Two of Indonesia's biggest miners are building power stations to reignite coal demand and counter a drop in global prices that has squeezed industry-wide profit margins to their slimmest in a decade and dulled the appeal of exports to top consumer China.
They are also banking on the dominant, government-owned utility's need to meet the projected 9.4 per cent annual growth in power demand over the next eight years, and the fact that a third of Indonesia's 250 million population is not linked to any grid.
"The coal business is cyclical. By moving into power, we balance our portfolio by adding a business with steady, predictable and good returns," said Adrian Lembong, a director at Adaro Power, a unit of Adaro Energy.
"We will become the primary coal supplier for more power projects in Indonesia and the region, ensuring more customers can accommodate our coal."
Indonesia is the world's largest exporter of thermal coal, used primarily for power generation, and China is its biggest customer. Exports, however, have diminished in value as benchmark prices fell by a third over the past 18 months and are now at their lowest in almost four years.