Understanding the ICI

The Indonesian Coal Price Index

Feisal Sham, Vice President, Sales and Marketing Asia Pacific Tokyo, 22 February 2012

London, Houston, Washington, New York, Portland, Calgary, Santiago, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Hamburg and Johannesburg

Presentation Guide
What is ICI How ICI is published Who use ICI and how they use it ICI and HBA(ICPR)

What is ICI

The most accepted Indonesian coal price index

ICI is a weekly price index for Indonesian steam coal ICI has been accepted in many pricing applications since 2006 Indicating representative prices of 5 major commodity grades of Indonesian coal ICI is the driver for HBA (or known as ICPR)

Independent Index
ICI stands for

Argus/Coalindo Indonesian coal price index

A basket index of Argus index and Coalindo index The methodologies are different but both designed to pursue Independence Transparency Accuracy

ICI evolves
ICI now covers 5 different grades
Calorific value ICI-1 ICI-2 ICI-3 ICI-4 ICI-5 6,500Kcal/kg GAR 5,800kcal/kg GAR 5,000kcal/kg GAR 4,200kcal/kg GAR 3,400kcal/kg GAR Sulphur 1.0% 0.8% 0.6% 0.4% 0.2% Ash 12% 10% 8% 6% 4% TM 12% 18% 30% 40% 50% Size Panamax Panamax Panamax Tug and Barge Mother vessel Timing in 90 days in 90 days in 90 days in 90 days in 90 days

How ICI is published

Argus and Coalindo

ICI is a joint production between Argus and Coalindo Argus Media Limited
World largest independent energy price reporting agency Dominant in coal price reporting with API, ICI and others Proven ability of research and analysis, based on 40 years of experience and worldwide cross markets networks

PT Coalindo Energy
Founded to facilitate the ICI partnership in 2006 Working closely with Indonesian government, regulators and ICMA Conduct weekly pannel-based assessment

An ideal basket
ICI is a basket index derived through the following formula

ICI Argus index Coalindo index 2

Argus index
Assessment based on deals, bids and offers plus analysis Reflects observation of the market

Coalindo index
Panel-based calculation Reflects views of desired prices by players

50:50 average

ICI

Argus observes the market

Argus indices are assessments based on Market survey for deals, bids and offers
Analysis with informed market intelligence Assessments are provided with explanation in Argus Coal Daily International

Argus analysts discuss with around 30 players on a weekly basis A proven method that is also applied to API

Argus Coal Daily International

Coalindo reflects players' views

Coalindo panels submit their views in the form of prices
Number of coalindo's panels as of Feb 2012 ICI-1 ICI-2 ICI-3 ICI-4 ICI-5 6,500Kcal/kg GAR 5,800kcal/kg GAR 5,000kcal/kg GAR 4,200kcal/kg GAR 3,400kcal/kg GAR 25 panels 31 panels 32 panels 30 panels 21 panels

Panels are selected to make balance of buyers, sellers and traders Top and bottom 10% outlier submissions are removed Submissions of 20pc higher or lower than last week are removed Consistent outliers are approached and replaced if necessary Selection of panels are reviewed every six month (Jan-Jun/Jul-Dec)

ICI is delivered as numerical data

ICI is a pure price data series, and delivered through web service or optional delivery tools such as GlobalView All 5 indices are updated every Friday

Argus Web/Link

GlobalView

Who use ICI and how they use it

ICI meets need for Indonesian coal index

August 2006--- ICI was launched to address
Growing impact of Indonesian coal internationally Critical requirement for Indonesian coal price index that is assessed directly, independently, and transparently Drew strong attention from government and ICMA, as well as from the marekt
Steam coal net exports by key producing countries (mn t) 700 600 500 400 300 200 100 0 Source: IEA 87.8 2003 198.0 2008 231.4 2009 284.6 2010 Estimated South Africa Colombia Russia Australia Indonesia

ICI is used across sectors

Trading and analysis reference
PLN Perseros buying price Domestic Market Obligation (DMO) to producers International trade to SE Asia, India and NE Asia, both on spot and term

Regulation
Annual production asset planning to Directorate of Mines and Minerals Driving component of monthly HBA (ICPR), tax and royalties

Others
Financial applications (project valuation and feasibility) Audit and internal reporting Basis for development of derivatives and OTC market Future exchanges interest for longer term pricing indicators

ICI and HBA(ICPR)

HBA(ICPR) is NOT ICI

HBA(ICPR) is a royalty collecting tool NOT an index that show where the market is today There are as many HBAs as grades of coal HBAs are calculated monthly

HBA stands for Harga Batubara Acuan

What is HBA (ICPR)

Devised and administered January 2009 by the Directorate General of Mineral and Coal, Ministry of Energy and Mineral Resources of Republic of Indonesia HBA(ICPR) is an average of
ICI-1 Platts Indonesian quote Energy Publishings Newcastle Export Index Globalcoals Newcastle index

HBA(ICPR) is a minimum price set to derive royalties

CCOW royalty fee at 13.5% KP/IUP royalty fee at 3-7%

ICI vs HBA

ICI-1 vs HBA

HBA analysis

ICI summary

ICI is a critical tool

Growth of Indonesian Coal exports from 80 million tons in 2004 to 300 million tons in 2011
Price flexibility Growing reliability Regional competition

Pricing Indonesian coal as an autonomous source

Transparency and reliability Projections and planning Investment strategy

ICI designed to reflect these changes and has become a critical tool for coal companies to peg their pricing and intelligence needs

Thank you
Feisal Sham, Vice President, Sales and Marketing Asia Pacific Tel : +65 6496 9964 Mail : feisal.sham@argusmedia.com

Please also contact our Tokyo office at Tel : 03-3561-1805 Mail : argusjapan@argusmedia.com

Argus Media Limited

Offices in London, Singapore, Beijing, Tokyo, Dubai, Moscow, Washington, Houston, Astana, Kiev, Calgary Founded in 1970 Today over 70 publications and more than 350 employees Privately held by employees and family of the founder Five times winner of UK Investor in People award for staff training

Argus and coal

Coal correspondents in: Australia, Singapore, Beijing, Tokyo, Moscow, London, South Africa, Washington DC and Colombia Largest coal team of any price reporting agency Publishers of:
Argus/Coalindo Indonesian Coal Report Argus/McCloskey Coal Price Index Report (API 2,4,6) Argus Coal Daily International Argus Russian Coal Argus Coal Daily (US market)