Nov 22, 2011

Fajar Bumi Sakti takeover story, end?

Despite an official letter sent by Nathaniel Rothschild that highlighted investment in Recapital Asset Management and debt to PT Bukit Mutiara, it is better for Nat Rothschild to look back in 2008 and 2009, especially regarding with acquisition of coal mining company PT Fajar Bumi Sakti (FBS).
Bumi Resources, via a wholly owned subsidiary dubbed PT Bumi Resources Investment (BRI), entered into shares purchase agreement on December 26 2008 to buy an indirect stake in FBS at the initial consideration price of Rp2.48 trillion.
However, Bumi Resources on January 5 2009 finally agreed to revise down the takeover price on FBS by half to Rp1.4 trillion after the stock market regulation founded that the price was too expensive.
At the same time, Bumi also acquired 44% stake in PT Darma Henwa Tbk (DEWA) at Rp2.14 trillion and 84% stake in PT Pendopo Energi Batubara worth Rp1.3 trillion.
In total, Bumi Resources spent Rp5.12 trillion for those acquisitions. The company used some part of an expensive loan facility obtained from China Investment Corporation of US$1.9 billion.
But, do not forget to ask about the FBS coal mining performance. If you check Q1 2011 financial statement on page 177, it was mentioned that BRI should pay incentive to Ancara Properties Limited, the seller of the FBS, if the FBS could reach a coal production rate of 4 million tons by the end of the second year after the completion date.
The question is how much coal that has been produced by Fajar Bumi Sakti? How about coal production of Pendopo Energi and performance of Darma Henwa as they were acquired with an expensive financing from CIC.
If you check Bumi's September financial statement, the company posted assets write-off of US$17.24 million.
On note 18, page 92, it was mentioned that on December 28 2010, the FBS official closed the underground mining operations permanently due to the scarcity of timber supply, which was a major support in the underground mining operations. 
A detailed studies that lasted up to December 2010, the FBS was not able to restore the operations.
In relation to the closure, as of December 31 2010, the FBS wrote-off certain deffered exploration and developmet costs with carrying value of US$2.19 million and the recognized accrual for employee termination amounting to US$3.43 million. 
Bumi also reported a write-off the costs related to Satui underground mining project amounting US$14.25 million. So, where is the coal production of the FBS? is it the end of story of the Rp1.4 trillion FBS take over?   

Disclosure: No position at the stock mentioned above.

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