Adaro Aluminum Smelter power station

Adaro Aluminum Smelter power station is a proposed 2,200-megawatt (MW) coal-fired power station in North Kalimantan, Indonesia.

Location

The map photo below shows the location of the PT Kalimantan Industrial Park Indonesia (KIPI) in North Kalimantan.

Loading map...

{"type":"ROADMAP","minzoom":false,"maxzoom":false,"types":["ROADMAP","SATELLITE","HYBRID","TERRAIN"],"mappingservice":"googlemaps3","width":"600px","height":"500px","centre":false,"title":"","label":"","icon":"","lines":[],"polygons":[],"circles":[],"rectangles":[],"copycoords":false,"static":false,"visitedicon":"","wmsoverlay":false,"zoom":6,"layers":[],"controls":["pan","zoom","type","scale","streetview","rotate"],"zoomstyle":"DEFAULT","typestyle":"DEFAULT","autoinfowindows":false,"resizable":false,"kmlrezoom":false,"poi":true,"cluster":false,"clustergridsize":60,"clustermaxzoom":20,"clusterzoomonclick":true,"clusteraveragecenter":true,"clusterminsize":2,"imageoverlays":[],"kml":[],"gkml":[],"searchmarkers":"","fullscreen":false,"scrollwheelzoom":false,"locations":[{"text":"","title":"","link":"","lat":2.528,"lon":117.858,"icon":""}]}

Background

Adaro and power

A May 2020 Adaro document noted “2,200 MW power plant in progress” as part of the action plan to “Continue to deepen integration and improve contribution from non-coal mining businesses.”

It also referenced three power stations related to Adaro Power, which together added up to approximately 2,260 MW of coal capacity:

• Makmur Sejahtera Wisesa (MSW), "Operator of 2x30MW mine-mouth power plant in S. Kalimantan" (see Tabalong Wisesa power station),
• Bhimasena Power (BPI), "Partner in 2x1000MW power generation project in Central Java" (see Central Java Power Project), and
• Tanjung Power Indonesia (TPI), "Partner in 2x100MW power plant project in S. Kalimantan" (see Tabalong power station).

In September 2022, company documents still listed those three projects, highlighting again that Adaro Power’s gross power generation capacity stood at 2,260 MW.

PT Adaro Minerals Indonesia Tbk

In a 2022 company overview of PT Adaro Minerals Indonesia Tbk (AMI), Adaro noted the company was established in 2007 and carries out integrated mining activities through its subsidiaries, which have one of the largest greenfields area in Central Kalimantan for metallurgical coal. The Company’s subsidiaries owned 5 Coal Contract Of Work (“CCoW”) located in East Kalimantan and Central Kalimantan with a total area up to 146,579 ha. The 5 CCoWs were in the operation and production operation development stages: Maruwai Coal was operating and selling metallurgical coal, Lahai Coal was conducting mining optimization, while Kalteng Coal, Sumber Barito Coal, and Juloi Coal were in the development phase. The overview provided a helpful map.

PT Kalimantan Industrial Park Indonesia (KIPI)

In late 2021, a consortium of local and foreign companies started developing Indonesia’s first so-called green industrial park in Tanah Kuning, Bulungan regency, North Kalimantan, “hoping to spur industrialization and integrate the country into the growing global supply chain for green products.” News noted the industrial park would draw power from soon-to-be operational hydropower and solar power plants.

Aluminum smelter & proposed coal

In October 2022, the Baise Aluminum Industry Association's website noted that Adaro was building an aluminum smelter with an annual capacity of 1.5 million tons. The project appeared to have started construction at the end of 2021, and was expected to be built in three phases: Phase I (500,000 tons/year) for operation by Q1 2025, Phase II (500,000 tons/year) for operation by Q4 2026, and Phase III (500,000 tons/year) by Q4 2029. The first and second phases were expected to use electricity from coal power, and the third phase from hydropower.

On February 5, 2023, other reporting confirmed that PT Adaro Energy Indonesia Tbk (ADRO) was planning to boost mining downstream through the construction of an aluminum smelter with a capacity of 500,000 tons per year in the PT Kalimantan Industrial Park Indonesia (KIPI) industrial area. The proposal would involve subsidiary PT Adaro Minerals Indonesia Tbk (ADMR). The total investment value, including a power plant, was projected to reach US$2 billion in the first phase. One source noted that the project was in the “detailed planning process.” ADRO was aiming to finalize the investment and start construction by the end of 2023 and it was estimated that the construction work would take two years.

On February 6, 2023, the Financial Times reported that Adaro was struggling to raise money from international banks to finance a landmark $2bn aluminum project (more below). Environmental groups were also accusing the company and its partner, South Korea’s Hyundai, of “greenwashing.”

The project was being marketed as a flagship green, renewable development for the south-east Asian economy, even though it appeared to involve building a 2.2 GW coal power plant. Adaro Minerals was planning to expand into aluminum and battery making for electric vehicles, but most of its revenue was still from coal.

Adaro reportedly signed a memorandum of understanding in November 2022 with Hyundai to supply the Korean automaker with aluminum, a deal the companies said would “accelerate” the transition to sustainable energy. Hyundai was reportedly planning to use aluminum from the smelter for electric vehicle production, describing it as “green and low-carbon” because it would be produced using hydroelectric power. However, according to the news, the smelter was only expected to use hydropower starting in 2029, while the planned partnership would give the South Korean company access to supply before then.

The first phase, which would reportedly involve construction of the smelter, a power plant, and a port, was estimated to cost about $2bn, according to data provider Refinitiv. Adaro was aiming to start commercial operations by the first quarter of 2025.

Adaro told the Financial Times that “[t]he main power source for the industrial park will be renewables. However, as it takes longer time to construct, transition to renewables will be powered by fossil fuel.” Hyundai said talks with Adaro were at an early stage and funding for the project had yet to be negotiated. It said Hyundai was interested in securing a stable supply of aluminum from the Indonesian company, but the MOU was not binding.

Financing

As noted above, the Financial Times reported in February 2023 that Indonesia’s Adaro was struggling to raise money from international banks to finance a landmark $2bn aluminum project: “Adaro Minerals said it planned to raise $1.1bn in bank loans for the smelter, being developed in partnership with Chinese investment group Legend Holdings. Global banks that have previously lent to the Adaro group, including Singapore’s DBS, told the Financial Times they were not involved in financing the smelter project. A person familiar with the situation said the UK’s Standard Chartered, which continues to work with Adaro, was also not participating. An executive at one global bank, speaking anonymously because of commercial sensitivities, said: ‘Adaro discussed financing with us, but we have pledged to stop funding coal-related businesses. [This project] would fall under that.’ DBS and other banks had already pledged to stop funding parent Adaro Energy as part of climate change commitments. Adaro has also approached European banks BNP Paribas, ING and Commerzbank for loans, according to two people with knowledge of the situation. The banks all declined to comment.”

Project Details

• Owner: PT Adaro Minerals Indonesia Tbk
• Parent company: Adaro
• Location: Tanah Kuning, Bulungan regency, North Kalimantan
• Coordinates: 2.528, 117.858 (approximate)
• Status: Announced
• Gross Capacity: 2,200 MW
• Type: Unknown
• Start date: 2025
• Coal Type:
• Coal Source:
• Source of financing:

Articles and resources

Related GEM.wiki articles

• Indonesia and coal