By k on August 3, 2009

Hong Kong, August 03, 2009 -- Moody's Investors Service has today upgraded
the local currency corporate family rating for PT Adaro Indonesia
("Adaro") to Ba1 from Ba2. 

"The upgrade acknowledges Adaro's strong and improving operating and
financial profile which has been aided by increasing ASP's as well as
efforts to improve efficiencies and reduce costs," says Laura Acres, a
Moody's Vice President. 

Such strengths have been manifest in the generation of positive free cash
flows over the last few years which have been primarily applied to
reducing total adjusted debt such that debt has fallen by more than 40%
since year-end 2006. As a result, Adaro's EBITDA/interest coverage has
increased to 19x as of March 2009 from 1.7x, while its adjusted
debt/EBITDA ratio has fallen to 0.9x from 3.3x during the same period. 

Adaro's Ba1 rating reflects: 1) its status as one of the world's
lowest-cost producers and exporters of coal, with a long concession life
(to 2022); 2) the quality of its customer base, as represented by large
utilities with excellent payment records; 3) its well established
operations, with a record of consistent production growth and
deleveraging; 4) ability to lock in customers, in terms of volume, for
substantial proportions of forward production; and 5) strong financial
profile.

At the same time, the rating recognizes key challenges such as a lack of
diversification given Adaro's single site and product, as well as issues
pertaining to the regulatory environment and emerging market risks
arising from operating in Indonesia as captured by the country ceiling of
Ba2/stable.

The stable outlook reflects our expectation that Adaro will maintain its
operating and financial profile.

The possibility of upward pressure is limited given that Adaro is one of
the most highly rated single commodity mining companies globally;
furthermore, its revenue base remains relatively small and the company
lacks production diversity compared with similarly rated global peers. 

Adaro's financial metrics are strong for the rating level therefore
downward pressure on the rating is most likely to come about should Adaro
experience material disruption to its operations, or industry
fundamentals deteriorate to the extent that Adaro's ability to service
its debt is compromised, Moody's considers the likelihood of this as low
over the near to medium term..

Other negative rating trends include: 1) event risk as a result of any
adverse decision regarding the off-setting of VAT payments; 2) any change
in laws and regulations, particularly on the mining concessions, that
would adversely affect the business; and 3) any abrupt change in
financial strategy and/or dividend policies.

The principal methodology used in rating Adaro was the Global Mining
Industry dated May 2009, which can be found at www.moodys.com in the
Credit Policy & Methodologies directory, in the Ratings Methodologies
subdirectory. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Credit Policy & Methodologies directory.

The last rating action was taken on 29th January 2008 when Adaro's local
currency corporate family rating was upgraded to Ba2/stable.

Adaro is one of the largest single site coal producers in the southern
hemisphere and one of the world's largest sub-bituminous coal companies.
It exports approximately 77% of its products to Southeast Asia, the US
and Europe, while the rest is for the domestic market.

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