Adaro Energy Tbk PT : Financial Press Release 9M18

NEWS RELEASE

Jakarta, October 31, 2018

For further information please contact:

Mahardika Putranto, Head of Corporate Secretary & Investor Relations [e-mail]

Febriati Nadira, Head of Corporate Communication [e-mail]

Adaro Energy Records Solid Performance on the back of Stronger Operations Executes Strategic Investment Opportunities and Sets Up Firm Foundation for Growth

Jakarta, October 31, 2018 - PT Adaro Energy Tbk (IDX: ADRO) (AE) today released its consolidated financial statements for the nine months of 2018 (9M18). After a subdued start, we are catching up with the guidance set at the beginning of the year as operation activities improved in 3Q18. We continue to maintain strong liquidity and healthy balance sheet on the back of improved operations and strong cash flow generation.

Adaro Energy's President Director and Chief Executive Officer, Mr. Garibaldi Thohir, said:

"We are pleased with our performance, highlighted by year-over-year growth in operational EBITDA and core earnings driven by solid performance across our business pillars. We remain positive on the long-term coal market fundamentals and continue to execute our strategic priorities to ensure sustainable value creation while maintaining healthy balance sheet and delivering strong profitability."

Highlights of 9M18 performance:

•  We recorded operational EBITDA of US$1,061 million, a 5% increase over 9M17, and maintained a strong operational EBITDA margin of 40% on the back of sustained high coal price and solid ASP. We are in line to achieve our operational EBITDA guidance of US$1.1 - 1.3 billion for FY2018.

•  Our balance sheet remained healthy with strong liquidity of US$1,381 million, providing us with flexibility and capability to execute strategic investment opportunities. Net debt to equity and net debt to last 12 months operational EBITDA stood at 0.07x and 0.22x, respectively.

•  Core earnings increased 6% to US$526 million.

•  Our subsidiary, PT Saptaindra Sejati (SIS), secured US$350 million, two-year revolving facility from a group of 14 banks.

Financial Performance

(US$ Million, except otherwise stated)	9M18
Net Revenue	2,667
Cost of Revenue	(1,788)	(1,579)	13%
Gross Profit	879	860	2%
Operating Income	740	729	2%
Core Earnings1	526	495	6%
Operational EBITDA2	1,061	1,006	5%
Total Assets	7,151	6,852	4%
Total Liabilities	2,846	2,790	2%
Stockholders' Equity	4,305	4,062	6%
Interest Bearing Debt	1,361	1,377	-1%
Cash3	1,056	1,259	-16%
Net Debt	305	Net cash	-
Regular Capital Expenditure4	339	106	220%
Free Cash Flow5	478	623	-23%
Basic Earnings Per Share (EPS) in US$	0.00978	0.01164	-16%
9M18
Gross Profit Margin (%)	32.9
Operating Margin (%)	27.8
Operational EBITDA Margin (%)	39.8
Net Debt to Equity (x)
Net Debt to last 12 months Operational EBITDA (x)
Cash from Operations to Capex (x)

9M17 2,439

% Change9%

Financial Ratios

9M17% Change

35.3 29.941.2

-7%

-7%

0.07Net Cash

0.22 3.09

Net Cash 11.99

-3% --

-74%

• 1 Profit for the period, excluding a one-time, non-operational transaction and transition costs related to Kestrel acquisition and non-operational items net of tax (amortization of mining properties, prior year tax assessment and recovery in allowance of trade receivables).

• 2 EBITDA excluding a one-time, non-operational transaction and transition costs related to Kestrel acquisition, foreign exchange loss, prior year tax assessment and recovery in allowance of trade receivables.

• 3 Cash including available-for-sale financial assets-current portion.

• 4 Regular spending defined as: purchase of fixed assets - proceed from disposal of fixed assets + payment for addition of mining properties + addition of fixed assets under finance leases.

• 5 Operational EBITDA - taxes - change in net working capital - capital expenditure excluding finance leases.

Operating Segment
Revenue	Profit for the period
(US$ Million)	9M18 2,468 149 50 9M17 % Change 9M18 9M17 % Change 2,283 109 47 8% 37% 6% 403 403 0% 8 14 -43% (3) 62 -105% (56) (65) 14% 2,667 2,439 9% 352 414 -15%
Coal mining & trading
Mining services
Others
Elimination
Adaro Energy Group

FINANCIAL PERFORMANCE ANALYSIS FOR THE FIRST NINE MONTHS OF 2018

Revenue, Average Selling Price and Production

Our revenue increased by 9% year-over-year to US$2,667 million, as a result of sound Average Selling Price (ASP) which was 9% higher compared to the same period last year. AE's coal mining and trading business accounted for 92% of total revenue.

AE's total coal production in 9M18 reached 38.98 Mt or 1% lower compared to the same period last year. In 3Q18, AE delivered 14% higher coal production compared to 2Q18 as we entered the dry season and weather conditions significantly improved. AE's coal sales in 9M18 were solid at 39.27 Mt, flat y-o-y. We continue to maintain our 2018 coal production guidance of 54-56 Mt and aim to achieve the lower end of that guidance.

Cost of Revenue

Cost of revenue increased 13% year-over-year to US$1,788 million largely driven by higher mining costs as a result of higher overburden removal volume hence higher strip ratio, higher fuel costs, and higher royalty payment to the Government of Indonesia following higher ASP.

AE's blended average strip ratio for 9M18 was 5.24x, a 13% increase over 4.65x in 9M17. We continue to maintain our strip ratio guidance of 4.9x for 2018. In line with the increased operational activities, fuel consumption increased by 22% y-o-y and fuel cost has also increased by 19% y-o-y. Furthermore, to manage risk from fuel price fluctuations, we have hedged approximately 20% of our fuel requirements for 2018 at prices below our budget.

Royalties to Government

Royalties to the Government of Indonesia increased 9% to US$277 million in line with higher revenue from coal sales.

Operating Expenses

Our operating expenses increased 8% in 9M18 compared to the same period last year to US$138 million mainly due to higher sales commission and higher employee cost.

Operational EBITDA

AE recorded a strong operational EBITDA of US$1,061 million in 9M18, 5% higher compared to last year, driven by healthy ASP and solid sales volume in the period. We excluded a one time, non-operational transaction and transition costs related to Kestrel acquisition. Furthermore, we managed to preserve a healthy operational EBITDA margin of 40% in 9M18. We are on track to achieve our 2018 operational EBITDA guidance of US$1.1 billion to US$ 1.3 billion.

Core Earnings

Core earnings increased 6% to US$526 million. We excluded a one time, non-operational transaction and transition costs related to Kestrel acquisition.

Total Assets

Total assets of US$7,151 million were 4% higher compared to the same period last year. Current assets decreased by 20% to US$1,673 million, primarily due to 23% lower cash balance as we paid for our equity portion in Kestrel. Non-current assets increased by 15% to US$5,478 million as a result of a higher investment in joint ventures.

Acquisition of Kestrel Coal Resources

On August 1, 2018, AE with EMR Capital Ltd (EMR) - a specialist mining private equity manager - completed the acquisition of Rio Tinto's 80% interest in the Kestrel Coal Mine (Kestrel). EMR and AE will jointly manage and operate the Kestrel mine.

Upon completion of the deal, Kestrel is owned by Kestrel Coal Resources Pty Ltd (80%) and Mitsui Coal Australia (20%). Kestrel Coal Resources Pty Ltd is a joint venture company formed by EMR (52%) and AE (48%).

Kestrel produces mainly hard coking coal of premium quality favored by premium customers in the seaborne market. Kestrel's saleable coal production was 0.57 Mt in August and 0.52 Mt in September and it sold 0.34 Mt in August and 0.44 Mt in September. This achievement was relatively even y-o-y as we carry on with Kestrel's original plan set at the beginning of 2018.

Total Liabilities

Total liabilities increased 2% compared to the same period last year to US$2,846 million. Current liabilities increased by 14% to US$930 million predominantly due to higher current maturity of bank loans and higher trade payables. Non-current liabilities declined by 3% toUS$1,917 million largely due to lower long-term borrowings positions following repayment of bank loans.

Current Maturity of long-term Borrowings

The current portion of long-term borrowings increased 11% compared to the same period last year to US$206 million following the increase of our scheduled payment.

Long-term Borrowings, net of Current Maturity

The non-current portion of long-term borrowings decreased by 3% compared to the same period last year to US$1,154 million, due to lower non-current portion of bank loans as we further repaid our bank loans.

Debt Management and Liquidity

We maintained robust liquidity position at US$1,381 million, consisting of US$965 million in cash, US$91 million in available for sale financial assets, and US$325 million in undrawn committed loan facilities. Given a strong liquidity position, AE can comfortably cover its upcoming debt payments from 2018 to 2021 with average amount of US$311 million per year.

SIS secured US$350 million bank loan

Our subsidiary, SIS, secured US$350 million, two-year revolving facility from a group of 14 banks to support SIS's working capital and capex requirement, as the mining contractor is entering its capex cycle. We would like to express our gratitude and appreciation to our relationship banks for their continuous support to the Adaro Group.

Cash Flows from Operating Activities

Our cash flows from operating activities increased 6% to US$865 million mainly driven by increased payments from customers.

Cash Flows from Investing Activities

AE booked US$702 million in net cash flows used in investing activities mainly for our strategic investment in Kestrel Coal Resources and heavy equipment purchase at SIS.

Capital Expenditure and Free Cash Flow

Our net capital expenditure (including acquisition of assets under finance leases) during 9M18 was US$339 million, in line with our plan to increase capex in 2018, mainly for purchase and replacement of heavy equipment, development of our metallurgical coal asset and regular maintenance along the coal supply chain. Further, we generated solid free cash flow of US$478 million due to strong cash flow generation from our operating activities.