Vallar has published its prospectus for relisting in London, following its deals with Indonesian coal producers Bumi and Berau. The company is being advised by JPMorgan. The prospectus is a lengthy document covering risk factors, financial statements and reserves review for both Bumi and Berau.
The prospectus states that Bumi has proved and probable reserves of 1891 million tonnes of coal, which would release an estimated 3.9 GtCO2 if burnt unabated.
The document covers a range of risk factors pertinent to the operations in Indonesia, including labour protests, corruption, regulatory risk (e.g. Mining Law revisions, new environmental regulation), lease disputes, forestry licenses and illegal mining. The company also notes the potential for climate change legislation to affect sales of its primary product – coal. The specific section reads:
“Coal characteristics may make it difficult for coal users to comply with environmental standards related to coal combustion causing the Group’s customers to switch to alternative fuels, which would adversely affect the Group’s volume of sales
Coal contains impurities, including sulphur, mercury, chlorine and other elements and compounds, many of which are released into the air when coal is burned. Stricter environmental regulations of emissions from coal-fired steam power generation plants and other industrial plants could increase the costs of using coal, thereby reducing demand for coal as a fuel source, the volume of the Group’s coal sales and its coal sales prices. Stricter regulations could make coal a less attractive fuel alternative in the planning and building of electricity generation plants in the future, thereby reducing demand for coal, which could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.
Indonesia and more than 160 other nations are signatories to the 1992 Framework Convention on Global Climate Change, which is intended to limit or capture emissions of greenhouse gases, such as carbon dioxide. In December 1988, in Kyoto, Japan, the signatories to the convention established a potentially binding set of emissions targets for developed nations. The specific emissions targets vary from country to country. In December 2007, the signatories to the convention participated in the United Nations Climate Change Conference in Bali, Indonesia. At this conference, the participants agreed to the adoption of the “Bali roadmap”, which sets forth a negotiating process. This process is ongoing, with the view to concluding a post-2012 international agreement on climate change. The enactment of legislation on climate change or other laws relating to greenhouse gas emissions could have the effect of restricting the use of coal in the Group’s primary markets. Other efforts to reduce emissions of greenhouse gases and initiatives in various countries to encourage the use of natural gas also may affect the use of coal as an energy source and could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.
Source: Vallar plc prospectus (160), February 2011