PT Adaro Energy Indonesia Tbk : Financial Press Release and Quarterly Activities Report 9M22

NEWS RELEASE

Jakarta, November 1, 2022

For further information please contact:

Bret Ginesky, Head of Investor Relations [e-mail]

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

Adaro Energy Indonesia reported record 9M22 Operational EBITDA and Core Earnings increases of 231% and 262% y-o-y to $3.80 billion and $2.33 billion, respectively; FY22 production target remains on track at 58-60 Mt

• ADRO's operational EBITDA increased by 231% to $3,798 million from $1,149 million year on year as pricing and production increased by 106% and 14% respectively. Our ASP in 3Q22 increased by 87% year on year.
• Royalties to the Government of Indonesia combined with income tax expense increased by 302% to $2,047 million from $510 million in the same period last year.
• Core earnings in 9M22 reached $2,331 million, reflecting a 262% increase y-o-y from a continuation of historically strong pricing and sales volume increasing 14% y-o-y.
• The Company generated $2,071 million of free cash flow in 9M22, representing a 223% increase y-o-y despite capex increasing by 123% to $277 million.
• ADRO's balance sheet remains healthy with a net cash position of $1,845 million, and total cash position increasing by 122% y-o-y to $3,353 billion from $1,511 billion.

					Change				Change
Key Highlights		3Q22	3Q21		YoY	9M22	9M21		YoY
Production	17.36	13.15	29.7%	45.37	39.64	14.5%
OB Removal	71.46	57.81	23.6%	173.52	173.03	0.3%
Strip Ratio	4.12	4.40	-4.8%	3.82	4.36	-12.4%

Jakarta, November 1, 2022 - PT Adaro Energy Indonesia Tbk (IDX: ADRO) today released its financial performance for the nine-month period ended September 30, 2022 (9M22). Overall, results remain at historically high levels of profitability supported by a continuation of the high coal price environment, leading to operational EBITDA increasing by 231% to $3,798 million from $1,149 million year on year. Adaro expanded operational EBITDA margins y-o-y by 1,950bps to 64.2% from 44.7% as average selling price increased by 106% and sales volume rose by 14%.

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

"In the first nine months of 2022 Adaro has continued to execute our strategy to increase production and sales, as we remain on pace to see both rise by more than 10% year on year. Our revenues, EBITDA and net profit reached all-time highs for any first nine months since the Company was founded 30 years ago. Our operational EBITDA of $3.8 billion, and core earnings of $2.3 billion were 231% higher and 262% higher y-o-y, respectively, reflecting the quality of our earnings. Recently, we celebrated our 30th birthday, a time to reflect on the past, and focus on our future. I am excited for the green initiatives at Adaro, as we evolve and innovate over the next 30 years, we will build the new Adaro. I can assure our shareholders we will continue to focus on execution, people and culture as we further invest in renewables, build the world's largest green industrial park and invest in the EV battery value chain."

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1. Profit for the period, excluding non-operational items net of tax (amortization of mining properties, prior year tax assessment, loss on derivative financial instruments, loss on impairment of loan to related parties, recoverable of allowance uncollectible receivables, loss on impairment of fixed assets, loss on impairment of investments in JV and provision decommissioning costs).
2. EBITDA excluding prior year tax assessment, loss on derivative financial instrument, loss on impairment of loan to related parties, recoverable of allowance for uncollectible receivables, loss on impairment of fixed assets, and loss on impairment of investments in JV, provision for decommissioning costs.
3. After deduction of cash and cash equivalent and current portion of other investments.
4. Capex spending defined as: purchase of fixed assets - proceed from disposal of fixed assets + payment for addition of mining properties + addition of lease liabilities.
5. Operational EBITDA - taxes - change in net working capital - capital expenditure excluding lease liabilities.

FINANCIAL PERFORMANCE ANALYSIS FOR THE FIRST NINE MONTHS OF 2022 (9M22)

Revenue, Average Selling Price and Production

Adaro Energy Indonesia's 9M22 reported revenue increased by 130% to $5,913 million from $2,569 million y-o-y, mainly due to a 106% higher average selling price (ASP) y-o-y. Inclement weather, supply constraints and geopolitical events have maintained prices near historically high levels seen in 2Q22, and thereby supporting the year-on-year ASP increase for Adaro. Despite significant rainfall and challenges in procuring heavy equipment, ADRO was able to increase production by 14% to 45.4 mt from 39.6 mt y-o-y in 9M22. The increase in production helped coal sales rise by an equal 14% to 44.2 mt in 9M22 from 38.9 mt in the year ago period. Additionally, Adaro recorded overburden removal improved in the quarter and is now flat year on year at 173.5 Mbcm in 9M22 from 173.0 Mbcm and the strip ratio declined by 12% y-o-y to 3.82x from 4.36x. Weather permitting we anticipate the strip ratio will increase further in 4Q22, but we expect full year 2022 strip ratio will be below our target of 4.1x.

Cost of Revenue

The cost of revenues increased by 59% y-o-y to $2,548 million mainly due to increased royalty payments due to the higher ASP and higher mining costs as a result of the increase in global oil prices. The strip ratio of 3.82x decreased by 54bp in 9M22, as 173.5 mBcm of overburden was removed, representing the same level of overburden removal compared to 9M21. The lower strip ratio remains below our guidance, but we anticipate the gap will continue to decline in 4Q22, but we will likely be below our strip ratio target in 2022. This can be made up in subsequent years as we follow our mining plan and mining sequence. Overall, cash costs (ex-Royalty) increased by 17% year on year.

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Operating Expenses

Our operating expenses in 9M22 increased by 78% y-o-y to $232 million, as we recorded a 300% increase in sales commission expenses. The higher sales commission expenses contributed 67% of the y-o-y increase in operating expenses and is attributed to the higher coal prices in the period.

Royalties to Government and Income Tax Expense

Royalties to the Government of Indonesia combined with income tax expense increased by 302% to $2,047 million from $510 million in the period resulting from higher coal revenue given the higher average selling price. To note on the royalties, Adaro Indonesia's contract of work has been officially transitioned to a Special Mining Business License as the Continuation of Contract/Agreement of Work Operation ("IUPK-KOP"). The IUPK-KOP has been granted for a period expiring on October 1, 2032, which can be extended in accordance with the prevailing regulations.

Based on the terms of an IUPK-KOP, the royalties paid by Adaro Indonesia (Adaro Indonesia's mine represents 79% of our 9M22 production) will increase progressively based on coal selling prices to between 14% and 28% (note: we fulfill the Domestic Market Obligation to power plants and the cement industry at a set price of $70/$90, respectively) from the current 13.5% level and the tax rate will decline to 22% from 45% among other changes to profit sharing, legal jurisdiction, and concession size. The provisions on taxation and/or Non-Tax State Revenue ("PNBP") are implemented in accordance with the provisions as stipulated in Government Regulation No. 15 of 2022 and will take effect on 1 January 2023.

		CCOW	IUPK
1	Royalty rate	13.5%	14% - 28%
2	CIT	45%	22%

3 Profit Sharing (from net income)

- Central Gov't	-	4%
- Regional Gov't	-	6%

Operational EBITDA

ADRO's operational EBITDA grew by 231% y-o-y to $3,798 million from $1,149 million in the year ago period. The strong operational EBITDA generation is reflective of volatile weather patterns,

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demand for coal from the global reopening post pandemic and geopolitical dynamics driving prices.

Operational EBITDA margin remains near historically high levels and stood at 64% in 9M22, an increase of more than 1950 bps y-o-y as demand remains strong and operating leverage remains positive.

In calculating Operational EBITDA, Adaro adjusts for one-timenon-operational items such as provision for decommissioning costs, allowances, derivatives and impairment expenses. In 9M22 the Company reported $1.0 million in adjustments that impacted our EBITDA.

Core Earnings

ADRO's underlying core earnings in 9M22 increased by 262% to $2,331 million from $644 million in the year-ago period, a result of the current pricing environment and continued operational excellence. On an as reported basis, net profit totaled $2,169 million, an increase of 366% year on year.

Total Assets

Total assets increased by 41% to $10,032 million from $7,118 million in the previous year driven by a 122% increase in cash to $3,353 billion. Current assets increased by 96% to $4,548 million from $2,326 million y-o-y, while non-current assets increased by 14% to $5,484 from $4,793 million y-o-y. The most significant contribution to the increase in non-current assets was through joint venture investments and available for sale financial assets.

Fixed Assets

Fixed assets at 9M22 declined by 3% y-o-y to $1,380 million from $1,417 million and accounted for 14% of total assets as accumulated depreciation increased to $2,761 million from $2,536 million year to date.

Mining Properties

At the end of 9M22, mining properties declined by 17% y-o-y to $1,045 from $1,254 million and accounted for 10% of total assets.

Total Liabilities

Total liabilities increased by 34% to $3,743 from $2,795 million due to the sizable increase in taxes payable given the strong coal price. In 9M22, taxes payable increased by 296% to $1,109 million from $280 million y-o-y. This led to current liabilities rising by 79% to $1,853 from $1,032 million y-o-y.Non-current liabilities increased by 7% to $1,890 million from $1,762 in the year ago period as the refinanced bank loan by SIS has a longer maturity date.

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