Indonesian Coal Billionaire Low Tuck Kwong Mines Super-Profits To Become The Country’s Second Richest Person

This story is part of Forbes’ coverage of Indonesia’s Richest 2022. See the full list here.

Bayan Resources’ Low Tuck Kwong, whose wealth jumped nearly fivefold in the past year, is confident that coal still has a profitable future.

While global campaigns to cut coal use cast a cloud over the fuel’s long-term future, the past two years have proved exceptionally serendipitous for billionaire Low Tuck Kwong, the founder and president director of Indonesia’s fourth biggest coal producer, Bayan Resources. The global market has been very strong, as prices soared following Russia’s February invasion of Ukraine. Also, ample rains have meant that barges needed to carry Bayan’s coal down the Senyiur River in Borneo to its port at Balikpapan have operated smoothly—unlike earlier years when drought disrupted their shipments and hurt the bottom line.

For the first nine months of this year, Bayan had more revenue ($3.3 billion) and profit ($1.7 billion) than for all of 2021—and last year already had delivered surging results, with revenue more than doubling and profit almost quadrupling. Bayan’s share price has increased fivefold since the beginning of 2021, and tripled this year. (In December, there will be a 1-to-10 stock split.) The share surge helped the 74-year-old Low, who owns a majority stake of Bayan, jump to No. 2 on Indonesia’s 50 Richest list, from 18th, with wealth shooting up 4.7 times to $12.1 billion.

The government of Indonesia, like many others, is trying to reduce how much of the country’s power is generated by coal, and during the Indonesia-hosted G20 summit in November, there was announcement of a program under which a group of developed countries and private banks would provide $20 billion to help Indonesia cut coal usage and develop more renewable energy sources.

Sizzling Performance

After several flat years, Bayan’s business boomed.

This doesn’t worry Low. He’s comfortable with Bayan’s prospects in an industry that’s under attack but pivotal for the country. In his message in Bayan’s 2021 annual report, Low said: “Whilst we recognize that coal is considered a sunset industry, our cost-base which is amongst the lowest in the world, and our low-emissions coal, which is ranked in the lowest third in terms of CO2 equivalent output, will ensure that we will be amongst the last companies left standing.”

Bayan’s chief financial officer Alastair Mcleod, when asked about the $20 billion financing program, says it is a “very small proportion of the amount needed to transition Indonesia away from coal.” And he asserted that coal will be part of the energy mix in developing countries for many years to come.

From the scene at Low’s operations base at Tabang in East Kalimantan, through which 85% of company production moves, coal is far from a sunset industry. Tabang is a beehive of activity. Double trailer hauling trucks, each bigger than an adult blue whale, carry 230 tonnes of coal 69 kilometers from the mines to Senyiur Port around the clock except for two days a year, Indonesia Independence Day and Eid al-Fitr. There are currently 150 trucks in the circuit and that number will double to keep up with the company’s target to increase production to 60 million tonnes annually in 2026.

Global Price Surge

Coal prices soared following Russia’s February invasion of Ukraine.

Bayan must get its black gold to both domestic customers—there are obligations to the country’s power utility—and international ones. In the first nine months of 2022, a quarter of Bayan’s coal went to the Indonesian market, while major international buyers included the Philippines (30%), South Korea (15%), India (9%), Bangladesh (7%) and Malaysia (5%).

It’s hard to overstate the importance of coal for Indonesia. It is the world’s largest exporter of thermal coal, which is expected to bring in more than $91 billion this year. And it’s still the biggest source of power at home, accounting for 38% of generated energy in 2021, ahead of petroleum and natural gas, with renewable energy at just 12%. There’s a lot of coal in the ground; the energy ministry has forecast that with an average annual domestic production of 600 million tonnes, Indonesia’s existing coal reserves could last more than 60 years.

It’s hard to overstate the importance of coal for Indonesia. It is the world’s largest exporter of thermal coal.

Low, who’s seen a lot of ups and downs over 25 years in what he calls a “tough business,” was born in Singapore. His father, who migrated to Singapore from Guangzhou in southern China when he was three years old, started a civil construction firm, Sum Cheong. When Low was 14, he started helping his father on building projects after school. Sum Cheong eventually became a successful firm in Singapore and Malaysia. But rather than planning to take it over, Low wanted to go out on his own, in a bigger place, and saw an opportunity in Indonesia, where at that time few people from Singapore did business. In 1973—at age 25—he secured his first project, doing the groundwork for an ice cream factory in Ancol, on Jakarta’s coast. Low says he was the first contractor in Indonesia to use diesel hammers for piling, which speeded up the work.

While carrying out the job, Low got a big break. He says he was “very lucky” to meet Liem Sioe Liong, founder of the Salim Group and a friend of the late President Suharto. Liem, who later became Indonesia’s richest businessman, was an owner of the Bogasari flour mill near the ice cream factory. “He saw us carrying the piles, stopped us and talked to me. I told him I couldn’t speak Bahasa Indonesia, and he gave me his name card, spoke to me in Mandarin and asked me to see him later,” says Low. This led to Low working with Liem, who died in 2012, and his youngest son Anthoni, who’s No. 5 on the Indonesia’s 50 Richest list. “Both helped us a lot,” Low says.

Low also teamed with Jaya Steel—a subsidiary of Pembangunan Jaya, a joint venture between Jakarta’s provincial government and local entrepreneurs including the late property tycoon Ciputra—to establish Jaya Sumpiles Indonesia. The initial ownership was 50/50, then Low took full control. Low had work but wanted a more stable revenue stream than the civil construction business was providing. At the end of 1987, Low decided to enter the coal contractor business.

At the time, Indonesia’s coal industry was still in its infancy. Jaya Sumpiles worked with several miners for overburden removal, mining and hauling (overburden is the material that must be removed before mining can start). During the 1990s domestic production rocketed from 4.4 million tonnes to 80.9 million tonnes, aided by pro-miner policies that boosted investment. In November 1997, after a decade of sector experience and with needed Indonesian citizenship in hand (he got it in 1992), Low bought his first concession: Gunungbayan Pratamacoal, in East Kalimantan.

Production started in 1998—which was a dismal time to start a business in Indonesia, amid the Asian Financial Crisis and political turmoil that included riots in Jakarta and Suharto getting pushed out of power. With its first shipment, the miner lost $3 per tonne as prices slumped. “Our journey wasn’t easy from the start. People were laughing at us [for buying the mine]. They said we are gila [Indonesian for crazy],” Low recalls.

There have long been serious logistical obstacles to mining in coal-rich East Kalimantan. Compared to another coal mine, Multi Harapan Utama, Low’s first concession was twice as far from the port at Balikpapan, and its barges had to take a four-day journey downstream. (It also takes four days to journey downstream from Tabang, Bayan’s current main producer, to Balikpapan.) For people to get to Tabang from Balikpapan entails a nearly two-hour helicopter ride, or a full day by river and roads.

Despite obstacles, Low played a hunch East Kalimantan coal would prove profitable and expanded, acquiring concessions and a majority stake in Dermaga Perkasapratama, the operator of Balikpapan Coal Terminal, one of the largest in the country, which currently has a stockpile capacity of 1.5 million tonnes or 24 million tonnes annually and can be extended. In 2004, Low consolidated assets and established Bayan Resources, named after a local district. Four years later, after becoming Indonesia’s eighth largest producer, Bayan listed shares on the Indonesia Stock Exchange. The IPO proceeds went to develop concessions, including the ones in Tabang, which now consists of 12 mining license permits covering 34,715 hectares—nearly half the size of Singapore. The area contains low-ash, low-sulfur sub-bituminous coal with a calorific value that’s most suitable for coal-powered power plants, yet is relatively less polluting than other types of coal.

Bayan puts Tabang’s huge coal deposit at nearly 2 billion tonnes, which could extend the mine’s life more than 30 years. To cope with the coal-price cycle and reduce nature’s seasonal risks, the company has been implementing a long-term efficiency plan. Tabang’s low stripping ratio of 2.9 (meaning 2.9 cubic meters of rock and soil have to be removed to access a tonne of coal) and the 69-kilometer asphalted private road for hauling coal to Senyiur port has significantly lowered Bayan’s production costs and improved margins, as has use of double trailers to save fuel. In the first nine months of this year, the company’s net profit margin was 51% outperforming others as coal prices soared. For all of 2021, the margin was 44%.

Performance depends in part on the level of the Senyiur River, which is sometimes too low to operate coal-laden barges. In 2016, 2018 and 2019, due to insufficient draft for the barges, some Bayan deliveries were delayed, generating over $3.6 million in penalty fees to clients. Low even made a move to sell his shares but canceled the plan as the bids were too low. Interested parties “would have made a fortune now if they bought the company,” Low says.

To tap the full potential of Tabang mines, Bayan is spending $400 million on new infrastructure. In 2019, it begun constructing a 101-kilometer private hauling road connecting Tabang and a new port in Muara Pahu on East Kalimantan’s largest river, the Mahakam. The Mahakam doesn’t have dry season draft issues and barges can sail at night. The company is installing three swing barge loaders at the new port for faster coal loading. Parallel to the private hauling road, Bayan is also building a road for public use, helping provide access in the remote area. The whole project, targeted to ramp up production to 60 million tonnes in 2026, is expected to be completed by the end of 2023.

“We want to be the biggest and the best in Indonesia,” says CFO Mcleod. At present, the most profitable in the country is rival coal company Adaro Energy. “They generated $1.3 billion for the first six months, and we generated $1 billion [in net profit]. But they did 27.5 million tonnes of sales, while we only did 17 million tonnes,” he says. When Bayan can match the volume, he claims, “We will be the most profitable coal company in Indonesia.”

Alberto Migliucci, CEO and founder of Singapore-based Petra Commodities, sees a good outlook for Indonesian coal and Bayan. In the medium term, he expects demand to increase from China, as it recovers from the pandemic, and India for the kind of low-ash coal that fits Bayan’s output. He notes the two countries, which account for two-thirds of coal consumption, abstained at the 2021 United Nations Climate Change Conference (COP26) commitment to stop issuing permits for coal-powered power plants.

“Bayan has been performing very well. They have solid operations with favorable geological conditions that will enable them to ramp up production and capitalize on the current market opportunity,” Migliucci says. Bayan is sitting on a huge cash pile. The company has over $1.3 billion of cash and almost $280 million in standby loans, and zero debts after early repayment of $400 million in bonds last year. With it, Migliucci thinks the company is better prepared to face tougher financing situations affecting the coal industry nowadays. With the cash, Bayan also has the opportunity to expand to minerals that relate to the green energy and EV industries. McLeod confirms the company is looking to diversify.

Low, who has a small renewable energy business, says he’ll stay focused on coal. Overlooking a new 581-meter bridge that will soon be busy with trucks moving coal 363 days a year, he indicates belief that Bayan will be bustling for a long time. “This bridge could last for more than 40 years,” a beaming Low says.

A Miner’s Menagerie

Low’s Bayan Resources has built much infrastructure in East Kalimantan to dig out and transport millions of tonnes of coal. Currently under construction, as a personal expenditure, is a rather different kind of structure—an air-conditioned space where 12 to 16 penguins can live. “They’ll be here next year,” he says.

It’s part of a private zoo owned by Low that he initiated in the late 1990s when he noticed that there were many wild animals who lost their habitats from mining and plantation cultivation, and consequently roamed to villages near his mines.

Low decided to obtain conservation permits and scale it up to what it is now. The penguins will join more than 200 species of birds and animals (mostly birds) in Low’s zoo. Surrounding the aviary, which covers two hectares, are 32-meter high nets. “I love animals,” says Low during a morning walk in the aviary as a pair of gray crowned cranes walk nearby. It includes cockatoos, flamingos, ibises, peacocks and hornbills, which roam around—only the carnivores like eagles are placed in separate enclosures. Besides the birds, the zoo also has an assortment of tigers, deer, crocodiles, giant tortoises, alpacas and horses, among others, with Low regularly adding to the ranks.

Beyond professionals who manage the zoo, Low also hires people living in the area and trains them to care for the animals, providing jobs for those who live the area. At present, 110 people work in the zoo on which Low spends more than 20 billion rupiah ($1.3 million) annually from his pocket. The zoo, which was open to the public at no charge, used to be visited by thousands every year. But Covid-19 forced its closure to the public, and it has yet to reopen since Bayan maintains strict protocols for people coming in and out of the mines.

Low says he intends to give animals bred at his facility to other zoos and conservation projects. When he visits the coal mines once or twice a month from Jakarta, he never misses checking on his animals, taking pictures and videos, which he often shares to his phone contacts. In addition to animals, Low also planted many varieties of plants and trees in the area in the Tabang concession 180 kilometers northwest of Samarinda, the capital of East Kalimantan.