Agenda

Day 1

OVERVIEW OF THE ASIAN COAL MARKET AND INDONESIAN AND AUSTRALIAN COAL INDUSTRIES

• Introduction to seminar objectives and organizational approach
• Asia-Pacific Thermal Coal Production, Exports, Consumption Trends (2010-2018)
• Brief History of Coal Price Discovery methods in Asia + Evolution of Price Indices (1970 – 2002)
• Introduction to Major Issues affecting the Asia Pacific Coal Industry and Asian Coal Markets
  • Shifts in Coal Availability by Quality
  • Government Regulation
  • Climate Change and Shifts in lender and
  • investor interest
  • Transport- IMO Marpol Annex VI

FOB PRICE REPORTING BASIS AND INDEX REVIEW

• Types of coal prices and the significance of reporting basis to coal price
• Main FOB steam coal price indices currently being used in Asia
• Methodology and data sources for each of these coal price indices
• Coal index price series: How have they varied between 2010 and 2018?
• Steam coal commodity cycles & the impacts of “market sentiment” on FOB steam coal prices
• Strengths and weaknesses of each index including comparative trend analysis
• Using statistical methods to select an appropriate coal price index
• Common mistakes and errors in setting and interpreting FOB coal prices

DETERMINING THE COST OF SHIPPING

• Methodology and data sources for calculating shipping costs
• The Baltic Exchange indices and their role in setting sea transport costs in Asia
• NETPAS as a tool for calculating shipping distances
• Case study & sensitivity analyses of shipping costs using sea transport cost model
  • Distance (Australian vs. Kalimantan ports)
  • Fuel usage efficiency vs. speed
  • Price of bunker
  • Term of contract
  • Consecutive vs. non-consecutive voyage
  • contracts
  • Port declared as open position for vessel
  • Loading/unloading rates
  • Port costs
• Short exercises for calculating Sea Transport Costs from Indonesia to India and China via either a Panamax or a Cape vessel

FOB PRICE SETTING: COAL PRODUCER’S PERSPECTIVE

• Cash costs as a tool for making short term production decisions
  • Components of total cash costs and expected margins
  • Examples of cash cost estimates for Indonesian and Australian coal suppliers
  • Relationship between a coal supplier’s expected coal price and his coal quality
  • Factors affecting cash costs of coal producers over time
• Long term production decisions based on DCF analysis

FOB PRICE ASSESSMENT: IPP COAL BUYER’S PERSPECTIVE

• Short and long-term demand considerations
• DCF methodology for evaluating new power plant projects
• Comparison of levelized tariffs for coal vs. gas-fired power plants under different price scenarios for coal and natural gas
• Implications for power plant technology selection

Day 2

PRICE PROVISIONS OF A TYPICAL COAL SUPPLY AND TRANSPORTATION AGREEMENT (PART 1)

• Process of soliciting coal bids and negotiating price provisions of a CSTA
• Selecting an FOB price index, setting and changing the initial coal price over time

PRICE PROVISIONS OF A TYPICAL COAL SUPPLY AND TRANSPORTATION AGREEMENT (PART 2)

• Ordering of optional and pre-COD quantities
• Cancelling shipments
• Possible terms and rationale for Buyer’s relief of minimum take obligations
• Timing of payments (days grace, LC requirements, interest for late payment)
• Provisions for replacing a discontinued or obsolete price index

FOB PRICE ADJUSTMENTS RELATED TO COAL QUALITY

• Standards for sampling and testing of coal quality
• Definition of a “statistically significant” quality difference
• Draft surveys at load port and discharge port: How to reconcile any differences
• Options for Seller to “make good” a rejected shipment

TRANSPORT PRICE ADJUSTMENT TERMS AND RELATED PRICE PROVISIONS

• Base quantity transport price contract terms
• Base quantity transport price adjustment equations

PRICE CASE STUDY 1

INDONESIA’S HBA/HPB COAL PRICE REGULATION

• Market analyses and coal pricing 2018, 2019 and beyond
• The methodology for calculating HPBs for specific coal types
• Illustration of how HPBs are calculated and their relationship to coal prices that are published periodically by Platts, Argus Media and globalCOAL
• Potential impacts of HPBs on Indonesia’s export coal prices and the demand for Indonesian coal
• Do holders of CCOWs have to sell their coal exports at the HPB?

 PRICE CASE STUDY 2:

Attendees will complete a quantitative exercise using Excel for which they will calculate the HPB for a specific coal type and then compare that the HPB price on a US$/GJ basis against the gcNEWC price after normalizing the gcNEWC price for the same CV as the coal type used for the HPB calculation

SEMINAR WRAP-UP INCLUDING FINAL Q&A SESSION