Indonesian coal producer Indika eyes biomass market

Indonesian coal producer Indika Energy is venturing into biomass, as it diversifies into more environmentally-friendly businesses and reduces its reliance on conventional fuel revenues.

Indika, which produced 30.1mn t of coal in 2023 through its subsidiary Kideco, last year completed construction of a wood pellet factory in Paser, east Kalimantan, the company said in its 2023 sustainability report.

The biomass business is part of its subsidiary Indika Nature that is preparing its first batch of production. It is aiming to produce 150,000 t/yr wood pellets by 2025. These will have an average calorific value of 4,200-4,750 kcal/kg that is suitable for biomass-based power plants or for co-firing in a thermal power plant. It is planning to export the pellets to Japan.

[Japan imported 531,500t of wood pellets in March](https://direct.argusmedia.com/newsandanalysis/article/2562604), up by 47pc from a year earlier, according to preliminary data released by the country's finance ministry on 26 April. This was also higher by 9pc from February. Imports from Indonesia rise to 59,353t in March, more than a fivefold increase from 10,796t a year earlier. This exceeded the previous record high of 35,516t in January.

Indika will become the first biomass company in Indonesia with a comprehensive value chain, it added. Indika Nature cultivates a commercial forest in east Kalimantan that provides biomass for carbon-neutral energy generation. It is aiming to cultivate this year 7,500 hectares of calliandra, a woody plant that is a source of biomass.

The group's commodity trading arm also started trading of palm kernel shells, a by-product of palm oil production that is used as a fuel in biomass power plants. Its customers included trading firms in Indonesia, Japan and Portugal.

Indika Energy has set a target for 50pc of its revenues to come from its non-coal business by 2025, as a part of its long-term goal to entirely transition away from coal and expand its presence in renewables and the non-energy space.

It has been reducing its presence in coal-related businesses, while becoming more involved in electric mobility, gold mining and digital technologies. It decided to sell a 100pc stake last year in its Mutu coal mining unit to domestic firm Petrindo Jaya Kreasi. Indika earned almost 87pc of its $3.02bn revenues in 2023 from coal compared with nearly 89pc in 2022.

By Ajay Modi