Okay, I'll start. Good afternoon, everyone. Welcome to CLSA conference call today with Bumi Resources. I am Virandi from research, and I'll be the moderator for this call, where BUMI will share updates on its 2023 and also 1 Q 2024 performance. From BUMI, we have Pak Dileep as Director and Corporate Secretary, Pak Andrew Beckham as CFO, Pak Ashok Mitra as Director, and also Pak Ido as Director. Without further ado, I'll pass on the floor to BUMI to begin with the presentation, and then we'll have the Q&A session later on.
Okay. Thank you, Pak Virandi. I'm Dileep Srivastava from BUMI. On my left is Mr. Ashok Mitra. He is the Chief Operating Officer of BUMI and is CEO of KPC, our largest coal unit. On my right is Mr. Andrew Beckham. He is Director and CFO of BUMI. On the extreme right is Mr. Ido Hutabarat. He's the Marketing Director for the Bumi Group. Without much ado, we have a presentation which consists of 46 slides. We'll try and run through them within about 25 minutes. The agenda is quite straightforward. There's an introduction. I don't think we need to spend too much time on that. There would be a full year 2023 summary. We submitted our financials and published them on 28 of March , and we put out a company announcement, which some of you may have already seen. But we will cover it generally.
It was a challenging year, but we turned out a profit. We will sharply focus on quarter one 2024. There is also a section which will cover our current proposal on KPC restructuring, which is subject to OJK approval. For the interest of the community, since it is a very important subject, we have our ESG credentials towards the end of the presentation. So, moving on to the first slide. That's an overview. KPC is the largest export coal mine in the world. Our coal production hit 78 million tons in 2023. We hope to do anywhere up to 82 million tons this year. We have adequate reserves, as a subsequent slide will show, and we have potential for expansion of reserves. We have the benefit of an ideal location very close to the sea. We only do open-cut mining. We have captive processing facilities.
We have dedicated infrastructure. We have all the coal loading terminals, two deep sea ports, captive power plants, and the proximity to the sea gives us an unmatched competitive advantage on cost. The next slide will show you how we segmented our business. The left is coal and energy, the middle is minerals and metals, where we have an investment in Bumi Resources Minerals, which is a listed company. The various assets under them have been highlighted. On the right are our future ambitions in the coal downstream and the non-coal projects, where we will make announcements as and when the whole project details get finalized. The next slide shows you the reserves. These are adequate for at least a decade or two, and we still have some potential to explore, and we have an unexplored property in Pendopo, and you can see it has licensed reserves.
Now, this is the introduction. I will now pass it on to my colleague, Mr. Andrew Beckham, the CFO, to cover full year 2023 and quarter one 2024 focus. There is the production, and there is the guidance for 2024, and how we have, in a nutshell, done 2023, and there is a guidance also for 2024. Over to Andy.
Thank you, Dileep. Welcome, everyone. I will go as quick as I can. We have data for 2023, and in quite detail for 2024, Q1. If you require more data on financial year 2023, feel free to email us or contact us after this meeting. The presentation should be on our website now. You should all be able to get a copy of this at least by the time we finish this meeting. Production-wise, in 2023, we were at 77.8 million tons, up from 71.9 million tons in 2022. This is due to the improved weather and also better performance from our mining operators and our contractors. In 2024, we have started well. Q1 2024 is at 19.5 million tons, up from 16.1 million tons in Q1 2023. Again, our strip ratio is down, so we are actually producing a lot more coal now with the same equipment.
Plus, rainfall for KPC was below the plan. For prices, unfortunately, though, the coal price trend in 2023 and 2024 has gone down since 2022. We have fallen from $81.30 per ton, compared to $121 per ton in 2022. Then for Q1 2024, we have continued to fall to $75.80 per ton, down from $103.70 per ton in quarter one 2023. This is following the trend. We can come onto prices in a minute. Production costs have increased from $46.9 per ton in financial year 2022 to $51.3 per ton in financial year 2023, mainly due to higher oil prices and we were stripping at quite a high ratio, in 2022. The cost has decreased from $54.6 per ton in quarter one 2023 to $48 per ton in quarter one 2024.
We say mainly due to lower oil price, but that is also because KPC has been managed to negotiate better discounts on its supplies and reduce the cost that way. There is also, as I mentioned, lower strip ratio at the moment and better productivity. We are trying to do everything we can in efficiency at the sites at the moment. If we go onto the next slide. Our guidance for the year, we see our production between 78 million and 82 million tons, and quarter one is on plan. In fact, above plan at the moment. Prices at $71-$81 per ton. I think if you ask anyone, it is very hard to predict where commodity prices are going in the year with the amount of geopolitical and elections that are still to be had. We will update as we go on this.
Cost-wise, we are currently predicting about $50 -$ 51 per ton, assuming that there will be some sort of oil price increase over the next three quarters with the geopolitical issues. If not, we will be remaining around that $48-$50 per ton level that we are in quarter one. Next slide, please. As we see the coal price, if we actually took 2022 and 2023, it would be a very nice trend where we are trending slightly up, from 2021 up. But of course, as we all know, we had this massive spike with the Russia-Ukraine war and supply issues. Then this has come down in 2023. Hopefully, we are seeing that sort of at most, I do not see a lot of people predicting a major drop in coal prices going forward. If we go onto the next slide, please.
As you can see, the market is currently in contango out to 2026. Looking at around $121 and $153 in calendar 2026. So at the moment, the market is still quite bullish that prices will start moving back up again in the future. Next slide, please. On operational highlights, on the combined at the bottom, you can see that in 2023, we were up 20% on overburden. We were up 13% on coal sales, but we were down on FOB prices by 33%, which of course hit our net profit. Q1 2024, as I stated, has started well with overburden up 4%, coal production up 21%, sales up 19%, and prices down though, slightly, 27% on Q1 2023. The main benefit increase has been at KPC, as you can see, with overburden up 8%, then coal mines and coal sales up 32% and 27% respectively.
Keep on going, the next slide. This shows you the rainfall and how it has been going, and as you can see, the last quarter, the last three months of that, KPC's rainfall, especially in March, has been below the long-term average. But you can see also that Arutmin has been slightly above the long-term average. Remember, Arutmin's mines are in South Kalimantan and KPC's mine is in East Kalimantan. So there is quite a bit of area difference. Next slide, please. For financial year 2023, overburden was up, as I stated, and coal mine was up as well due to the better weather and better improvement on the performance from the contract. Next slide. 2024, again, an improvement on last year, 4% up on overburden and coal mine up 21%. Next slide, please. From 2023 operational performance, coal sales were up 13%.
This despite we actually wanted to increase sales in the quarter four, but were unable to because we had not got the approval. The approval from the government was not coming. So we had to hold back on actual sales in 2023. Stripping ratio was also up 11%, a movement because of high-grade coal, more high-grade coal production, and KPC, because of the way the mine plan was developed. Next slide, please. Coal sales in Q1 2024 have been up against 2023 Q1, as we have stated, and the strip ratio was down in 2023. Can we just be careful with the slides? They keep going in and out. They said. On the next slide, please.
The BUMI operational performance in 2023, we saw production costs up 9% compared to 2022 due to the higher stripping ratio. We saw prices fall as the downward trend came down off the highs of $400 + in 2022. Next slide, please. In 2024, we have seen the production cost fall. As I mentioned, the fuel prices have come down, mainly because of negotiations we have had. Although at the moment, fuel prices are on a trend down, we believe with the geopolitical issues, I think they could rise again. Coal prices are still down based on contracted tonnage and sales we have made into first quarter. Next slide, please. This you can see our weighted average prices. Like I said, if you look at 2021 - 2024, it is quite a nice grade from $78.3 per ton to $86 per ton for our normal coal, per se, or our higher grade coal.
Ecocoal has gone from $34 per ton in 2021 to $47 per ton in 2024. You had this anomaly in, well, you had this big increase and big drop in 2022 and 2023. So overall, we are running at $75.80 at the moment. As I said, the predictions are all up and down over where the price will go in the next two to three quarters. Next slide, please. BUMI cost, production cost. We can see the 2023 and 2024 have been coming down because of better performance, better efficiency and strip ratio reduction. Fuel prices, of course, have helped and contributed. Going from back in Q1 2023, up at $1.40, down to about $1.29 in Q1 2024. As I said, it is possible this could start to trend back up. If we go on to the next slide, please.
You can see that the red curve gives you the current oil price, which is trending slightly up. As I said, KPC's fuel price that we have got here, just to get a guidance, has come down, though, because of the work done by the team to reduce the discount or increase the discounts on the fuel prices that on the suppliers. So hopefully, we can maintain that, but naturally, there is a lot of pressure for prices to start moving up. Next slide, please. For 2023, as we reported our PSAK 66, so this is a movement fully consolidated BRMS, fully consolidated, but KPC only as equity income basis.
That net profit was down 10.9%. You will notice that income and tax and profit sharing were running at about 80% of the total profit because of the increased deferred tax adjustment that we had to book in 2023. Net equity was slightly down. This is due to we have dividends paid related to a group that went to Tata Power in terms of on paper. So that was the adjustment made in equity. If we go on to the next slide. Now, when you see Q1 2024, we have improved because of our volumes have improved. Our interest costs are down. As you can see, the income tax and profit sharing is back to reduced down again because of the benefits we had with the additional tax benefit of carried forward losses. So there has been a positive adjustment.
These are non-cash adjustments that both 2023 and 2024, and it depends on the review. The government are auditing BUMI on a probably about three or four years in arrears. It will depend on once their audit is complete, we can close the numbers. Next slide, please. On a consolidated basis, we get a more clearer picture of how well things are going. That is 2024 consolidated. Yes. For current 2024, sorry. With revenues currently for the first quarter at $1.4 billion against $1.6 billion because of prices. Costs are down 9% and gross profit of course, has been hit because of that. Royalty payments are down but still remaining high. I should have mentioned that in Q1 2023, our royalty rates were running at about 32% based on how they calculated the HBA prices in 2023. That has now changed. They have improved that how they have done the calculation.
We are now running more in line with the 28% royalty that we have to pay. Please note that companies like Bayan are paying 6%-7% on their royalty at the max. Operating income was down 50%, but as I said before, we have managed to improve on our income tax and other income, and now we are running at $67.6 million for the quarter. Going forward, see that maintaining reasonable chance of maintaining that subject to the global coal price and of course, production. But production itself looks good. Prices remain stable at the moment. From a net equity point of view, we are up from $2.96 billion to $3.1 billion. We go on to the next slide. This is just a comparison for Q1 against the PSAK reporting standards and if we consolidated the numbers. There is not much more to say on this one. Next slide, please.
Overall, our revenues are down only by 13% despite a large drop in prices because of the volumes increase. Our cost of revenues are down 9% as our strip ratio has improved. Yes, our gross profit is down, but we have made it back up because of the tax and the benefit that we have had and we are running now currently as profit overall has improved since 2023. Next slide, please. At a BUMI level, the equity has gone up slightly as we have avoided and on EBITDA, the last 12 months adjusted consolidated EBITDA has come down, of course, because of our coal prices by about 22%. Next slide, please. This we can show the detail. Note that in Q4 2023 the proportionate EBITDA was very good but because of non-cash adjustments, we reduced our net profit.
This was as we mentioned about the tax adjustment and an impairment on one of our assets because the IUP has not been published, been given. We are still waiting for that as the government transition completes. Next slide, please. Our cash balance, still healthy, but the thing to highlight is that we have $43 million tied up in paying royalty in advance of sale. We have, if you see the DHE SDA deposit, we have about $375 million, which is the revenues you receive that you have to keep. You have got to keep your 30% in bank deposits, and you cannot touch for 3 months. So that money is being tied up again with the government regulation, and then we have an additional $100 million of mine closure deposits.
The government is definitely improving how the banks look and the deposits look by locking up most of our money at the moment. Some of it very valid, some of it we can question. From a cash point of view, we have good cash, but working capital is tight at the moment because of these restrictions. Next slide, please. Now, onto the quasi-reorganization, which you might have seen we published yesterday. We have not been able to pay a dividend since 2012, and the main reasons being the retained earnings or the deficit, as you can see, there are $2.351 billion. The main reason for that deficit was non-cash impairment of our assets back more, what, 10- 15 years ago. Unfortunately, we have not been in a position where we have had enough profit to start reducing that significantly.
Even with the $500 million profit that we had in 2022, it would take us four to five years to clear. What we have requested, and under the OJK regulations is allowed, is that we use the share premium of about $3.2 billion that we have at the moment, to offset that deficit of $2.35 billion to come back to zero. It is just moving equity numbers, really. That would allow us, therefore, to pay a dividend to all the shareholders so that the minorities especially, get a benefit from the company. We have cash. We can pay dividend, but we cannot at the moment. We are restricted. When we do this calculation, there is a number of, shall we call it, hurdles to go through in terms of whether we have the correct numbers to justify a quasi-reorganization. We have used net profit for the company.
Which is the net profit attributable because the retained earnings and the deficit you see there is based off that net profit attributable to the company. That is how we have done it. Our auditors have confirmed that and approved that performance. We are now will be in discussions with OJK for their approval for this so that when we come to the shareholders' meeting due at the end of May, we can actually get the shareholders to make a decision to vote on this restructuring. What it does is it resets the 31st of December 2023 numbers on the 1st of January 2024 becomes zero for the earnings, and then your retained earnings start increasing again. We would republish Q1 with the revised numbers, with the updated equity number if we had approval from OJK and from the shareholders. Please note that is vital that both those approve.
But we hope that given BUMI's history, we are owned by a lot of people. There are 371 shares in circulation, so we hope that both the authorities and the shareholders will support this sort of change. The next slide, I think, gives you the timetable for that. Once we have the approval of the AGM on the 30th of May, the GMS as it is called here. Then we will be able to announce the summary of the GMS by the June, and maybe by the end of July, then we can look at announcing a dividend. Next. That is about next slide. This is the current management, just for info. I think it has gotten now we should be aware that a number from the selling group are coming on the board.
We still have CIC on the board as a major shareholder, and we have a number of independent directors and commissioners. Next slide. This is up to the directors as well. We go quickly. I think we go to the end. Then the appendixes system, we have KPC and group [metadata]. At the back, you'll find the ESG numbers. Thank you. Have you got it there? The ESG numbers, which are there. As we've said many times, we have a huge amount of data on these areas. If you need more data, please contact us and we'll happily supply it. If we go on to the next slide, I think is our safety performance, which remains in the world-class levels and in performance. Next slide. Is our awards, both for ESG and for human rights.
In fact, I think yesterday, BUMI even got an award for most tax paid in 2023. This is, I think, due to all the royalties or the levies or the corporate tax that we are having to pay at the moment. I think 2023, we were up to 40% or 35%-40%.
I think 35%-40% of our revenue is paid in as royalties, subsidies, levies, profit sharing, taxes, and all that. So we are actually working on a net revenue of 60% of what we are showing you as our share of the revenue.
Okay. I think that's it. Is there any more? These are just the awards that I think you've seen before. Okay. With that, we'll open up to Q&A. If anyone has any questions regarding the numbers or anything else you've seen about BUMI.
Yeah. Thank you, Pak Dileep and Pak Andy, for the presentation. Now we will move on to the Q&A session. For those who would like to ask question, you can type your question in the Q&A box, or you can also press the raise hand feature, and I will call out your name to ask your question. Maybe I will kick start with the first question. As we have seen, the coal industry has been experiencing a rollercoaster ride in the past several years, and especially now with the geopolitical situation. May I know how is your view on the coal industry currently, and what is the long-term direction for the company?
You are right about the rollercoaster. I think there have been a fair amount of geopolitical, economic, and conflict issues globally which have impacted. I think the disturbances really happened during the period of the pandemic, which did contract demand. Thereafter, it has been the wars. It is the Ukraine one to begin with, and now it is followed by the Middle Eastern one. There were also some scares out of China. 2022 saw a change in fortunes for the coal sector, where coal became short, gas became unaffordable, and there was a shortage of coal. Rains were very heavy in Indonesia, and production was impacted when demand was going up, and Europe was also demanding coal. That led to a spike, as Andy said, to prices which even crossed $400.
2023, we saw contraction in the price, and we also saw some signs of surpluses in India and China. Australia, of course, mended its relations with China. Then we had the green hysteria, which is imposed on top of that, which creates additional pressure. We see the impact of 2023 and all the pressures of 2023 flowing into 2024. Now, if we are looking at BUMI very specifically in 2023, our volume rose from 70 million tons to about 78 million tons or up by 13%. If we are looking at this year versus quarter one last year versus quarter one this year, we are seeing an increase of production by about 21%. Basically, that is a sign that the weather is normal and we are able to produce normally. Now, the issue basically is balancing supply demand, managing the geopolitics.
India and China are increasing production and availability. So we have got to have our very grip very close to the market and try and see what is the best that we can do to maintain our realizations. From a company standpoint, we are looking at costs, we are looking at optimizing costs. As Andy said, the challenge basically is the 35%-40% of our revenue, along with the working capital pressure that he also mentioned, which is impacting our company. Now, we are trying to take every step to increase efficiencies. We have McKinsey working in one of our units. We are going for cost optimization, and we are seeing what is the best that we can do under the circumstances.
I mean, if we are looking at 2023, even though the volume went up as an offset, the coal price dropped by 33% and the revenue dipped by 23%. 40% of our revenue went to the government. Plus, on top of that is now liquidity. Our costs were reduced by 31%. Despite all that and the impairment that Andy referred to, BUMI still turned out a profit. When we are looking at quarter one 2024, the net income is up by 10%-12% versus quarter one of last year. Coal production is up by 21% this year versus last year. The sales volume has jumped by 19%, in spite of an increase in 2023. Revenue, however, because of the price, is lower by 12.5%, and the coal price, after having fallen by 33% last year, fell further by 27% this year.
The fact that the royalty and levies and subsidies that we have to incur cost us almost 35% of our revenue, probably a little more. In spite of that, we are making a profit. 2024, we think will be far superior to what we did in 2023. When we are looking medium and long term, we don't see coal disappearing in Asia in a hurry. In fact, we see India and China increasing coal capacity. We are also increasing coal production. We see demand sustaining for the medium to long term. We will be very surprised if there's an impact on Asia before 2030 or 2035. As you know, coal is a commodity which is subject to a lot of imponderables over which we have no control. One is weather, the other is infrastructure, the other are supply-demand factors, then there's the geopolitical factor.
All these have the potential of driving the price up or driving the price down. On top of that, if we superimpose government regulation levies and policies, if they are more friendly towards the sector, and if the issue of royalty and levies can be levelized across the sector, I think that would be a great benefit to companies like ours who are on the IUPK status, because we have ambitions to grow beyond coal. We wish to have a coal downstream project for which investments are required and proper partners, and we are advancing that. Government incentives are necessary and the dialogue with the government has already begun on both issues, on what is necessary. The collaborators, technical collaborators and the commercial collaborators have demands on us as to what they expect from the country and from the company and from on regulation.
We are also looking at non-coal projects. All this requires money. If it requires money, it has to come out of our coal companies. Our coal companies have to be more efficient and generate more liquidity and profit. What is holding us back really is the kind of levies and the kind of constraints that are imposed on the sector. That also has the potential to make overseas investors a little more worried. We are hoping that with the changes that are proposed in the government and the structure and the administration, they could look more kindly at the sector, levelize some issues which are necessary and make it a playing level field even within the sector. That would be of great benefit.
So all in all, we see the coal sector as robust and strong over the long term, that is 10 or 15 years. Let's not forget that as far as Indonesia is concerned, their energy transition policy is up till 2060, which is stated. Essentially, whether it is fossil fuels or whether it is renewables, we have to coexist up to that period. From our side, we think that there are some investments necessary in research and development on issues like carbon capture, utilization and storage, where nobody really has invested and people dismiss it as being too costly. It is too costly because there is no R&D that has gone into making the technology cheaper. I think that is the order of the day, and I think the world is beginning to realize that.
As far as BUMI is concerned, it has three captive power plants, and I think it will be definitely examining the potential of doing this and pioneering this development. This is something for the authorities to also consider, and I understand Indonesia has a regulation for the oil and gas sector. Perhaps that same sunshine can also shine on the coal sector. It is really the power plants that have to invest in it. But we as coal producers unfortunately do get impacted, although we are not the major polluters. It is our users, and that is where the attention is required. I think governments by and large are being pragmatic on how they want to approach the energy transition, and I think Asia is far more pragmatic in that regard. I think the China and India policy really is to balance renewables and fossil fuels.
Where you increase fossil fuel capacity, you also increase renewable capacity. So if one fails, the other is available. We have seen examples in Europe and in the U.S. of where things have failed, where they have relied completely on one source. So we think that definitely up to 2060, there is scope for coal, and over 2030- 2040. You have seen our reserve statements, I think we are there. As Andy said in his marketing report, where he gave the forecast on price, I think in 2024, the coal prices are in contango. They are looking more in the region of $150. If it is in that area, we think that those are prices at which the core business is sustainable. Our effort would be to maximize revenue and margins and liquidity out of our coal assets.
We may not invest in capacity, but we do have one or two coal-producing mine, coal mines which can produce coal. So those have a potential to also contribute. We are looking at projects that we can place on these sites. A fair amount depends upon how government policy goes and how much kindlier they can look upon the sector. I think fossil fuels are here to stay in Asia, at least for the next 20- 30 years. So we definitely in-house believe in that. But we recognize reality, and we are looking at non-coal and coal downstream projects. Looking at ways on how to make our existing business more profitable. So all in all, I would say we consider prospects to be robust.
Okay. Thank you, Pak Dileep. That's very insightful. We have several queues from the participants. Maybe we can go to it one by one. First up from Nitin Arora. You can unmute your line.
Yeah. Thank you for taking my question. Just quickly on the subject of dividend. Assuming that the quasi-restructuring actually succeeds, could you talk a little bit about how the management intends to free up cash in order to make a dividend payment, just considering the large deposits and the large working capital requirements, which are fairly onerous and placed upon the firm?
I will still be receiving cash from our coal companies, especially KPC, over this year. Despite the restrictions, it just won't be as much as we would like. But there is still sufficient cash to give a reasonable dividend for 2024. I know someone saying the dividend payout for 2023. Just to be clear, the dividend would be with zero retained earnings as of 2024 December, so the dividend would be for 2024. But we could do an interim dividend if that was a possibility. But there would be sufficient cash to be able to pay out this year, some sort of dividend at least.
Thank you.
Okay. Next we have [Ian]. Unmute your line.
I can't hear anyone. [Virandi], is there anyone doing the question? Asking the question?
Yeah. We have [Ian] here. Can you unmute your line to ask your question?
Yeah. He's asking the question. It's muted. If it's [Ian] that's asking the question.
Okay. Maybe while waiting for [Ian], we can go to the question from [inaudible]. I think you have answered the question for the dividend payout for 2023. The other question is, will BUMI be able to increase stake in KPC going forward, and to what level?
Look, we have Tata Power and CIC as shareholders in that company. We are very happy with them there. If they want to sell, we will happily discuss with them the option. But, we cannot do anything if they are quite comfortable to stay there. That is up to their own companies and their own policies. Owning one of the largest coal mines in the world. If not the largest truck and shovel fleet in the world. But it is up to them. At the moment, there is no plan or no discussion that I am aware of on a sale or us buying the shares.
Okay. Thank you, Pak Andrew. Maybe we can go to the question from Ian now.
I think that might be [Ian]. He is one of our commissioners from CIC, so I do not know if that is a mistake or not.
Oh, okay.
I would like to ask a question probably maybe for the audience regarding the future coal price. This probably should be answered by Pak Ido regarding the future price.
Yes, the industry, the current coal price is actually the market will be continuing for the next three months, but at current level, the consumption in Japan a little bit decreased. China, the biggest importer from Indonesia, currently producing, so at current market, China is the current market. Europe also decreased in the coal consumption. In other markets, Asia, like India, current consumption also flat. Philippines also flat. Indonesia consumption actually increasing, but Indonesia as you know, more is on the DMO basis, but the smelter increasing their consumption. As a whole, the consumption a little bit decreased compared with 2023. We expect the price will be moving. The gC NEWC will be moving around $130-$150, depends on the current situation in Japan and other markets, in Korea also.
The impact of the war of Russia and Ukraine still the factor of why the price is not moved up, because Russia just keep producing and selling at the low price. For example, right now, they are selling CRS, China and Taiwan and other markets at around $110. While this is now with FOB market is about $130. That is the reason why the market, FOB market does not increase. That is currently the situation of the coal market. I am listening any question.
I do. I have another question. It is regarding the coal consumption projection for future. Because our coal is a thermal coal. Do we have any data on the new build coal-powered power plant in China, India, and our target countries? Is there any additional new coal power plant being proposed and to be built in the future? That probably can give us some indication that the future demand for thermal coal will increase. I am not sure you have such data. This is something outside of the marketing analysis.
Currently, we do not have any detailed data. We understand from some countries, there is new build power plant of the fossil fuel, coal-fired power plant. At the same time, as Ido said, China also built a new renewable energy power plant. Currently, we do not have detailed data, but we can find it out. We believe, in all countries, there is a new power plant, coal power plant. In Philippines, we understand also newly built power plant in Visayas island. In Japan also, they just rebuilt new one, 2 x 1,000 MW in the Cilegon area. In China, there is. In India also. Yes, to be more exactly on the analysis, we need to have more data that we have to collect, by assistant of our agents.
[Ian], just to inform you, India, NTPC, which is the biggest power producer, they are setting up 3,000 MW power plant. Some of the power plants which had closed down during COVID time or they couldn't pay the debt, it is reported that both Adani and Jio are buying those mines. Those coal fire power plants. In addition to what Ido said, Philippines, China India, there are power plants which had closed down during COVID time, or those owners who could not pay the debt to the bank and are closed are now being opened up and are going to start generating power. That will definitely help in increasing the power consumption in India, which will have an effect on coal dispatched to that country. This is all I can say about India at this moment.
I think there have been newspaper reports, Ian, which has talked about China building coal plants in Africa. At the same time, they are also building about 200 GW- 250 GW of coal-fired power in China. That has been approved, and construction is in progress. That is what the reports are saying. As far as India is concerned, there are also reports that India is scrambling to add coal-fired power capacity to avoid outages. As Ashok said, they are even reviving old, what you call, obsolete plants. They cannot risk any outage. The policy both in China and India appears to be to have a balance between renewables and coal, to have adequate capacity in both these forces of feedstock, so that the risk of an outage is reduced, should there be any imponderable kind of situation. That seems to be the policy.
But you might also have some information on this because this concerns China, and definitely we can research a lot more in India. There's a lot of activity. Renewables is being talked on one hand, but at the same time, coal-fired is very much there, and they're building super capacities. In fact, even Coal India is increasing production, and I think this year they have gone up by 15% or 20%. They are crossing 1 billion tons.
Yeah, I noticed the news from China in the newspaper that they are building quite a few large coal-fired power plants recently. So I don't have the exact number, but I can really do the research and feedback to you.
It'll be interesting to get that information. Definitely from our side, we try and secure more.
Right.
Any other questions?
Okay. I think next we can take a question from Bharat. You can go ahead, Bharat.
Yeah. Hi, can you hear me?
Yes, I can hear you.
Yeah, we can.
Yeah. Thank you so much, sir, for a fairly detailed presentation and the insights. This is Bharat Parekh. I head the overall power utilities and the new energy research for CLSA in India. We do concur with the view that India is going to go on the energy transition unlike the energy disruption which is caused all over the world, and that is where we will have a balanced growth. Just to update you that India has just launched last quarter, 80 GW of fresh thermal power expansion over the next decade, which is what is the balanced transition which we are aiming for versus the 500 GW renewables, which will be added as well. [Ashok], so much for the feedback, but really I must congratulate you on a 32% growth, sir, which you have been able to achieve at KPC in the first quarter.
But when I see your guidance of 53 million - 55 million tons for KPC, it seems to me a bit more conservative. If you can give us some insights that why would production grow only 2%-3% as per your guidance, compared to a very solid growth which you have had in the first quarter? Is it only the weather and you expect some sort of softening in the growth? Or it is just a conservative number which probably is set to be beaten? Thank you so much, sir.
Let me answer that, Mr. Bharat, and see what happened last year. First quarter, there were heavy rains, there were landslides, floods in KPC which led to reduction in production at KPC. So compared to last year's quarter, January to March 2023, this year we did not see anything of that sort. As a result, we could increase our production and that was much higher compared to last year. So for the next nine months, if the weather being good at this moment, this month also we are seeing a better weather, we should be able to increase our production beyond last year what we have achieved. So that much I can let you know now.
We have approval from the government, don't we?
Yeah. 53.5 million tons but we will be able to seek more production increase approval from the government in month of June, July. We hope to at least reach by at least much better compared to last year. That was one. Production cost, as you mentioned, 53 million tons is basically to anticipate an increase in fuel price because of the geopolitical situation. Other than that is not and what effect it shall have on economy going forward is hard to predict. We are seeing every day some news or the other coming up. As the news flare up, the Brent crude price goes up. It's an effect you can see every day because we are tracking some of the prices, both fuel, coal, and other mineral price on a daily basis. It's just a news item which really moves up the price of coal.
That has an effect and we hope that if that is not affected, we will be able to keep the cost at the same level as of now.
Sure. Thank you so much, sir. If I may answer the follow-on question. If you can give us some idea about the KPC's capacity, effective capacity, if I may say. Also the second question on the financials that you had, it seems like there is some tax reversal at the BUMI level. Does any of that pertain to KPC or that is more of a corporate adjustment? Thank you so much.
It has nothing to do with KPC.
Okay.
From the tax point of view. That was purely at the BUMI level. The other question which you mentioned, the cost and other effects won't be other than the fuel, which we have at this moment.
But, sir, I was asking you for the capacity of the—
No, capacity, we have adequate capacity to go, but also it depends on what price you realize. You can go up to 60 million- 65 million tons production, but if your cost, you don't realize, what do you do then? You can't afford to have a loss in margin, taking into account that we pay 28% royalty.
That's a good point. Sir, if you could help us understand the current strip ratio, especially at KPC, because when the prices are low, we tend to mine on the better strip ratio areas. The plan here in terms of what are the average strip ratios right now for KPC, that will be helpful. Thank you so much.
Compared to other coal mining companies who are buying and all, they produce 4,200 GAR and below. KPC average production GAR is more than 5,000 GAR. 5,100 GAR. It all needs a higher strip ratio than compared to those producing 4,200 GAR. Our average strip ratio compared to last year has gone down. It is hovering around 9.6 bcm per ton at this moment.
Sure. Thank you so much, and wish you best of luck with the guidance. Appreciate your help. You have a good day.
Thank you.
Okay, thank you. We have one last question from the question box. I think we have passed the 4:00 P.M. mark, but is it okay to take this one last question?
Yeah, go ahead.
Okay. Last question from [Giovanni]. Can you explain more regarding the cost efficiency stated previously, especially regarding your contract with your mining contractors?
Let me now, in KPC, what we have done, we had engaged McKinsey to look at the operating mining optimization. More or less, we have been able to automate the entire operations in KPC. Today, we have a system where the figures come directly as and when it is mined, and we are able to do much effectively, much efficiently, what where we are lagging behind. For example, if my road condition is bad and we are consuming more fuel, it is immediately informed to the supervisor that go to that stretch and see how it can be rectified so that we can stop increasing the fuel consumption. This is one example I am giving you. It is called road mapping in mining parlance, we call it. So we have all the software to guide us what to do and where we are lagging behind.
For example, if there is a mismatch of trucks and excavators, we immediately relocate those trucks or the excavators as may be to that particular pit, so that we optimize our utilization of these trucks and shovels.
And on the part regarding your contracts with your mining contractors, can you give more color on that?
So with the contractors, our fuel cost is almost 30%-35% of our cost, the entire cost. So what we have worked out with the contractor is that we have set up a ratio, a fuel ratio. Beyond that ratio, if there is a consumption, there is a fuel penalty to be charged. So they also know, the contractors are also aware of the situation. We are also working with them on a regular basis how to reduce the overburden distance, more so when our royalty is so high. So the contractors at the beginning of the year are given the particular objectives to be achieved, otherwise they are penalized for that.
In addition to that, we have been able to reduce the cost, the price, and you will be glad to know that 2022, 2023, 2024, the contractors were not given any price increase despite the increase in price of materials as well as wages of employees.
Okay. Thank you, that is very clear. I think with that, we can conclude the call. Do you have any last closing remarks?
Well, Virandi, I would like to thank you, CLSA, for arranging this call. We welcome this opportunity to interact. We are not covered adequately enough for people to know what we do. Therefore, we wish to extend an invitation that any time that you have a question or a query or clarification, we would be very happy to respond. Any of your team or your participants here wish to visit our site, and this is an open invitation even to Bharat, we would be very happy to accommodate that. You can have a look at the kind of sites that we have, which is probably one of the best, and see what we do. It can also address specifically some of the questions that have been raised in this meeting. Our ESG and the governance credentials are very sound, which we have covered.
We hope if you have the time, you might like to refer to them. We have posted our presentation on the website. We will invite you to access them, and if you have any questions or queries, we would be happy to take it on. With these words from Ido, from Andy, from Ashok, and myself and the team, thank you very much, and we look forward to such interactions in future.
Okay. With that, we will conclude the call. Thank you everyone for joining. Thank you for the participants and also BUMI management. See you again next time.
Thank you Virandi.