The Bakrie’s version of Robbing Peter to Pay Paul in IndoCoal Deals

2005fr
Direct Ownership

PT IndoCoal Kaltim Resources (IKTR) Jakarta, Indonesia
Special Purpose Company

2005
Ownership: 99,99%
Assets: IDR50m

PT IndoCoal Kalsel Resources (IKSR) Jakarta, Indonesia
Special Purpose Company

2005
Ownership: 99,99%
Assets: IDR50m

Indirect ownership

through Forerunner

IndoCoal Resources (Cayman) Limited (ICR) Cayman, UK
Coal Distributor

2005
Ownership: 100,00%
Assets: IDR4,522,049m


Forerunner International Pte. Ltd. (Forerunner)

On November 18, 2005, the Company established Forerunner in Singapore, wholly owned by the Company. On the same date, the Company transferred its 100% share in IndoCoal Resources (Cayman) Limited to Forerunner at nominal value of the shares (see Note 4d).

IndoCoal Resources (Cayman) Limited

On May 13, 2005, the Company established IndoCoal Resources (Cayman) Limited (ICR), company, domiciled in the Cayman Islands, and engaging in the business of selling coal (see Note 4a).

PT IndoCoal Kaltim Resources

PT IndoCoal Kaltim Resources (IKTR) was established based on Notarial Deed No. 44 dated May 13, 2005, which has been approved by the Minister of Law and Human Rights of the Republic Indonesia by virtue of decision No C-13305.HT.01.01.TH.2005. IKTR is located in Jakarta and engages in the business of coal mining.

PT IndoCoal Kalsel Resources

PT IndoCoal Kalsel Resources (IKSR) was established based on Notarial Deed No. 43 dated May 13, 2005, which has been approved by the Minister of Law and Human Rights of the Republic Indonesia by virtue of decision No. C-13303.HT.01.01.TH.2005. IKSR is located in Jakarta and engaging in the business of coal mining.

2005, Balance of Long-term loans of BUMI from
IndoCoal Export (Cayman) Ltd. IDR4,263,382m

IndoCoal Exports (Cayman) Ltd.

On July 6, 2005, IndoCoal Resources (Cayman) Ltd., (ICR), a Subsidiary, has entered into a Notes Purchase Agreement with IndoCoal Exports (Cayman) Ltd., (ICE) that covers a period of seven (7) years. Based on the agreement, ICR received a loan amounting to US$ 563,400,000. The loan was used to repay the syndication loan II and III, PT Bank Mandiri loan I and III and used for working capital of the Company and Subsidiaries (see Note 35a).

This loan bears interest at 7.134% and will mature on July 6, 2012.

The loan was guaranteed by receivables from sale of coal of KPC and Arutmin based on the originator receivables sale agreements and long-term supply agreement (see Note 35a).


Syndication of Bank and Financial Institutions Loan III

On October 4, 2004, KPC, the Company, and Credit Suisse Singapore (“Arrangers”) entered into a loan facility agreement with a syndication of banks and financial institutions. Acting as facility and security agent is Credit Suisse Ltd., Singapore Branch.

The purposes of this loan is to refinance in full Syndication of Banks and Financial Institutions Loan I.

This loan is secured by fiduciary rights over KPC’s receivables, inventory, insurance claims, and the escrow accounts of KPC.

Total loan facility amounted to US$ 385,000,000, with LIBOR plus 4% interest rate per annum.

The loan principal is repayable in ten (10) equal installments of US$ 38,500,000 each, which must be paid quarterly, commencing three (3) months from the date the loan agreement was signed.

In 2005, this loan facility has been settled by a loan obtained from IndoCoal Export (Cayman) Ltd., (see Notes 20a and 35a)


Syndication of Bank and Financial Institutions Loan II

On March 26, 2004, Arutmin, Credit Suisse First Boston Ltd., and UFJ Bank Ltd., entered into a loan facility agreement with a syndication of banks and financial institutions, which consists of UFJ Bank Ltd., Singapore Branch (”Facility A Lender”), Credit Suisse First Boston Ltd., (”Facility B Lender”) and Credit Suisse First Boston Ltd., (”Facility C Lender”). Acting as facility agent is UFJ Bank Ltd., and as security agents are PT Bank Mandiri (Persero) Tbk and Credit Suisse First Boston Ltd.

The purposes of this loan are as follows:

  • Refinance in full the loan from CSFB amounting to US$ 58,000,000.
  • Repayment to contractor (PT Cipta Kridatama Mining) amounting to US$ 32,000,000.
  • Use to finance Arutmin’s general purposes.

This loan is secured by fiduciary rights over Arutmin’s insurance claims, receivables, inventory (including equipment, machinery, transportation equipment, other moving items, spare-parts and accessories) and the escrow accounts of Arutmin.

Total loan facility amounted to US$ 95,000,000.

The details of loan as of December 31, 2004 were as follows:

Bank and Financial Institution / Loan Facility / Total (US$) / Interest Rate
UFJ Bank Ltd, A 40,625,000 LIBOR + 5% p,a
Credit Suisse First Boston Ltd, B 14,062,500 LIBOR + 4% p,a
Credit Suisse First Boston Ltd, C 22,500,000 LIBOR + 4% p,a
Total 77,187,500

Arutmin must repay the Loan A facility in sixteen (16) equal quarterly installments amounting to US$ 3,125,000, starting on June 23, 2004 and ending on March 23, 2008.

Arutmin must repay the Loan B facility in eight (8) equal quarterly installments amounting to US$ 2,812,500, starting on June 23, 2004 and ending on March 23, 2006.

Arutmin must repay the Loan C facility in eight (8) equal quarterly installments amounting to US$ 2,812,500, starting on June 30, 2006 and ending on March 31, 2007.

In 2005, all the loan facility was settled by a loan obtained from IndoCoal Export (Cayman) Ltd., (see Notes 20a and 35a).


PT Bank Mandiri (Persero) Tbk – Loans I

The loan from PT Bank Mandiri (Persero) Tbk is a bridging loan amounting to US$ 103,906,045 obtained by the Company on October 19, 2001, with a credit limit amounting to US$ 103,950,000. As stipulated in the agreement, the Company shall convert the loan, so that the non-revolving bridge loan shall be converted into ten (10) semi-annual installments for five (5) years and shall bear interest at a floating rate referenced to PT Bank Mandiri (Persero) Tbk prime rate. In 2004 the annual interest rate was 9.5% per annum. The last installment, amounting to US$ 13,906,045, will be due on October 17, 2006.

On December 12, 2001, as requested by PT Bank Mandiri (Persero) Tbk and based on loan novation agreement, this loan was transferred to Arutmin and secured by fiduciary rights over all of Arutmin assets, inventory, receivables and all of the Arutmin shares owned by the Company, plus corporate guarantee provided by Long Haul Ltd., a related party.

In 2005, this loan facility has been paid after obtaining a loan from IndoCoal Export (Cayman) Ltd., (see Notes 20a and 35a).


PT Bank Mandiri (Persero) Tbk – Loan II

On July 25, 2003, Arutmin entered into a loan agreement with PT Bank Mandiri (Persero) Tbk (Bank Mandiri) with the total limit amounting to US$ 40,000,000. The loan facility represents a bridging loan for the purpose of refinancing the credit facility from PT Bank Danamon Tbk, with an interest rate at 10% p.a and maturing in six (6) months.

The collateral for this loan were fiduciary rights over the Company’s shares in Arutrnin, Arutmin’s bank accounts, receivable from all parties, inventory, insurance claims, which amounts are cross-collateral for outstanding loan from PT Bank Mandiri (Persero) Tbk and other outstanding loans.

On March 26, 2004, Arutmin received the approval to extend this loan facility from Bank Mandiri. The first installment of this extension will be due on July 30, 2004 and the final installment, amounting to US$ 2,500,000, will be due on March 16, 2008.

In 2005, this loan facility has been paid by a loan obtained from IndoCoal Export (Cayman) Ltd., (see Notes 20a and 35a)


Financial Agreements

On June 22, 2005, IndoCoal Exports (Cayman) Ltd., (ICE) a limited liability company established under the laws of the Cayman Islands (“The Issuer), issued the US$ 600,000,000 Series 2005-1 (the “Series 2005-1 Notes”) that will mature on July 6, 2012 (the “Expected Final Payment Date”) and will bear interest at 7.134% per annum. Principal and interest will be paid on each Monthly Payment Date, for each full month prior to July 28, 2008 in an amount equal to US$ 12,250,988 and thereafter in an amount equal to US$ 6,063,308. Principal and interest will be paid in monthly installments in the amounts set forth below:

Principal and Interest (US$)/Interest (US$) Payment Schedule

8.943.221 July 28, 2005

Every month commencing August 28, 2005

12.250.988
to June 28, 2008

7.733.981 July 28, 2008

6.063.308
Every month commencing August 28, 2008 to June 28, 2012

1.637.093
July 6, 2012

In connection with the issuance of the above notes, KPC and Arutmin (“the Seller Parties”), IndoCoal resources (Cayman) Limited (“the Originator”) and the Bank of New York (the Indenture Trustee and Security Trustee) entered into the following agreements:

1. Originator Receivable Sale Agreements

This agreement provides that the Originator will purchase from the Seller Parties, existing and future receivables and related assets generated from sales of coal by the Seller Parties. The agreements preclude the Seller Parties from amending or modifying the term and/or conditions of any contract pertaining to the Receivable Assets, making an offer to sell any of the Transferred receivables or Related Property, (or any interest therein) to any other Party, creating or assuming any Lien upon any of the Receivable Assets, merging with or into any party, taking any action that would impair in any respect the rights and interests of the Parties, opening any account into which Collection in respect of receivables are deposited other than the Collection Accounts, paying or declaring any Restricted Payments more than once each quarter, changing credit and collection policy, engaging in any business other than mining sales, and so long as any Series 2005-1 Notes are outstanding, creating, assuming or otherwise incuring indebtedness other than as stated in the agreement.

2. Long-term Supply Agreement

This agreement was entered into on July 6, 2005, in which among other things, it provides that the Seller Parties will sell coal to the Originator at the purchase price of the coal of US$ 34.30 per tonne. This agreement also provides that the Originator will advance to the Seller Parties an amount of US$ 173,230,197 for Arutmin and US$ 426,769,803 for KPC at the closing date.

This advance amount shall be decreased each month by the aggregate Receivables Purchases Price payable by the Originator for Receivables Assets purchased pursuant to the Arutmin Originator Receivables Sales Agreement/KPC, and shall be increased by payments made by the Originator to Arutmin/KPC under this Agreement and the Interest Amount payable by Arutmin/KPC to the Originator on such Monthly Payment Date.

During the term of this agreement, the obligations of Arutmin/KPC shall be absolute and unconditional and shall not be impaired, modified or otherwise affected in any manner by the failure of either Arutmin/KPC or the Originator to perform under and pursuant to the terms and conditions or any other transaction entered into between them or the acceleration of indebtedness or commencement of enforcement proceedings under the documents affecting any such transactions.

Based on the agreement Arutmin/KPC are required to:
a. Maintain, renew and keep in full force and effect their legal existence and material rights, franchises, licenses, concessions, third party permits and other privileges in the jurisdictions as necessary or reasonably desirable;
b. Maintain in full force and effect the Arutmin/KPC Coal Contract of Work and all other contracts with marketing agents and production contractors on substantially the same terms as are in effect on the Closing Date;
c. Maintain their books, account and records in accordance with Applicable Accounting Principles
d. Keep all material property and third party permits necessary for the conduct of their business in good working order and condition.

3. Cash and Accounts Management Agreement (CAMA)

These parties and Foo Kon Grant Thornton, Indo Kaltim, Indocoal Kalsel, The Bank of New York and Standard Chartered Bank entered into a CAMA. This agreement provides that the parties agree to implement certain payment arrangements, including certain payment arrangements in relation to the amounts owing to the Principal Contractors and the Principal Marketing Agents under or pursuant to the Assigned Documents and described in the contract. Payments to production contractor are based on detailed invoices and priority payments are subject to limitations specified in the contract.

4. Deed of Transfers of CCOWs

In connection with the above Long-term Supply Agreement, each of KPC and Arutmin entered into a Deed of Transfer with each of IndoCoal Kaltim and IndoCoal Kalsel pursuant to which the transfer of the Coal Contracts of Work will be completed automatically upon the occurrence of certain bankruptcy events (including a bankruptcy of either KPC and Arutmin or Bumi Resources) or the declaration (or deemed declararion) of a Default Payment of the Notes (including the Series 2005-1 Notes), to allow IndoCoal Kaltim and IndoCoal Kalsel to continue to supply coal to IndoCoal Resources for sale to Obligors. Contracts with major production contractors and marketing agents will be assigned by KCP and Arutmin to the Security Trustee to permit their assignment to IndoCoal Kaltim and IndoCoal Kalsel in the event the transfer of the CCOW is completed.


Coal Agreement (CCOW)

On November 2, 1981 and April 8 1982, KPC and Arutmin (Subsidiaries) entered into CCOW with PT Bukit Asam (PT BA) whereby Subsidiaries have been appointed as the sole contractor for coal operations for thirty (30) years with respect to specific mining areas in the eastern and southeastern part of Kalimantan, initially covering 1,260,000 hectares and 790,900 hectares. The CCOW gives right to Subsidiaries to take 86.5% of the coal produced from the final production process and the balance of 13.5% shall be retained by PT BA. As consideration for such CCOW, Subsidiaries, among other conditions, finance the acquisition costs of materials, spare-parts, fixed assets required in the contract of work. All fixed assets and spare-parts inventories, as further provided in the CCOW, shall become the property of PT BA upon arrival at the Indonesian port of import or when purchased locally.

Under the CCOW, Subsidiaries continue to have the right to use such fixed assets and inventories for coal operations as long as the Subsidiaries require, but they are responsible for the maintenance thereof. Accordingly, these costs are reflected as assets in Subsidiaries financial statements.

Subsidiaries are fully responsible for financing the exploration and subsequent operation of the mining area, the latter being dependent on the discovery of adequate coal deposits. Subsidiaries are also obligated to pay the rent on the mining area to the Indonesian Government through PT BA.

As further stipulated in the CCOW, in the event that any part of the area to be explored does not contain any commercially viable coal deposits, Subsidiaries may relinquish such area to PT BA. Accordingly, since 1999, Subsidiaries have relinquished 1,889,787 hectares or 92% of the mining area and as of December 31, 2005 the mining area is 161,113 hectares.

Effective July 1, 1997, all rights and obligations of PT BA under the CCOW were transferred to the Government of Indonesia represented by the Ministry of Mines and Energy, based on contract amendment dated June 27, 1997 executed by Subsidiaries and PT BA and approved by the Ministry of Mines and Energy on October 7, 1997.


Joint Coal Sales Agreement

On September 30, 1991 and November 1, 1999 Arutmin and KPC, entered into a Joint Coal Sales Agreement (CSA) with PT BA whereby both parties agreed to participate jointly in supplying coal produced, based on the CCOW discussed above, for a five (5) year period until January 1, 1997, which was subsequently extended by both parties as agreed to in writing. As stipulated in the CSA, the amount of each shipment deemed to be from each party shall be determined based on a certain formula set forth in the CSA. The CSA gives right to Subsidiaries to take 86.5% of coal sales proceeds, while the balance of 13.5% shall be for the account of and owned by PT BA.


2006fr
Direct Ownership

PT IndoCoal Kaltim Resources (IKTR) Jakarta, Indonesia
Special Purpose Company

2005
Ownership: 99,99%
Assets: $5091

2006
Ownership: 99,99%
Assets: $8217

PT IndoCoal Kalsel Resources (IKSR) Jakarta, Indonesia
Special Purpose Company

2005
Ownership: 99,99%
Assets: $5091

2006
Ownership: 99,99%
Assets: $8222

Indirect ownership

through Forerunner

IndoCoal Resources (Cayman) Limited (ICR) Cayman, UK
Coal Distributor

2005
Ownership: 100,00%
Assets: $460,025,400

2006
Ownership: 100,00%
Assets: $889,483,441


Forerunner International Pte. Ltd. (Forerunner)

On November 18, 2005, the Company established Forerunner in Singapore, a wholly-owned subsidiary of the Company. On the same date, the Company transferred its 100% shareholding in IndoCoal Resources (Cayman) Limited (ICR) to Forerunner at the nominal value of the shares (see Note 4d).

IndoCoal Resources (Cayman) Limited

On May 13, 2005, the Company established ICR, a company domiciled in the Cayman Islands and engaged in the business of selling coal. The ICR shares were 100% indirectly owned by the Company through Forerunner (see Note 4a).

PT IndoCoal Kaltim Resources

PT IndoCoal Kaltim Resources (IKTR) was established based on Notarial Deed No. 44 dated May 13, 2005, and this deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia by virtue of his decision No. C-13305.HT.01.01.TH.2005. IKTR is located in Jakarta and engages in the business of coal mining. IKTR shares are 99.99% owned by the Company.

PT IndoCoal Kalsel Resources

PT IndoCoal Kalsel Resources (IKSR) was established based on Notarial Deed No. 43 dated May 13, 2005, and this deed was approved by the Minister of Law and Human Rights of the Republic Indonesia by virtue of his decision No. C-13303.HT.01.01.TH.2005. IKSR is located in Jakarta and engaging in the business of coal mining. IKSR shares are 99.99% owned by the Company.

As of December 31, 2006 and 2005, KPC and Arutmin’s trade receivables arising from the sale of coal to customers other than ICR have been sold to IndoCoal Exports (Cayman) Limited (the “Issuer”) under the Issuer Receivables Sale Agreement and accordingly, are not assets of KPC and Arutmin. KPC and Arutmin, however, will remain responsible for the exercise of all rights, powers and discretion hereunder (see Note 37a).

Balance of Long-term loans of BUMI from IndoCoal Export (Cayman) Ltd.
2005, IDR4,263,382m
2005: $433.711.338
2006: $647.909.571

IndoCoal Export (Cayman) Ltd.

On July 6, 2005, KPC, and Arutmin (the “Seller Parties”), ICR (the “Originator”), IndoCoal Exports (Cayman) Limited (the “Issuer”), PT IndoCoal Kalsel Resources (“Indo Kalsel”) and PT IndoCoal Kaltim Resources (“Indo Kaltim” together with Indo Kalsel, the “Indo SPVs”), the Bank of New York (the “Trustee”), and Foo Kon Tan Grant Thornton (the “Transaction Administrator”) entered into an Indenture and a Series 2005-1 Indenture Supplement under which the Issuer issued and sold Series 2005-1 Notes in the aggregate principal amount of US$ 600 million. The Series 2005-1 Notes bear interest at the rate of 7.134% per annum and mature on July 6, 2012. The Issuer used the proceeds from the sale of the Series 2005-1 Notes to purchase receivable assets from the Originator by paying the Originator Prepayment Amount of US$ 600 million to the Originator under the Issuer Receivable Sale Agreement between the Issuer and the Originator. The Originator used US$ 600 million of the Originator Prepayment Amount from the Issuer to make an advance payment to the Seller Parties (the “Prepayment Amount”) for existing and future Receivable Assets under the Originator Receivables Sale Agreements between the Originator and the Seller Parties and for future coal deliveries by the Seller Parties under the Long-term Supply Agreements entered into between the Seller Parties and the Originator (see Note 37b).

On April 28, 2006, the Seller Parties, the Originator, the Indo SPV’s , the Issuer and the Indenture Trustee executed the Series 2006-1 Indenture Supplement under which the Issuer issued Series 2006-1 Notes in the aggregate amount of US$ 800 million. The proceeds from the Series 2006-1 Notes were used to redeem the Series 2005-1 Notes and to repay a bridge loan granted by Credit Suisse to Bumi. The Series 2006-1 Notes mature on July 28, 2006, however, on July 28, 2006, it was extended until September 28, 2006 and subsequently redeemed by the issuance of Series 2006-2 Notes.

On October 3, 2006, the Seller Parties, the Originator, the Issuer, the Indo SPV’s, the Trustee, and the Transaction Administrator, executed Indenture Supplement, the IndoCoal Series 2006-2 Notes under which the Issuer issued US$ 600 million aggregate principal amount of floating rate Series 2006-2 Class A-1 Notes due 2011; and US$ 300 million aggregate principal amount of floating rate Series 2006-2 Class A-2 Notes due 2012.

The outstanding balance of each class of the Series 2006-2 Notes bears interest at an annual rate equal to LIBOR plus relevant margin. Interest accruing on the Series 2006-2 Notes during each interest period will be payable on the related Monthly Payment Date, Early Amortization Payment Date or Expected Final Payment Date. The Monthly Payment Dates will be the 28th day of each calendar month, the first of which is on October 28, 2006 (see Note 37b).


Coal Receivables Securitization Transaction

On July 6, 2005, KPC and Arutmin (the Seller Parties), and ICR, a wholly-owned subsidiary of the Company (the Originator), entered into a series of transactions with IndoCoal Exports (Cayman) Limited, an exempted company with limited liability established under the laws of the Cayman Island (the Issuer), under which
(i) the Seller Parties sold all of their then existing and future coal sale receivables to Originator and agreed to sell all of their future coal produced to the Originator to the extent required by the Originator,
(ii) the Originator agreed to sell its existing and future coal sale receivables generated by itself and the Seller Parties to the Issuer and
(iii) the Issuer issued US$ 600 million in 7.134% Series 2005-1 Notes (referred to below) under an Indenture and Series 2005-1 Indenture Supplement between the transaction parties and used the proceeds to purchase those receivables from the Originator (collectively, the Securitization Transaction).
The Securitization Transaction and the material transaction documents related to the Securitization Transaction (the Securitization Transaction Documents) are explained below.

On July 6, 2005, the Issuer issued the US$ 600 million Series 2005-1 that mature on July 6, 2012 and bear interest at 7.134% per annum. The Issuer is a special purpose company unaffiliated with the Subsidiaries whose principal activities are limited to
(i) the issuance of Notes (including the Series 2005-1 Notes) under the Indenture and Series 2005-1 Indenture Supplement,
(ii) the application of the proceeds of those Notes, together with other funds available to the Issuer from time to time (such as collections on Receivables purchased from the Originator and the Seller Parties),
(iii) to service its outstanding debt under the Notes and,
(iv) pursuant to the Issuer Receivables Sale Agreement, to acquire the Receivables generated by the Originator, the Seller Parties and, under certain circumstances, the Indo SPVs through sales of coal.

In connection with the issuance of the Series 2005-1 Notes, the Seller Parties, the Originator and the Bank of New York (the Indenture Trustee and Security Trustee) entered into the following agreements:

1. Issuer Receivables Sale Agreement (IRSA)

The Issuer and the Originator entered into the IRSA that provides for the Issuer to purchase from the Seller Parties the receivable assets purchased by the Originator from the Seller Parties. Under the Issuer Receivables Sale Agreement, the Issuer agreed to advance US$ 600 million to the Originator as a prepayment amount for those receivables (the Originator Prepayment Amount) on the closing date. The Originator used the proceeds of the Originator Prepayment amount from the Issuer to advance amounts to the Seller Parties under the Originator Receivables Sale Agreements referred to below and the Long-term Supply Agreements referred to below.

2. Originator Receivables Sale Agreements (ORSA)

The Originator and each of the Seller Parties entered into an Originator Receivables Sale Agreement that provides for the Originator to purchase from that Seller Party its existing and future receivables and related assets generated from sales of coal by that Seller Party

The agreements preclude the Seller Parties from amending or modifying the terms and/or conditions of any contract pertaining to the Receivables Assets, except as permitted by the Seller Parties’ credit and collection policies, making an offer to sell any of the Transferred Receivables or Related Property to any other party, creating or assuming any lien upon any of the Receivable Assets, merging with or into any party, taking any action that would impair in any respect the rights and interests of the parties to the Originator Receivables Sale Agreements, opening any account into which collections in respect of receivables are deposited other than the Collection Accounts, paying or declaring any Restricted Payments more than once each quarter, changing their credit and collection policies, engaging in any business other than the mining, selling and shipping of coal, and as long as any Series 2005-1 Notes are outstanding, creating, assuming or otherwise incurring indebtedness, other than as permitted under the Originator Receivables Sale Agreements.

3. Long-term Supply Agreements (LTSA)

The Long-term Supply Agreements were entered into by the Seller Parties with the Originator on July 6, 2005, which among other things, provide that the Seller Parties will sell coal to the Originator at the purchase price of US$ 34.30 per tonne based on a calorific value of 6,322 kcal/kg (as adjusted for variations in the calorific values of the coal the Originator purchases from the KCP/Arutmin under the Long-term Supply Agreement) (the Fixed Forward Price).

The Long-term Supply Agreements entered into by the Seller Parties also provided that the Originator would advance to the Subsidiaries the Prepayment Amount of US$ 600 million on the closing date.

The Prepayment Amount is required to be decreased each month by the aggregate Receivables Purchase Price (as defined in the Securitization Transaction Documents) payable by the Originator for Receivables Assets purchased under the ORSA to which the Seller Parties are parties and increased by payments made by the Originator to the Seller Parties under the Long-term Supply Agreement and ORSA in the manner provided under the cash waterfall set out in the Indenture and interest amounts payable by the Seller Parties to the Originator on the relevant Monthly Payment Date.

The Seller Parties are required to pay to the Originator an amount of interest on the Prepayment Amount that is equal to the amount of interest the Issuer is required to pay to holders of the Series 2005-1 Notes under the Indenture and the Series 2005-1 Indenture Supplement on the relevant Monthly Payment Date.

During the term of these agreements, the obligations of the Seller Parties are absolute and unconditional and may not be impaired, modified or otherwise affected in any manner by the failure of either the Seller Parties or the Originator to perform under and pursuant to the term and conditions of any other transaction entered into between them or the acceleration of indebtedness or commencement of enforcement proceedings under the documents affecting any transaction.

4. Cash and Accounts Management Agreement (CAMA)

On July 6, 2005, the Issuer, the Originator, the Seller Parties, the Transaction Administrator, the Indo SPVs, the Trustee and Standard Chartered Bank entered into the CAMA. Under this agreement, the parties agreed to implement certain payment arrangements, including certain payment arrangements in relation to the amounts owing to certain principal production contractors and marketing agents. Payments made to production contractors are based on detailed invoices and priority payments are subject to limitations specified in the contract.

5. Deed of Transfer of CCOW/Coal Agreement

In connection with the LTSA, KPC and Arutmin entered into a Deed of Transfer with Indo Kaltim and Arutmin entered into a Deed of Transfer with Indo Kalsel pursuant to which the transfer of the KPC’s CCOW and Arutmin’s Coal Contracts of Work will be completed automatically upon the occurrence of certain bankruptcy events (including a bankruptcy of either KPC, Arutmin or the Company) or the declaration (or deemed declaration) of a Default Payment (as defined in the Securitization Transaction Documents) of the notes issued under the Indenture (including the Series 2005-1 Notes), to allow Indo Kalsel and Indo Kaltim to continue to supply coal to the Originator for sale to coal customers. Contracts with the principal production contractors and marketing agents were assigned by the Seller Parties to the Security Trustee to permit assignment of those contracts to Indo Kalsel and Indo Kaltim in the event the transfer of the CCOW/Coal Agreement is completed

Under the Deed of Transfer, Arutmin/KPC are required to:
a. Maintain, renew and keep in full force and effect their legal existence and right, franchises, licenses, concessions, third-party permits and other privileges in the jurisdiction as necessary or reasonably desirable;
b. Maintain in full force and effect the Seller Parties’ CCOW and all other contracts with marketing agents and production contractors on substantially the same terms as are in effect on the Closing Date;
c. Maintain their books, account and records in accordance with Applicable Accounting Principles (as defined in the Securitization Transaction Documents); and
d. Keep all material property and third party permits necessary for the conduct of their business in good working order and condition.

In connection with the Deed of Transfer of the CCOW/Coal Agreement from Seller Parties to Indo Coal Kalsel, Indo Coal Kaltim and Indo Coal Kalsel and Originator entered into CCOW under which Indo Kaltim and Indo Kalsel agreed to supply coal to Originator at the price as stated in the agreement.

In connection with the issuance of the Series 2006-1 and Series 2006-2 Notes, the Issuer, the Originator and the Bank of New York (the Indenture Trustee and Security Trustee) has modified the above agreements by issuing the “Amended and Restated” agreements to conform with Series 2006-1 Notes and the “First Amendment to the Amended and Restated” agreements to conform with Series 2006-2 Notes (see Note 20a).

Pursuant to the amended and restated agreements, no modification or amendment shall be effective with respect to these Agreements unless each of the parties hereto consented or agreed to such amendment or modification.


IndoCoal Exports (Cayman) Ltd.

1. Series 2006-2 Notes

On October 3, 2006, KPC and Arutmin (the Seller Parties), ICR (the Originator), IndoCoal Exports (Cayman) Limited (the Issuer), PT Indocoal Kalsel Resources (Indo Kalsel) and PT Indocoal Kaltim Resources (Indo Kaltim and, together with Indo Kalsel, the Indo SPVs), the Bank of New York (the Trustee), and Foo Kon Tan Grant Thornton (the Transaction Administrator), executed Indenture Supplement, the IndoCoal Series 2006-2 Notes under which the Issuer issued:
(i) US$ 600 million aggregate principal amount of floating rate Series 2006-2 Class A-1 Notes due 2011; and
(ii) US$ 300 million aggregate principal amount of floating rate Series 2006-2 Class A-2 Notes due 2012.

The proceeds raised upon the issue of the Series 2006-2 Notes were applied as follows:
(a) Redemption of the Series 2006-1 Notes amounting to US$ 800 million;
(b) Partial funding of Series 2006 Reserve Account in the amount of US$ 25.5 million;
(c) To provide for KPC and Arutmin’s working capital amounting to US$ 30 million; and
(d) The remaining amounts to pay all fees and reasonable costs and expenses incurred in connection with this loan.

The outstanding balance of each class of the Series 2006-2 Notes bears interest at an annual rate equal to LIBOR plus relevant margin. Interest accruing on the Series 2006-2 Notes during each interest period will be payable on the related Monthly Payment Date, Early Amortization Payment Date or Expected Final Payment Date. The Monthly Payment Dates will be the 28th day of each calendar month, the first of which is on October 28, 2006.

The covenants, representations and warranties, conditions subsequent agreed to under the transaction documents entered into in connection with the issuance of the Series 2006-2 Notes (the Series 2006-2 Indenture Supplement) are similar to the representations and warranties, conditions subsequent and covenants under the Securitization Transaction Documents, including the early amortization events and trigger events with such changes as may be mutually agreed between the Company, the Seller Parties, the Indo SPVs, the Originator and the Arranger (see Note 21a).

The security granted in connection with the Series 2006-2 Notes is similar to the security that was granted in connection with the Series 2005-1 Notes with the Company granting a pledge over 99.99% of Arutmin’s shares and 99.98% of the Indo SPV’s shares and Forerunner granting a charge over 100% of the Originator’s shares. In connection with the Series 2006-2 Notes, KPC’s shareholders granted pledges over 92% of KPC’s shares as security.


2. Series 2006-1 Notes

On April 28, 2006, the Seller Parties, the Originator, the Issuer, the Indo SPV’s, and the Indenture Trustee executed the Series 2006-1 Indenture Supplement under which the Issuer issued Series 2006-1 Notes in the aggregate principal amount of US$ 800 million. The proceeds from the Series 2006-1 Notes were used to redeem the Series 2005-1 Notes and to repay a bridging loan granted by Credit Suisse to the Company. The Series 2006-1 Notes mature on July 28, 2006 (the Expected Final Payment Date) and bear interest at a rate of 7% per annum, payable on each Monthly Payment Date.

On July 28, 2006, in reference to Series 2006-1 dated April 28, 2006, all parties agreed to amend some provisions in the Series 2006-1 Indenture Supplement, major amendments being as follows:
1. The expected final payment date was extended to September 28, 2006, instead of July 28, 2006.
2. The interest rate was amended by replacing the words, “a rate per annum equal to 7.0%: with the words “ending on or prior to July 28, 2006, a rate per annum equal to 7.0%, and for each interest period thereafter, a rate per annum equal to 7.5%.”
3. The additional extension fee was US$ 2 million.

On October 3, 2006, part of the proceeds from Series 2006-2 Notes was used to pay the redemption price of Series 2006-1 Notes and the related costs attached to it (see Note 21a).


3. Series 2005-1 Notes

On July 6, 2005, the Seller Parties, the Originator, the Issuer, the Indo SPVs, the Trustee, and the Transaction Administrator entered into an Indenture and a Series 2005-1 Indenture Supplement under which the Issuer issued and sold Series 2005-1 Notes in the aggregate principal amount of US$ 600 million. The Series 2005-1 Notes bear interest at the rate of 7.134% per annum and mature on July 6, 2012. The Issuer used the proceeds from the sale of the Series 2005-1 Notes to purchase receivable assets from the Originator by paying the Originator Prepayment Amount of US$ 600 million to the Originator under the Issuer Receivables Sale Agreement between the Issuer and the Originator. The Originator used US$ 173.3 million of the Originator Prepayment Amount from the Issuer to make an advance payment to the Seller Parties (the “Prepayment Amount”) for existing and future Receivables Assets under the Originator Receivables Sale Agreement between it and the Seller Parties and for future coal deliveries by the Seller Parties under the Long-term Supply Agreement entered into between the Seller Parties and the Originator.

The Seller Parties are required to pay to the Originator an amount of interest on the Prepayment Amount that is equal to the amount of interest the Issuer is required to pay to holders of the Series 2005-1 Notes under the Indenture and the Series 2005-1 Indentures Supplement on the relevant monthly payment date.

The Seller Parties used the proceeds of the Prepayment Amount as follows:
a. approximately US$ 438.7 million to repay all outstanding amounts under the KPC 2004 Facility Agreement, Arutmin 2001 Mandiri Loan, Arutmin 2004 Mandiri Loan and Arutmin 2004 Facility Agreement;
b. US$ 69.5 million to provide advances to the Company;
c. approximately US$ 36.6 million to fund required reserve amounts under the Series 2005-1Indenture Supplement; and
d. the remaining amounts to pay certain expenses incurred in connection with the Securitization Transaction and to provide for the Seller Parties’ working capital.

On April 28, 2006, part of the proceeds from Series 2006-1 Notes was used to pay the early redemption price of Series 2005-1 Notes and the related costs attached to it (see Note 21a).


Marketing Agreement

1. On October 22, 2001, Arutmin entered into a marketing agreement with BHP Billiton Marketing AG (BHPB) under which BHBP agreed to act as marketing agent for the sale of coal outside Indonesia pursuant to the JCSA. Arutmin paid a commission of 4 % of the F.O.B. barge price of such coal sold outside Indonesia after deducting PT BA’s share of the sales and commission as calculated in accordance with the JCSA between Arutmin and PT BA, but only to the extent that Arutmin has actually received payment for such sales. The marketing services agreement was valid for a period of five (5) years and could be renewed three (3) months before the end of the agreement.

On October 4, 2003, Arutmin and BHPB entered into an amendment to the marketing services agreement under which BHPB was entitled to a commission of 4% of the sales proceeds received for each shipment of export coal. Under the amended marketing services agreement, BHPB was obligated to pay a service fee of 0.75% from each commission payment received by BHPB to Enercorp Ltd (“Enercorp”). The term of the amended marketing services agreement was to expire on November 29, 2011

On July 6, 2005, Arutmin and BHPB terminated the October 22, 2001 and October 4, 2003 marketing services agreement and Arutmin, BHPB, the Originator, and Indo Kalsel entered into a new marketing services agreement. Under the new marketing services agreement, BHPB agreed to provide marketing services for Arutmin, the Originator, and (following a transfer of Arutmin’s CCOW to Indo Kalsel) Indo Kalsel. BHPB is entitled to receive a commission of 4% of the sale proceeds of all export coal sold, other than coal sold by Arutmin to the Originator under the Long-term Supply Agreement or coal sold by Indo Kalsel to the Originator under the Conditional Long-term Supply Agreement. The term of the new marketing services agreement expires on November 29, 2011.

2. On October 6, 2003, Arutmin entered into marketing services agreement with Enercorp Limited (Enercorp) under which Enercorp has agreed to act as the exclusive marketing agent of Arutmin for coal sales within Indonesia. As compensation, Arutmin is required to pay Enercorp a commission of 4% of the sales on a F.O.B, CIF, CFR or other basis. The marketing services agreement is effective for a period of five (5) years from the date of the agreement.

On July 6, 2005, the Enercorp marketing service agreement was amended and restated in order to make the Originator and Indo Kalsel parties to the marketing services. Under the amended and restated Enercorp marketing service agreement, Enercorp agreed to provide marketing services for Arutmin, the Originator and (following a transfer of the Arutmin’s CCOW to Indo Kalsel) Indo Kalsel.

3. On October 10, 2003, KPC entered into an agreement with Glencore Coal Mauritius Ltd., (“Glencore”) under which Glencore agreed to act as the exclusive marketing agent for sales of KPC’s coal outside Japan. As compensation, KPC is required to pay a commission of 5% of sales on a F.O.B. CIF, CFR or other basis. The marketing agreement is effective for a period of twelve (12) years from the date of the agreement.

On July 6, 2005, the Glencore marketing agreement was amended and restated in order to make the Originator and Indo Kaltim parties to the marketing agreement. Under the amended and restated Glencore marketing services agreement, Glencore agreed to provide marketing services for KPC, the Originator, and (following a transfer of KPC’s CCOW to Indo Kaltim) Indo Kaltim.

4. On January 9, 2004, KPC entered into an agreement with Mitsubishi Corporation “Mitsubishi”, under which Mitsubishi agreed to act as the exclusive marketing agent of KPC for coal sales in Japan. As compensation, KPC is required to pay a commission of 5% of sales on a FOB. CIF, CFR or other basis. The marketing agreement is valid for a period of twelve (12) years, and may be renewed based on a new joint agreement.

On July 6, 2005, the Mitsubishi marketing services agreement was amended and restated in order to make the Originator and Indo Kaltim parties to the Mitsubishi marketing services agreement. Under the amended and restated Mitsubishi marketing services agreement, Mistubishi agreed to provide marketing services for KPC, the Originator, and (following a transfer of the KPC’s CCOW to Indo Kaltim) Indo Kaltim.

5. On January 9, 2004 and April 20, 2004, the Company and Mitsubishi Corporation (Mitsubishi); the Company and Glencore Coal (Mauritius) Ltd. (Glencore), entered into a Marketing Advisory Agreement (MAA) in respect of the sale of Coal product. Accordingly, Mitsubishi and Glencore will pay a commission on sales of Coal by KPC to the Company (see Note 40d).


Operating Agreement

1. On October 19, 2000, Arutmin signed an operating agreement for mining services with PT Thiess Contractors Indonesia (“Thiess”) for the operation and maintenance of the Satui and Senakin mines. Under this agreement, Thiess provides plant, equipment, facilities, services, materials, supplies (other than the items to be provided by Arutmin as listed in the agreement), labor and management required. As compensation, Arutmin pays Thiess service fees, the amount of which are calculated in accordance with the rates and formula set forth in the agreement.

On July 6, 2005, the operating agreement was amended to make Indo Kalsel a party to the operating agreement. Under the amended operating agreement, Thiess has agreed to provide mining services for Indo Kalsel in the event that the Company’s CCOW is transferred to Indo Kalsel. In addition, the operating agreement was amended to permit the Company to assign its rights under the operating agreement to the Bank of New York, as security trustee under the Indenture, and to modify the termination and payment provision.

2. On March 1, 2006, Arutmin signed and operating agreement for mining services with PT Bokormas Wahana Makmur (‘Bokor”) for mining of the existing coal deposits economically, to maximize the mine operation age, and actively with Arutmin to stop illegal mining activities in Batulicin mine. Under this agreement, Bokor provides labor, funds, materials, equipment transportation and accommodation, supervision and administration to carry out the work under the agreement in accordance with the scope of work, specifications, maps, drawings (if any) and term of condition of this agreement. This agreement takes effect on March 1, 2006 and will ended on March 1, 2008.

3. On October 10, 2003, KPC signed an amendment to the operating agreement for mining services with PT Thiess Contractors Indonesia (“Thiess”) for the operation and maintenance of the Melawan and Sangatta mines. Under this agreement, Thiess provides plant, equipment, facilities, services, materials, supplies (other than the items to be provided by KPC as listed in the agreement), labor and management required. As compensation, KPC pays Thiess service fees, the amount of which are calculated in accordance with the rates and formula set forth in the agreement.

On July 6, 2005, the operating agreement for mining services was amended to make Indo Kaltim a party to the operating agreement. Under the amended operating agreement, Thiess has agreed to provide mining services for Indo Kaltim in the event that KPC’s CCOW is transferred to Indo Kaltim. In addition, the operating agreement was amended to permit KPC to assign its rights under the operating agreement to the Bank of New York, as security trustee under the Indenture, and to modify the termination and payment provisions.

4. On November 1, 2002, Arutmin signed a mining services agreement with PT Cipta Kridatama Mining (CKM) for the opening of Arutmin mining concession at Ata-Mereh, Batulicin, South Kalimantan. As stipulated on the Contract No. BTL/02/RC02-D of this agreement, CKM will maintain all mining activities, including the provision of labor required, equipment, supervision, mining, transportation, and barge loading. CKM shall also design, fabricate, construct and operate coal-washing plant facilities both in Ata and Mereh and construct new access roads from the mines to the port facility. The mining service agreement is valid for a period of five (5) years, commencing on November 1, 2002.

5. On April 8, 2004, KPC entered into an operating agreement with PT Pamapersada Nusantara (“PAMA”), under which PAMA agreed to provide contract mining services to KPC. Under this operating agreement, PAMA shall provide plant, equipment facilities, services, materials, supplies (other than the items to be provided by KPC as listed in the agreement), labor and management required. As compensation, KPC is required to pay PAMA service fees, the amount of which shall be calculated in accordance with the rates and formula set forth in the agreement. The mining service agreement is valid for a period of eleven (11) years, commencing on July 1, 2004 (see Note 37r).

6. On May 27, 2004, KPC entered into an operating agreement with PT Darma Henwa (“Darma Henwa”) under which Darma Henwa agreed to provide mining services for KPC. Under the operating agreement Darma Henwa will provide coal mining services in the Bengalon area. Darma Henwa shall provide plant equipment, facilities, services, materials, supplies (other than the items to be provided by KPC as listed in the agreement), labor and management required. As compensation, KPC is required to pay Darma Henwa service fees, the amount of which are to be calculated in accordance with the rates and formula set forth in the operating agreement. The term of the operating agreement will expire in ten (10) years from the commencement date.

On July 6, 2005, the operating agreement with Darma Henwa was amended to make Indo Kaltim party to the operating agreement. Under the amended operating agreement, Darma Henwa has agreed to provide mining services to Indo Kaltim in the even that KPC CCOW is transferred to Indo Kaltim. In addition, the operating agreement was amended to permit KPC to assign its rights under the operating agreement to the Bank of New York, as security trustee under Indenture, and to modify the termination and payment provisions.


i. Underground-Mining, Satui Agreement

On November 8, 2002, Arutmin signed an Underground Mining Agreement with Tunnel Mining Australia Pty. Ltd., for its Satui Mine Concession, South Kalimantan. As stipulated in Contract No. STI/02/C10 Rev1, the Contractor is responsible for the provision of office buildings, construction, underground mining facilities, road facilities and communication network for underground mining work. As of the date of this report the project is still ongoing.


l. Conditional Sales and Purchase Agreement (CSPA)

The Company and PT Borneo Lumbung Energi (Borneo), an affiliate of PT Renaisance Capital entered into a CSPA dated March 16, 2006, regarding the sale of the shares ownership of the Company in KPC, Arutmin, ICR, IKTR and IKSR at a purchase price of US$ 3.25 billion.

In accordance with CSPA, completion of the sale will only occur, if the following conditions (among others), have been fulfilled within 3.5 months:
1. The transaction is approved by the Company’s general shareholders meeting;
2. The transaction is not in violation of the Coal Mining Agreement with the GOI;
3. The transaction is approved by KPC/Arutmin’s general shareholders meeting;
4. There are no acts of the GOI, that restrict or prohibit the transaction;
5. No material breach by any of the companies being sold of the terms of existing financing agreements; and
6. The establishment of a Completion Escrow Account.

On August 25, 2006, the Company announced to the public that it had agreed with Borneo that both parties will not proceed with the CSPA signed on March 16, 2006. The agreement not to proceed leaves both parties open to pursue their own opportunities, and the terms and conditions of the CSPA will no longer have effect (see Note 41d).

On January 1, 2007, KPC and Arutmin, Enercorp Ltd (the Buyer) and ICR (the Seller), entered into a Coal Sale and Purchase Agreement, wherein the Seller agrees to sell and deliver and Buyer agrees to purchase and take delivery of coal upon the terms and conditions set out and KPC and Arutmin agrees to guarantee the obligations of the Seller to the Buyer. Unless this Agreement is earlier terminated in accordance with the provisions herein, this Agreement shall continue to be in effect until December 31, 2016. The term shall be divided into two terms under:

1. “Initial term” that shall take effect as of January 1, 2007 and shall terminate on December 31, 2013 or until the obligations of both parties have been completed as mutually agreed, whichever occurs first; and
2. “Extended term” that shall commence upon expiry of the Initial term until the completion of the term. Conditions for this extended term are to be discussed and mutually agreed.

After the cancellation of the divestment plan on August 25, 2006, the Company has a new plan to divest 30% of KPC, Arutmin and IndoCoal Resources’ (Coal Companies) shares. Based on the Company’s letter to PT Bursa Efek Jakarta on March 21, 2007, the Company has invited several companies to participate in the bidding process and six (6) Companies have completed their due diligence process on February 2007. The decision who will be the new shareholder of the Coal Companies’ 30% shares will be announced by the Company on March 30, 2007.


2007fr
Direct Ownership

PT IndoCoal Kaltim Resources (IKTR) Jakarta, Indonesia
Special Purpose Company

2005
Ownership: 99,99%
Assets: $5091

2006
Ownership: 99,99%
Assets: $8217

2007
Ownership: 70%
Assets: $846

PT IndoCoal Kalsel Resources (IKSR) Jakarta, Indonesia
Special Purpose Company

2005
Ownership: 99,99%
Assets: $5091

2006
Ownership: 99,99%
Assets: $8222

Indirect ownership

through Forerunner

IndoCoal Resources (Cayman) Limited (ICR) Cayman, UK
Coal Distributor

2005
Ownership: 100,00%
Assets: $460,025,400

2006
Ownership: 100,00%
Assets: $889,483,441

2007
Ownership: 70,00%
Assets: $405,945,684


Divestment of 30 % Shares of Subsidiaries (Coal Companies)

Pursuant with the Sale and Purchase Agreement (SPA) dated March 30, 2007, the Company and Subsidiaries, SHL, KCL and Forerunner (the “Sellers”) have agreed to sell 30% of their ownership in KPC, Arutmin, ICRL, Indo Kaltim and Indo Kalsel (the “Coal Companies”) to Tata Power Company Ltd (Tata Power) (the “Buyer”). The aggregate consideration shall be a sum of cash equal to the Purchase Price of US$ 1.1 billion plus or minus the Buyer’s Percentage of the working capital adjustments, which will be determined on settlement of the transaction (see Note 39g).

Calipso Investment Pte. Ltd.

On October 10, 2007, the Company through IndoCoal Resources (Cayman) Ltd. acquired 1 share of Calipso Investment Pte. Ltd., a holding company domiciled in Singapore for a gross consideration of S$1 (or equivalent to US$0.68). Calipso is a wholly owned subsidiary of IndoCoal Resources (Cayman) Ltd.

Receivables from Tata Power (Cyprus) Ltd. (Tata) represent the balance ($45,611,595) granted by Indocoal Resources (Cayman) Ltd. (ICRL) in connection with the loan facility signed on June 26, 2007. This amount is non-interest bearing and will be repaid from dividend declared by ICRL to Tata.

IndoCoal Export (Cayman) Ltd.

The balance of long-term loans as of 31 December
2007, $0
2006, $647,909,571

On July 6, 2005, KPC, and Arutmin (the “Seller Parties”), ICRL (the “Originator”), IndoCoal Exports (Cayman) Limited (the “Issuer”), PT IndoCoal Kalsel Resources (“Indo Kalsel”) and PT IndoCoal Kaltim Resources (“Indo Kaltim” together with Indo Kalsel, the “Indo SPVs”), the Bank of New York (the “Trustee”), and Foo Kon Tan Grant Thornton (the “Transaction Administrator”) entered into an Indenture and a Series 2005-1 Indenture Supplement under which the Issuer issued and sold Series 2005-1 Notes in the aggregate principal amount of US$ 600 million. The Series 2005-1 Notes bear interest at the rate of 7.134% per annum and mature on July 6, 2012. The Issuer used the proceeds from the sale of the Series 2005-1 Notes to purchase receivable assets from the Originator by paying the Originator Prepayment Amount of US$ 600 million to the Originator under the Issuer Receivable Sale Agreement between the Issuer and the Originator. The Originator used US$ 600 million of the Originator Prepayment Amount from the Issuer to make an advance payment to the Seller Parties (the “Prepayment Amount”) for existing and future Receivable Assets under the Originator Receivables Sale Agreements between the Originator and the Seller Parties and for future coal deliveries by the Seller Parties under the Long-term Supply Agreements entered into between the Seller Parties and the Originator (see Notes 39c and 39d).

On April 28, 2006, the Seller Parties, the Originator, the Indo SPV’s, the Issuer and the Indenture Trustee executed the Series 2006-1 Indenture Supplement under which the Issuer issued Series 2006-1 Notes in the aggregate amount of US$ 800 million. The proceeds from the Series 2006-1 Notes were used to redeem the Series 2005-1 Notes and to repay a bridge loan granted by Credit Suisse to the Company. The Series 2006-1 Notes mature on July 28, 2006, but on July 28, 2006, were extended to September 28, 2006.

On October 3, 2006, the Seller Parties, the Originator, the Issuer, the Indo SPV’s, the Trustee, and the Transaction Administrator, executed Indenture Supplement, the IndoCoal Series 2006-2 Notes under which the Issuer issued US$ 600 million aggregate principal amount of floating rate Series 2006-2 Class A-1 Notes due in 2011; and US$ 300 million aggregate principal amount of floating rate Series 2006-2 Class A-2 Notes due in 2012. The proceeds from the Series 2006-2 Notes were used to redeem Series 2006-1 Notes.

On June 26, 2007, a portion of the consideration received from divestment of the Coal Companies and in the debt service reserve account for the Series 2006-2 Notes was used to settle and redeem the Series 2006-2 Notes (see Note 39g).


Series 2005-1 Notes

On July 6, 2005, KPC and Arutmin (the “Seller Parties”), and ICRL, a wholly-owned subsidiary of the Company (the “Originator”), entered into a series of transactions with IndoCoal Exports (Cayman) Limited, an exempted company with limited liability established under the laws of the Cayman Island (the “Issuer”), under which
(i) the Seller Parties sold all of their then existing and future coal sale receivables to Originator and agreed to sell all of their future coal produced to the Originator to the extent required by the Originator,
(ii) the Originator agreed to sell its existing and future coal sale receivables generated by itself and the Seller Parties to the Issuer and
(iii) the Issuer issued US$ 600 million in 7.134% Series 2005-1 Notes that will mature on July 6, 2012 under an Indenture and Series 2005-1 Indenture Supplement between the transaction parties and used the proceeds to purchase those receivables from the Originator (collectively, the Securitization Transaction). The Securitization Transaction and the material transaction documents related to the Securitization Transaction (the Securitization Transaction Documents) are explained below.

On July 6, 2005, the Seller Parties, the Originator, the Issuer, the Indo SPVs, the Trustee, and the Transaction Administrator entered into an Indenture and a Series 2005-1 Indenture Supplement under which the Issuer issued and sold Series 2005-1 Notes in the aggregate principal amount of US$ 600 million. The Series 2005-1 Notes bear interest at the rate of 7.134% per annum and mature on July 6, 2012. The Issuer used the proceeds from the sale of the Series 2005-1 Notes to purchase receivable assets from the Originator by paying the Originator Prepayment Amount of US$ 600 million to the Originator under the Issuer Receivables Sale Agreement between the Issuer and the Originator. The Originator used US$ 173.3 million of the Originator Prepayment Amount from the Issuer to make an advance payment to the Seller Parties (the “Prepayment Amount”) for existing and future Receivables Assets under the Originator Receivables Sale Agreement between it and the Seller Parties and for future coal deliveries by the Seller Parties under the Long-term Supply Agreement entered into between the Seller Parties and the Originator.

The Seller Parties are required to pay to the Originator an amount of interest on the Prepayment Amount that is equal to the amount of interest the Issuer is required to pay to holders of the Series 2005-1 Notes under the Indenture and the Series 2005-1 Indentures Supplement on the relevant monthly payment date.

The Seller Parties used the proceeds of the Prepayment Amount as follows:
a. approximately US$ 438.7 million to repay all outstanding amounts under the KPC 2004 Facility Agreement, Arutmin 2001 Mandiri Loan, Arutmin 2004 Mandiri Loan and Arutmin 2004 Facility Agreement;
b. US$ 69.5 million to provide advances to the Company;
c. approximately US$ 36.6 million to fund required reserve amounts under the Series 2005-1 Indenture Supplement; and
d. the remaining amounts to pay certain expenses incurred in connection with the Securitization Transaction and to provide for the Seller Parties’ working capital.

On April 28, 2006, part of the proceeds from Series 2006-1 Notes was used to pay the early redemption price of Series 2005-1 Notes and the related costs attached to it (see Note 22e).

In connection with the issuance of the Series 2005-1 Notes, the Seller Parties, the Originator and the Bank of New York (the “Indenture Trustee and Security Trustee”) entered into the following agreements:

1. Issuer Receivables Sale Agreement (IRSA)

The Issuer and the Originator entered into the IRSA that provides for the Issuer to purchase from the Seller Parties the receivable assets purchased by the Originator from the Seller Parties. Under the Issuer Receivables Sale Agreement, the Issuer agreed to advance US$ 600 million to the Originator as a prepayment amount for those receivables (the “Originator Prepayment Amount”) on the closing date. The Originator used the proceeds of the Originator Prepayment amount from the Issuer to advance amounts to the Seller Parties under the Originator Receivables Sale Agreements and the Long-term Supply Agreements referred to below.

2. Originator Receivables Sale Agreements (ORSA)

The Originator and each of the Seller Parties entered into an Originator Receivables Sale Agreement that provides for the Originator to purchase from that Seller Party its existing and future receivables and related assets generated from sales of coal by that Seller Party

The agreements preclude the Seller Parties from amending or modifying the terms and/or conditions of any contract pertaining to the Receivables Assets, except as permitted by the Seller Parties’ credit and collection policies, making an offer to sell any of the Transferred Receivables or Related Property to any other party, creating or assuming any lien upon any of the Receivable Assets, merging with or into any party, taking any action that would impair in any respect the rights and interests of the parties to the Originator Receivables Sale Agreements, opening any account into which collections in respect of receivables are deposited other than the Collection Accounts, paying or declaring any Restricted Payments more than once each quarter, changing their credit and collection policies, engaging in any business other than the mining, selling and shipping of coal, and as long as any Series 2005-1 Notes are outstanding, creating, assuming or otherwise incurring indebtedness, other than as permitted under the Originator Receivables Sale Agreements.

3. Long-term Supply Agreements (LTSA)

The Long-term Supply Agreements were entered into by the Seller Parties with the Originator on July 6, 2005, which among other things, provide that the Seller Parties will sell coal to the Originator at the purchase price of US$ 34.30 per tonne based on a calorific value of 6,322 kcal/kg (as adjusted for variations in the calorific values of the coal the Originator purchases from the KCP/Arutmin under the Long-term Supply Agreement) (the “Fixed Forward Price”).

The Long-term Supply Agreements entered into by the Seller Parties also provided that the Originator would advance to the Seller Parties the Prepayment Amount of US$ 600 million on the closing date.

The Prepayment Amount is required to be decreased each month by the aggregate Receivables Purchase Price (as defined in the Securitization Transaction Documents) payable by the Originator for Receivable Assets purchased under the ORSA to which the Seller Parties are parties and increased by payments made by the Originator to the Seller Parties under the Long-term Supply Agreement and ORSA in the manner provided under the cash waterfall set out in the Indenture and interest amounts payable by the Seller Parties to the Originator on the relevant Monthly Payment Date.

The Seller Parties are required to pay to the Originator an amount of interest on the Prepayment Amount that is equal to the amount of interest the Issuer is required to pay to holders of the Series 2005-1 Notes under the Indenture and the Series 2005-1 Indenture Supplement on the relevant Monthly Payment Date.

During the term of these agreements, the obligations of the Seller Parties are absolute and unconditional and may not be impaired, modified or otherwise affected in any manner by the failure of either the Seller Parties or the Originator to perform under and pursuant to the terms and conditions of any other transaction entered into between them or the acceleration of indebtedness or commencement of enforcement proceedings under the documents affecting any transaction.

4. Cash and Accounts Management Agreement (CAMA)

On July 6, 2005, the Issuer, the Originator, the Seller Parties, the Transaction Administrator, the Indo SPVs, the Trustee and Standard Chartered Bank entered into the CAMA. Under this agreement, the parties agreed to implement certain payment arrangements, including certain payment arrangements in relation to the amounts owing to certain principal production contractors and marketing agents. Payments made to production contractors are based on detailed invoices and priority payments are subject to limitations specified in the contract.

5. Deed of Transfer of CCOW/Coal Agreement

In connection with the LTSA, KPC entered into a Deed of Transfer with Indo Kaltim and Arutmin entered into a Deed of Transfer with Indo Kalsel pursuant to which the transfer of the KPC and Arutmin’s CCOW will be completed automatically upon the occurrence of certain bankruptcy events (including a bankruptcy of either KPC, Arutmin or the Company) or the declaration (or deemed declaration) of a Default Payment (as defined in the Securitization Transaction Documents) of the notes issued under the Indenture (including the Series 2005-1 Notes), to allow Indo Kalsel and Indo Kaltim to continue to supply coal to the Originator for sale to coal customers. Contracts with the principal production contractors and marketing agents were assigned by the Seller Parties to the Security Trustee to permit assignment of those contracts to Indo Kalsel and Indo Kaltim in the event the transfer of the CCOW is completed.

Under the Deed of Transfer, Arutmin/KPC are required to:
a. Maintain, renew and keep in full force and effect their legal existence and right, franchises, licenses, concessions, third-party permits and other privileges in the jurisdiction as necessary or reasonably desirable;
b. Maintain in full force and effect the Seller Parties’ CCOW and all other contracts with marketing agents and production contractors on substantially the same terms as are in effect on the Closing Date;
c. Maintain their books, account and records in accordance with Applicable Accounting Principles (as defined in the Securitization Transaction Documents); and
d. Keep all material property and third party permits necessary for the conduct of their business in good working order and condition.

In connection with the Deed of Transfer of the CCOW from Seller Parties to Indo Kalsel and Indo Kaltim; the Originator entered into CCOW under which Indo Kaltim and Indo Kalsel agreed to supply coal to Originator at the price as stated in the agreement.

In connection with the issuance of the Series 2006-1 and Series 2006-2 Notes, the Issuer, the Originator and the Bank of New York (the “Indenture Trustee and Security Trustee”) has modified the above agreements by issuing the “Amended and Restated” agreements to conform with Series 2006-1 Notes and the “First Amendment to the Amended and Restated” agreements to conform with Series 2006-2 Notes.

Subsequently on June 26, 2007, the Actual Completion date of the 30% shares divestment of the Coal Companies, the parties in the Coal Receivables Securitization Transaction terminated the IndoCoal Securitization Transaction Documents. However, the Company, Tata Power, BONY and Standard Chartered Bank, Singapore Branch entered into a new Cash Distribution Agreement (the “CDA”) to replace the terminated CAMA, which was one of the IndoCoal Securitization Transaction Documents, and to implement certain cash management and account administration arrangements in relation to the revenues of KPC, Arutmin and ICRL. The cash management arrangements in the new CDA are similar to the cash management arrangements in the previous CAMA, excluding the provisions in the previous CAMA which related to the IndoCoal Securitization Programme. In addition, the parties acceded an amended and restated KPC and Arutmin LTSA to conform to the new CDA.

6. KPC and Arutmin Long-term Supply Amendment and Restatement Agreement

On June 26, 2007, KPC and ICRL; Arutmin and ICRL entered into a Long-term Supply Agreement, whereby, KPC and Arutmin produce and sell Product (coal produced, or which may be produced) to ICRL, from the Agreement Area as defined in the CCOW, and ICRL desires to purchase from KPC and Arutmin, a portion of ICRL’s requirements for Product from and beginning on the effective date of this agreement until the termination date.

ICRL shall secure that its marketing agents shall take into account KPC and Arutmin’s production of the Product (including, without limitation, in respect of quantity, type, quality and cost) and consult with KPC and Arutmin, when entering into contracts with customers, and shall, or shall procure that its marketing agents shall keep KPC and Arutmin notified at all times of the details of each contract and any renewal, variation or termination thereof.

7. Cash Distribution Agreement

On June 27, 2007, the Company, Tata Power, the Coal Companies, the Bank of New York, Standard Chartered Bank and each Principal Contractor and Principal Marketing Agent that has acceded to this agreement, whereas:
(a) The parties hereto have agreed to implement certain account administration and cash management arrangements in relation to the revenue of KPC and Arutmin and payments required to be made to various parties on the terms set out in this Agreement.
(b) KPC and Arutmin have agreed to implement certain payment arrangements in relation to amounts owing thereto by KPC and Arutmin pursuant to the Principal Contractor Agreements and the Marketing Agreements, respectively, on the terms set out in this Agreement

Pursuant to the amended and restated agreements, no modification or amendment shall be effective with respect to these Agreements unless each of the parties hereto consented or agreed to such amendment or modification.


Series 2006-2 Notes

On October 3, 2006, KPC and Arutmin (the “Seller Parties”), ICRL (the “Originator”), IndoCoal Exports (Cayman) Limited (the “Issuer”), PT Indocoal Kalsel Resources (Indo Kalsel) and PT Indocoal Kaltim Resources (Indo Kaltim and, together with Indo Kalsel, the “Indo SPVs”), the Bank of New York (the “Trustee”), and Foo Kon Tan Grant Thornton (the “Transaction Administrator”), executed Indenture Supplement, the IndoCoal Series 2006-2 Notes under which the Issuer issued:
(i) US$ 600 million aggregate principal amount of floating rate Series 2006-2 Class A-1 Notes due 2011; and
(ii) US$ 300 million aggregate principal amount of floating rate Series 2006-2 Class A-2 Notes due 2012.

The proceeds raised upon the issuance of the Series 2006-2 Notes were applied as follows:
(a) Redemption of the Series 2006-1 Notes amounting to US$ 800 million;
(b) Partial funding of Series 2006 Reserve Account in the amount of US$ 25.5 million;
(c) To provide for KPC and Arutmin’s working capital amounting to US$ 30 million; and
(d) The remaining amounts to pay all fees and reasonable costs and expenses incurred in connection with this loan.

The outstanding balance of each class of the Series 2006-2 Notes bears interest at an annual rate equal to LIBOR plus relevant margin. Interest accruing on the Series 2006-2 Notes during each interest period will be payable on the related Monthly Payment Date, Early Amortization Payment Date or Expected Final Payment Date. The Monthly Payment Dates will be the 28th day of each calendar month, the first of which is on October 28, 2006.

The covenants, representations and warranties, conditions subsequent agreed to under the transaction documents entered into in connection with the issuance of the Series 2006-2 Notes (the Series 2006-2 Indenture Supplement) are similar to the representations and warranties, conditions subsequent and covenants under the Securitization Transaction Documents, including the early amortization events and trigger events with such changes as may be mutually agreed between the Company, the Seller Parties, the Indo SPVs, the Originator and the Arranger.

The security granted in connection with the Series 2006-2 Notes is similar to the security that was granted in connection with the Series 2005-1 and Series 2006-1 Notes with the Company granting a pledge over 99.99% of Arutmin’s shares and 99.98% of the Indo SPV’s shares and Forerunner granting a charge over 100% of the Originator’s shares. In connection with the Series 2006-2 Notes, KPC’s shareholders granted pledges over 92% of KPC’s shares as security.

On June 26, 2007, the divestment actual completion date, a portion of the consideration received from divestment of Coal Companies and in the debt service reserve account for the Series 2006-2 Notes was used to settle and redeem the Series 2006-2 Notes under the IndoCoal Securitization Programme (see Note 39g).


Series 2006-1 Notes

On April 28, 2006, the Seller Parties, the Originator, the Issuer, the Indo SPV’s, and the Indenture Trustee executed the Series 2006-1 Indenture Supplement under which the Issuer issued Series 2006-1 Notes in the aggregate principal amount of US$ 800 million. The proceeds from the Series 2006-1 Notes were used to redeem the Series 2005-1 Notes and to repay a bridging loan granted by Credit Suisse to the Company. The Series 2006-1 Notes mature on July 28, 2006 (the Expected Final Payment Date) and bear interest at a rate of 7% per annum, payable on each Monthly Payment Date.

On July 28, 2006, in reference to Series 2006-1 Notes dated April 28, 2006, all parties agreed to amend some provisions in the Series 2006-1 Indenture Supplement, major amendments being as follows:

1. The expected final payment date was extended to September 28, 2006, instead of July 28, 2006.
2. The interest rate was amended by replacing the words, “a rate per annum equal to 7.0% with the words “ending on or prior to July 28, 2006, a rate per annum equal to 7.0%, and for each interest period thereafter, a rate per annum equal to 7.5%.”
3. The additional extension fee was US$ 2 million.

On October 3, 2006, part of the proceeds from Series 2006-2 Notes was used to pay the redemption price of Series 2006-1 Notes and the related costs attached to it (see Note 22e).


Term Loan Credit Agreement

On March 30, 2007, the Company (the “Borrower”), Financial Institutions (the “Original Lenders”) and Credit Suisse, Singapore branch (the “Arranger, Facility agent and Security agent”) entered into a Credit Agreement, wherein the Original Lenders made available to the Borrower a term loan facility in an aggregate amount equal to the Total Commitments of US$ 110 million.

The rate of interest on the loan for each term is the percentage rate per annum equal to the aggregate of the margin and LIBOR. Except where as provided to the contrary in this Agreement, the Company must pay accrued interest on the loan on the last day of each term.

The term has successive terms, wherein each term for the loan will be three months or such other shorter period as may be agreed by the Company and the Majority Lenders.

On June 26, 2007, the Actual Completion date of 30% shares divestment of the Coal Companies, the Company and Credit Suisse amended the requirements and conditions of the agreement, wherein, on July 12, 2007, the due date was changed from May 2, 2007 to July 12, 2008 with 4% per annum interest rate.


Divestment of 30 % shares of Subsidiaries (Coal Companies)

Pursuant with the Sale and Purchase Agreement (SPA) dated March 30, 2007, the Company and Subsidiaries, SHL, KCL and Forerunner (the “Sellers”) have agreed to sell 30% of their ownership in KPC, Arutmin, ICRL, Indo Kaltim and Indo Kalsel (the “Coal Companies”) to Tata Power Company Ltd (Tata Power) (the “Buyer”). The aggregate consideration shall be a sum of cash equal to the Purchase Price of US$ 1.1 billion plus or minus the Buyer’s Percentage of the working capital adjustments, which will be determined on settlement of the transaction.

In the SPA as agreed by both Parties, the following, among others, are set forth:

1. The conditions and execution of the agreement have been approved by the Shareholders of the Company, SHL, KCL, Forerunner, Amara, PT Sitrade Coal, KPC, Arutmin, ICRL, Indo Kaltim and Indo Kalsel.
2. The transaction is not in violation of the CCOW of KPC and Arutmin with GOI.
3. The transaction has been approved by the Ministry of Energy and Mineral Resources and the Invesment Coordinating Board based on CCOW of Arutmin and KPC and also approved by other government institutions as required by law.

In accordance, the Completion Conditions of the SPA as agreed by both Parties include, among others, the following:
(a) all Notes (Series 2006-2 Notes) issued under the IndoCoal Notes Program must be redeemed;
(b) all securities granted in favor of the Security Trustee of the IndoCoal Notes Program must be released or discharged in full;
(c) each Long-Term Supply Agreement must be amended in order to provide for its continuation subsequent to the redemption of the Notes under the IndoCoal Notes Program and in order to remove certain references to the IndoCoal Notes Program; and
(d) other than total current liabilities and capital leases, bid bonds and performance guarantees, there is no financial indebtedness owing by the Coal Companies to any person.
(e) all loans and interest owing by a Coal Company to a Related Body Corporate (including the Sellers); and
(f) all loans and interest owing by a Related Body Corporate of a Coal Company (including the Sellers) to that Coal Company, must be repaid in full.

Proceeds from the 30% divestment of the Coal Companies were used to settle inter-company payables and the redemption of the Series 2006-2 Notes (see Note 39d).


Operating Agreement

1. On October 19, 2000, Arutmin signed an operating agreement for mining services with PT Thiess Contractors Indonesia (Thiess) for the operation and maintenance of the Satui and Senakin mines. Under this agreement, Thiess provides plant, equipment, facilities, services, materials, supplies (other than the items to be provided by Arutmin as listed in the agreement), labor and management required. As compensation, Arutmin pays Thiess service fees, the amount of which are calculated in accordance with the rates and formula set forth in the agreement.

On July 6, 2005, the operating agreement was amended to make Indo Kalsel a party to the operating agreement. Under the amended operating agreement, Thiess has agreed to provide mining services for Indo Kalsel in the event that Arutmin’s CCOW is transferred to Indo Kalsel. In addition, the operating agreement was amended to permit Arutmin to assign its rights under the operating agreement to the Bank of New York, as security trustee under the Indenture, and to modify the termination and payment provision.

2. On November 1, 2002, Arutmin signed a mining services agreement with PT Cipta Kridatama Mining (CKM) for the opening of Arutmin mining concession at Ata-Mereh, Batulicin, South Kalimantan. As stipulated on the Contract No. BTL/02/RC02-D of this agreement, CKM will maintain all mining activities, including the provision of labor required, equipment, supervision, mining, transportation, and barge loading. CKM shall also design, fabricate, construct and operatecoal-washing plant facilities both in Ata and Mereh and construct new access roads from the mines to the port facility

The mining service agreement is valid for a period of five (5) years, commencing on November 1, 2002.

On July 1, 2006, Arutmin and CKM renewed the agreement under the Contract No. BTL/05/C06, which will continue for the duration of the life of the mine in Batulicin (ATA and Mangkalapi) unless otherwise terminated in accordance with the terms and conditions of this contract.

3. On November 8, 2002, Arutmin signed an Underground Mining Agreement with Tunnel Mining Australia Pty. Ltd., for its Satui Mine Concession, South Kalimantan. As stipulated in Contract No. STI/02/C10 Rev1, the Contractor is responsible for the provision of office buildings, construction, underground mining facilities, road facilities and communication network for underground mining work.

Arutmin decided to transfer the activity from underground mining to open pit mining, thus, on November 19, 2007 Arutmin sent a letter to Directorate General Geology and Mineral Resources (DGGMR, now known as Directorate General Mineral Geology, Coal and Geothermal) informing of the termination of this project. By the end of December 2007, Arutmin entered into an agreement with PT Wahana Baratama Mining (“WBM”) for the mining of coal on the common boundary in Satui concession area.

For the period ended December 31, 2007 and 2006, total payment to Tunnel Mining Australia Pty Ltd. amounted to US$ 53,356 and US$ 103,341, respectively.

4. On October 10, 2003, KPC signed an amendment to the operating agreement for mining services with PT Thiess Contractors Indonesia (Thiess) for the operation and maintenance of the Melawan and Sangatta mines. Under this agreement, Thiess provides plant, equipment, facilities, services, materials, supplies (other than the items to be provided by KPC as listed in the agreement), labor and management required. As compensation, KPC pays Thiess service fees, the amount of which are calculated in accordance with the rates and formula set forth in the agreement.

On July 6, 2005, the operating agreement for mining services was amended to make Indo Kaltim a party to the operating agreement. Under the amended operating agreement, Thiess has agreed to provide mining services for Indo Kaltim in the event that KPC’s CCOW is transferred to Indo Kaltim. In addition, the operating agreement was amended to permit KPC to assign its rights under the operating agreement to the Bank of New York, as security trustee under the Indenture, and to modify the termination and payment provisions.

5. On April 8, 2004, KPC entered into an operating agreement with PT Pamapersada Nusantara (PAMA), under which PAMA agreed to provide contract mining services to KPC. Under this operating agreement, PAMA shall provide plant, equipment facilities, services, materials, supplies (other than the items to be provided by KPC as listed in the agreement), labor and management required. As compensation, KPC is required to pay PAMA service fees, the amount of which shall be calculated in accordance with the rates and formula set forth in the agreement. The mining service agreement is valid for a period of eleven (11) years, commencing on July 1, 2004 (see Note 39r2).

6. On May 27, 2004, KPC entered into an operating agreement with PT Darma Henwa Tbk (Darma Henwa) under which Darma Henwa agreed to provide mining services for KPC. Under the operating agreement Darma Henwa will provide coal mining services in the Bengalon area. Darma Henwa shall provide plant equipment, facilities, services, materials, supplies (other than the items to be provided by KPC as listed in the agreement), labor and management required. As compensation, KPC is required to pay Darma Henwa service fees, the amount of which are to be calculated in accordance with the rates and formula set forth in the operating agreement. The term of the operating agreement will expire in ten (10) years from the commencement date.

On July 6, 2005, the operating agreement with Darma Henwa was amended to make Indo Kaltim party to the operating agreement. Under the amended operating agreement, Darma Henwa has agreed to provide mining services to Indo Kaltim in the even that KPC’s CCOW is transferred to Indo Kaltim. In addition, the operating agreement was amended to permit KPC to assign its rights under the operating agreement to the Bank of New York, as security trustee under Indenture, and to modify the termination and payment provisions.

7. On March 1, 2006, Arutmin signed and operating agreement for mining services with PT Bokormas Wahana Makmur (Bokor) for mining of the existing coal deposits economically, to maximize the mine operation age and actively with Arutmin, to stop illegal mining activities in the Batulicin mine. Under this agreement, Bokor provides labor, funds, materials, equipment transportation and accommodation, supervision and administration to carry out the work under the agreement in accordance with the scope of work, specifications, maps, drawings (if any) and terms and condition of this agreement.

This agreement takes effect on March 1, 2006 and will end on March 1, 2008.

8. On December 2007, Arutmin and PT Wahana Baratama Mining (“WBM”), entered into an agreement for the mining of coal on the common boundary in Satui concession site to maximize the exploitation of the coal reserve near this boundary area and to address some operational issues that arisen as a result of the common boundary. Under this agreement, guidelines on how both parties shall work together to maximize recovery were set. Such guidelines cover mine plan nomination, each parties’ rights to coal, pit limit boundary, coal and cost sharing mechanism, coal mining parameters, overburden dumping, safety and environment, land compensation, dewatering, surveys, agreement rates, invoicing and payment, as well as the resolution of disputes.

This agreement shall remain in full force or effect until the earlier occurrence of (the “Agreement Term”):
(i) the expiration, cancellation and revocation of WBM’s Work Agreement for Coal Mining enterprises and any extensions thereto or Arutmin’s CCOW or any extensions thereto or;
(ii) the termination of the Parties due to substantial breach of contract by any Party.


Marketing Agreements

1. On October 6, 2003, Arutmin entered into marketing services agreement with Enercorp under which Enercorp has agreed to act as the exclusive marketing agent of Arutmin for coal sales within Indonesia. As compensation, Arutmin is required to pay Enercorp a commission of 4% of the sales on a F.O.B, CIF, CFR or other basis. The marketing services agreement is effective for a period of five (5) years from the date of the agreement.

On July 6, 2005, the Enercorp marketing service agreement was amended and restated in order to make the Originator and Indo Kalsel parties to the marketing services. Under the amended and restated Enercorp marketing service agreement, Enercorp agreed to provide marketing services for Arutmin, the Originator and (following a transfer of the Arutmin’s CCOW to Indo Kalsel) Indo Kalsel.

2. On October 10, 2003, KPC entered into an agreement with Glencore Coal Mauritius Ltd., Glencore under which Glencore agreed to act as the exclusive marketing agent for sales of KPC’s coal outside Japan. As compensation, KPC is required to pay a commission of 5% of sales on a F.O.B. CIF, CFR or other basis. The marketing agreement is effective for a period of twelve (12) years from the date of the agreement.

On July 6, 2005, the Glencore marketing agreement was amended and restated in order to make the Originator and Indo Kaltim parties to the marketing agreement. Under the amended and restated Glencore marketing services agreement, Glencore agreed to provide marketing services for KPC, the Originator, and (following a transfer of KPC’s CCOW to Indo Kaltim) Indo Kaltim.

3. On January 9, 2004, KPC entered into an agreement with Mitsubishi Corporation (Mitsubishi), under which Mitsubishi agreed to act as the exclusive marketing agent of KPC for coal sales in Japan. As compensation, KPC is required to pay a commission of 5% of sales on a FOB. CIF, CFR or other basis. The marketing agreement is valid for a period of twelve (12) years, and may be renewed based on a new joint agreement.

On July 6, 2005, the Mitsubishi marketing services agreement was amended and restated in order to make the Originator and Indo Kaltim parties to the Mitsubishi marketing services agreement. Under the amended and restated Mitsubishi marketing services agreement, Mistubishi agreed to provide marketing services for KPC, the Originator, and (following a transfer of the KPC’s CCOW to Indo Kaltim) Indo Kaltim.

4. On July 6, 2005, Arutmin, BHP Billiton Marketing AG (BHPB), the Originator, and Indo Kalsel entered into a new marketing services agreement. Under the new marketing services agreement, BHPB agreed to provide marketing services for Arutmin, the Originator, and (following a transfer of Arutmin’s CCOW to Indo Kalsel) Indo Kalsel. BHPB is entitled to receive a commission of 4% of the sale proceeds of all export coal sold, other than coal sold by Arutmin to the Originator under the Long-term Supply Agreement or coal sold by Indo Kalsel to the Originator under the Conditional Long-term Supply Agreement. The term of the new marketing services agreement expires on November 29, 2011.


Collaboration Agreement with Koba Steel

On May 19, 2006, the Company and Kobe Steel, Ltd. (“KSL”), entered into a Collaboration Agreement, whereby KSL will complete the development of the UBC Process by utilizing a demonstration plant. Bumi will be participating in the development of the UBC Process, and further utilizing the established UBC Process to produce and sell the UBC Products, under license from KSL.

Under the license given by KSL, the Company should make a payment to KSL amounting to JPY 1,100,000,000. The amount will be paid in four (4) installments; the first installment of JPY 220,000,000 was due on the 60th day after the signing date of the agreement. The second installment amounting to JPY 440,000,000 was due on March 2007. The third and last installments amounting to JPY 220,000,000 each are due on March 2008 and 2009, respectively.

As of December 31, 2007 and 2006, contributions paid by the Company amounted to JPY 660,000,000 (equivalent to US$ 5,549,786) and JPY 220,000,000 (equivalent to US$ 1,913,560), respectively.


Coal Sale and Purchase Agreement

On January 1, 2007, KPC and Arutmin, Enercorp (the “Buyer”) and ICRL (the “Seller”), entered into a Coal Sale and Purchase Agreement, wherein the Seller agrees to sell and deliver and Buyer agrees to purchase and take delivery of coal upon the terms and conditions set out and KPC and Arutmin agrees to guarantee the obligations of the Seller to the Buyer. Unless this Agreement is earlier terminated in accordance with the provisions herein, this Agreement shall continue to be in effect until December 31, 2016. The term shall be divided into two terms under:

1. “Initial term” that shall take effect as of January 1, 2007 and shall terminate on December 31, 2013, or until the obligations of both parties have been completed as mutually agreed, whichever occurs first; and
2. “Extended term” that shall commence upon expiry of the Initial term until the completion of the term. onditions for this extended term are to be discussed and mutually agreed.


Coal Sales Agreement

Based on the Coal Sales Agreement dated March 30, 2007 entered into between Tata Power (the “Buyer”) and ICRL (the “Supplier”), the Buyer intends to purchase coal from a number of sources, including from the Supplier under this Agreement. This Agreement shall be effective from June 26, 2007.


Conditional Sales and Purchase Agreement (CSPA)

The Company and PT Borneo Lumbung Energi (Borneo), an affiliate of PT Renaisance Capital entered into a CSPA dated March 16, 2006, regarding the sale of the shares ownership of the Company in KPC, Arutmin, ICRL, Indo Kaltim and Indo Kalsel at a purchase price of US$ 3.25 billion. In accordance with CSPA, completion of the sale will only occur if certain conditions have been fulfilled within 3.5 months.

On August 25, 2006, the Company and PT Borneo Lumbung Energi agreed to terminate the CSPA.


Investment Agreement with PT Recapital Asset Management

On October 8, 2007, the Company and PT Recapital Asset Management entered into investment management service contract for a period of six (6) months commencing on the signing date of contract. The Company gave full authority to Recapital as investment manager to carry out the management of the Company’s funds based on the agreed investment guidelines /policies. In return, Recapital has the right of 1% of allocated funds to compensate as investment cost.


Legal Suit of East Kalimantan Provincial Government

On April 5, 2006, the Government of East Kalimantan Province (“Pemprov Kaltim”) filed a suit against KPC, Rio Tinto Plc., BP Plc., Pacific Resources Investment Ltd, BP International Limited, SHL and KCL in an arbitration forum called International Center for Settlement of Investment Disputes (ICSID) (“Arbitration Suit”). This Arbitration Suit is filed in association with the Pemprov Kaltim’s assumption that KPC and other defendants did not fulfill their obligations in accordance with CCOW by not carrying out the obligatory divestment action of 51% of KPC’s shares.

From KPC’s perspective, Pemprov Kaltim does not have any legal standing to file Arbitration Suit in the ICSID forum since Pemprov Kaltim is neither a Contracting State who signed the PKP2B KPC, nor a sub-division or agency of a Contracting State appointed by the GOI to file a suit against KPC in the ICSID arbitration forum.

The Tribunal consisting of Prof. Gabrielle Kauffman Kohler (President), Prof. Albert Jan Van Den Berg and Michael Hwang was set up on April 12, 2007. On February 27 and 28, 2008, the Tribunal conducted Hearing on Jurisdiction at Singapore International Arbitration Center to examine the legal standing of the Government of the Province of East Kalimantan in filing a claim, as well as to examine ICSID jurisdiction in judging the case in Hearing Jurisdiction. On April 10, 2008, the Tribunal required the plaintiff and the defendant to provide written statements in connection with several statements by the plaintiff and defendant.

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