Coal upstart
SK Zainuddin | December 02, 2011

Achmad Hadiat Kismet - “Met” for short - built TMT into one of the largest companies in Indonesia since clinching the Caterpillar distributorship in 1971. Now, his son Muki wants to build his own business empire focusing on coal and energy.
 
Muki Hamami may be the ultimate prodigal son. Although hailing from a prominent business family, he chose to go it alone after finishing university and traveled around the world. His parents were concerned when he stopped in Africa to work with an investment bank.

“I did not want to be controlled by my father,” he says bluntly in his spacious office in the new multi-million dollar Trakindo building in Cilandak. The office tower is the new headquarters for the fast-growing TMT (Tiara Marga Trakindo) Group.  While the building is new, the site is not, as this was where the Hamami family’s business first began back in 1971.

Still the largest privately held company in the country, TMT booked a turnover of $1.55 billion in the first half of this year and expects the figure to rise above $3 billion for the full year.

Fate and opportunity finally led Muki back to Indonesia and to his family business but, again, on his own terms. “I decided to come back but I did not want to work for my father so I went to Canada to learn about the mining business,” he notes, adding that he did spend time with Caterpillar distributor Finning.

That was in the late 1980s when the Hamami family was very involved in distributing Caterpillar equipment. Although Trakindo had 25% of its business in mining then, Indonesia’s mining sector was still in its infancy.

“I knew Indonesia had a lot of potential in mining so in 1992 I persuaded my father to allow me to set up a new mining division that was separate from the rest of the business,” the 47-year-old businessman says.  His father, Met Hamami, was skeptical as coal prices were depressingly low and there was little international demand.

“In fact, coal prices hit their lowest-ever mark in 2001 at A$65 and all the coal mining companies were bleeding,” says Muki. “But everything changed when the Chinese government decided to build coal-powered power plants in 2004 and ban coal exports.”

The move created a huge supply deficit in the market, especially for low-calorie coal, and prices began to rise. China produced 2 billion tons of coal annually at that time so the shortfall as a result of the ban was huge.
“Indonesia was at the center of low-calorie coal so suddenly the country’s coal mining industry became really hot,” he adds.

Muki’s earlier gamble was now looking like a shrewd move. As both demand for coal and its price continued to rise, more and more investors started acquiring coal concessions in Kalimantan and Sumatra.

Instead of looking to China, Muki decided to look west to India, the other emerging Asian power. With a fast-expanding economy, the country was in dire need of power and low-calorie coal. He started to source coal for buyers and traveled widely in the country.

“In Indonesia, anybody who has money has a coal mine. In India, anyone who has money has a power plant. This is a match made in heaven,” he says.

Emerging energy player

As the family’s coal business grew, Muki found himself in an uncomfortable position. Trakindo was a major supplier of heavy equipment to all the big coal mining companies and its entry into coal was creating some uneasiness.

Recognizing the conflict of interest, he resigned from Trakino’s board in 2009 to form ABM Investama, handing over the reins of the heavy equipment business to his brother. The new company, which plans a public listing in December, will consolidate TMT’s dispersed energy-related businesses under one roof.

ABM hopes to raise Rp2.6 trillion ($291.2 million) from the initial public offering. If it does achieve its target, the offering would be the third biggest IPO this year by an Indonesian company.

The Hamami family will cede a 20% stake in the company, the first time it has listed any of its companies, with the proceeds to go towards financing expansion and paying down debt.

“The target is quite large,” said David Chang, a director at UOB Kay Hian Securities. “It’s not impossible but it’s a tricky time because the market is not that strong globally but there may be a narrow window for them to pull it off.”

Much will depend, he adds, on how the family sells the company to investors. The country’s mining sector remains attractive to global investors. 

ABM includes coal production, contract mining, power plants, engineering services and integrated solutions. Muki’s vision is to create an integrated energy and logistics company to rival the larger players.

“The family built its business empire from the Caterpillar distributorship but mining is my passion,” he says. “My challenge is to grow from zero to being a significant player very quickly so my strategy is to concentrate on low-calorie coal. “ABM is my creation so my father’s emotional attachment to it is much less,” he noted.

This year, the company targets to achieve $700 million in revenue, up from $500 million last year. But the real story, he says, will kick in next year when the coal operations start coming on line.

He intends to acquire coal mines that are close to the Indian market and have very low production costs. The problem with low-calorie coal, however, is that it is heavy with water and extra steps need to be taken to dry it out.

But isn’t he a latecomer to the game given that Indonesia already has a number of large listed coal companies? “The coal story still has another 15 to 20 years to run so it is still very hot,” he replies. “Plus I already have a coal mine in Aceh, which is close to India and which will come on stream early next year.”

Muki has spent more than $100 million in building infrastructure so that he can produce and ship coal at very competitive prices. “I have to make sure that my coal is the cheapest of the cheapest so I know I will be in control.”

And rather than compete with existing coal operators in Kalimantan, he intends to focus on Sumatra, which also has rich deposits but is undeveloped.  GA
 

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