tonnes. Despite Adaro’s green initiatives, it has no time-bound plans and targets to reduce its coal business. 

As recently as 2021, Adaro was exploring for new coal in an undeveloped greenfield acreage in East Kalimantan through its subsidiary, Bhakti Energi Persada (BEP), as stated in its 2021 Annual Report. The greenfield coal mining areas cover 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 2021 Annual Report.

The Indonesian Ministry of Environment and Mineral Resources official concession map shows that Adaro’s mines exceed its official license area, as indicated by the red outline in the screenshot of this map.

The Indonesian Ministry of Environment and Mineral Resources official concession map shows that Adaro’s mines exceed its official license area

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. These banks are enabling Adaro’s expansionary coal business and backing a company whose plans undermine the 1.5°C goal of the Paris Agreement.

wdt_ID Name   Amount loaned in 2021 Ruled out Adaro? Explanation 
1 United Overseas Bank 78 No

UOB has not made any commitment to stop providing support to Adaro.

UOB’s policy states that UOB will not knowingly provide financing to companies for the development of greenfield thermal coal mines or thermal coal mine expansion projects. 

The policy also states that UOB will not knowingly provide financing to companies in the thermal coal mining sector, other than anchor clients approved by the Bank with well established diversification strategies, as well as their subsidiaries, affiliates, suppliers, contractors and traders.

2 Maybank 75 No

Maybank has not made any commitment to stop providing support to Adaro.

Maybank’s latest policy in September 2022 states that it is committed to not financing any new greenfield coal activity and no new borrowers engaged in thermal coal-related activities or derive >25% of annual revenue from thermal coal.

This policy currently includes corporate lending, project financing as well as advisory services such as arranging, syndicating, fundraising and underwriting.

3 Bank Mandiri 68 No Able to finance Adaro under its current policy.
4 Bank Negara Indonesia 49 No Able to finance Adaro under its current policy.
5 Standard Chartered Bank 33 Yes

Standard Chartered Bank advised that they would no longer be funding Adaro.

6 Sumitomo Mitsui Banking Corporation 20 No

SMBC has not made any commitment to stop providing support to Adaro.

SMBC’s policy states it will not provide support for new or expansion of existing thermal coal mining projects.

7 Bank Rakyat Indonesia 15 No Able to finance Adaro under its current policy.
8 CIMB Bank 11 No

CIMB has not made any commitment to stop providing support to Adaro.

In December 2020, CIMB committed to phasing out coal from its portfolio by 2040 and will prohibit asset-level or general corporate financing for new thermal coal mines as well as expansions. 

CIMB’s latest coal policy in 2022 states that it will not engage with clients involved in coal, specifically in project financing and any forms of asset-level or general corporate financing as well as capital raising that are specified as being for greenfield thermal coal mines.

9 HSBC 10 No

HSBC has not made any commitment to stop providing support to Adaro.

HSBC’s coal policy stated that it will seek to withdraw any financing and advisory services with a client that makes a new commitment to, or proceeds with, thermal coal expansion after 1 January 2021. 

HSBC will not provide any new financing to any client where the client declines to engage sufficiently on its transition plan or HSBC determines that the plan is not compatible with HSBC’s Net Zero by 2050 target.

10 Bank of China 9 No

Bank of China has not made any commitment to stop providing support to Adaro. 

In 2020, Bank of China stated it would no longer provide financing for new coal mining and coal power projects overseas. 

11 Citibank 8 No

Citibank has not made any commitment to stop providing support to Adaro.

Citibank will not provide project-related financial services for the new thermal coal mines or significant expansion of existing mines.

12 Bank Permata 8 No Able to finance Adaro under its current policy
13 Qatar National Bank 8 No Able to finance Adaro under its current policy
14 Bank Danamon 8 No Able to finance Adaro under its current policy
Adaro’s international shareholders and bondholders

Adaro issued a US$750 million bond in 2019. This bond will mature on 31 October 2024.

wdt_ID Asset Manager Bondholder Shareholder
1 AllianceBernstein L.P. Yes Yes
2 BlackRock Yes Yes
3 Credit Suisse Yes Yes
4 Dimensional Fund Advisors, L.P. No Yes
5 Fidelity International Yes Yes
6 Goldman Sachs Asset Management No Yes
7 HSBC Global Asset Management Yes Yes
8 Invesco Yes Yes
9 JP Morgan Asset Management Yes Yes
10 Manulife Yes Yes
11 Maybank Asset Management Singapore Yes No
12 Mitsubishi UFJ Kokusai Asset Management No Yes
13 UBS Asset Management Yes Yes
14 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, consistent with the climate goals of the Paris Agreement and IEA Net Zero 2050 pathway.

References

References
1 Potential emissions from coal use are estimated using Australian National Greenhouse Accounts Factors

Disclaimer

This webpage is intended to convey factual information about Adaro Energy Indonesia group.

Information comes from the companies’ available annual reports and websites, Refinitiv Eikon, Bloomberg and various news reports.

Occasionally where information is incomplete, assumptions must be made about data and these were made in a consistent manner and in good faith. Whilst we have endeavoured to gather and include all relevant deals, we cannot guarantee the completeness of the information presented.