Indonesian Coal Miners’ Earnings Outlook Improving in 2021

Indonesian coal selling prices and volumes will improve in 2021, which should support a modest improvement in credit metrics, Fitch Ratings says in a new report. Most Indonesian coal miners have also curtailed mining costs in 2020, which is likely to flow through to 2021 – helping earnings.

Fitch expects sector credit metrics to improve. However, the Negative Outlooks on PT Indika Energy Tbk (BB-), PT Bukit Makmur Mandiri Utama (BB-) and PT ABM Investment Tbk (B+) reflect limited ratings headroom on industry dynamics weaker than Fitch’s expectations. The Stable Outlooks on Adaro, PT Bayan Resources Tbk (BB-/Stable) and Golden Energy and Resources Limited (GEAR, B+/Stable) continue to reflect the comfortable ratings headroom.

Fitch also expects further clarity on the renewals of the first-generation mining contracts of work (CCoW) shortly, as a large one has already expired. Fitch continues to consider the implications of the renewals, which are applicable to PT Adaro Indonesia (BBB-/Stable) and Indika as event risks.\