United Fiber System, a Singapore-based group of companies specialising in the forestry and pulp sphere, announced on Friday, 23 January 2015, that it had received approval-in-principle for conducting a reverse takeover deal with Indonesian coal mine owner PT Golden Energy Mines Tbk.
Controlled by Indonesia’s Sinar Mas Group via the PT Dian Swastatika Sentosa Tbk, a listed unit, it holds the coal assets of the Sinar Mas group. This backdoor listing will enable the Sinar Mas Group’s coal-mining assets to access to more funds. Another outcome of this will be a shift by United Fiber’s business away from the forestry and construction verticals to coal-mining.
However, in light of concerns about the industry’s performance and decline as countries shift away from coal-based energy sources, which are cheap but have high ecological and socioeconomic costs, this move may be somewhat questionable.
The rise of coal in the last 10 years, the most carbon-intensive of major fossil fuels, was driven by China, which gets 80 percent of its electricity from coal. The world’s largest energy user and CO2 emitter, as of H1 2014, China currently consumes almost 50 percent of global coal.
Having outstripped its own internal supplies reserves, China’s demand has driven massive investments in new coal mining in Australia, Indonesia, Mongolia, South Africa, Russia, and Kazakhstan. Shenhua Group, a Chinese state-owned enterprise is the world’s largest coal company, nearly double the U.S. giant Peabody Energy in size.
This move may be in preparation for further economic growth in Southeast Asia, as emerging markets like Myanmar, Philippines, Vietnam and Indonesia will need to fuel their growing infrastructures with affordable energy – and the prevailing assumption here may be that its coal.
With a deal valued at US$1.88 billion, United Fiber will swap 92.8 percent of its enlarged share capital with a 67 percent stake in Golden Energy.