Gribaldi thohir ambition

Boyish Ambition
Justin Doebele, 09.26.11, 12:00 PM ET

It's a warm night in Tanjung, a small town in the heart of South Kalimantan, and billionaire industrialist Garibaldi Thohir can be found at a humble roadside eatery. Sitting with the chief of police and other dignitaries at simple wooden tables, Boy--as everyone has called him since childhood--chats and enjoys the basko, a traditional clear broth meatball soup costing around $1 a bowl. "For me it's a relaxing time," he says. "I can be myself, but I'm also fulfilling my duties as CEO." The restaurant is filled with guests and employees of coal mining company Adaro Energy, where he is president director and one of the largest shareholders.

Good relations with local officials in the town nearest Adaro's two mines is just one of the many factors in the company's success. Over a three-day visit he'll participate in a groundbreaking for a new Islamic center, pray with local religious figures and visit with community leaders.

Jakarta-based Thohir will also visit the mines, and both the older Tutupan and the adjacent Wara are going full tilt. Since Thohir and four other investors purchased Adaro in 2005 production has jumped from 34.3 million metric tons in 2006 to 42.2 million last year. This year the company is aiming to hit at least 46 million metric tons, enough to sup ply half of Jakarta's power for a year. Today Adaro is the largest single-site coal producer in the southern hemisphere and the fourth largest in the world. Demand is high for its special, branded "Envirocoal" because it boasts an extremely low ash and sulfur content, making it ideal for companies looking to reduce emissions. "We want to be the number one coal company in Southeast Asia," he says. "That's my vision."

The company's success has made four of the five in vestors billionaires and the fifth one is virtually a billionaire. Thohir owns roughly one-sixth of Adaro, a stake worth well over $1 billion. That holding plus his other investments give him an estimated net worth of $1.5 billion. "I never count how much I'm worth," he says. "I'm still the same person."

This year net profits are bouncing back after falling by 47% last year to $245 million (on a 4% decline in revenue to $2.7 billion). In the first half of this year Adaro already made more money than all of last year--net profits totaled $268 million, a jump of 113% over the same period a year earlier. Revenue rose 36% to $1.8 billion. The reason for last year's plunge in profits: Heavy rains in the third quarter caused output to fall. 

That episode exposed Adaro's main vulnerability. "With one [mining] site [an event or condition] affects the entire company," says Macquarie Securities analyst Albert Saputro. "Yes, you have economies of scale, but the risk is higher."

To diversify Adaro agreed last year to pay $335 million to take a 25% stake in the Maruwai coal project in East Kalimantan, joining with Australian miner BHP Billiton, which owns the rest. Coal reserves at this site are estimated at 774 million metric tons, 80% being higher-value coking coal used to make steel, rather than Envirocoal, which is used mostly for power production. The company is also looking for acquisitions. Last month it agreed to buy 75% of coal miner Mustika Indah Permai for $222.5 million. "We have to do organic growth, but we have to go beyond that and be sophisticated," says Thohir. "So we are looking--but only for world-class assets."

He would also like to expand into power production, using Adaro's coal as fuel: "It's good to go into power. It has more predictable earnings than mining." The company is building two 30-megawatt power plants next to its mines, and they're expected to produce power by 2013, mainly for its own use.

Planning ahead is one key to Adaro's success. To hit its goal of producing 80 million metric tons in 2014, it must continually improve productivity. The company already operates around the clock except for major holidays. It has built a 50-mile road from the pit to a loading terminal to take coal down a river and out to sea for delivery, especially to coal-hungry India and China. To increase efficiency Adaro is also planning a conveyor system to carry dirt waste and other "overburden" out of the pit. Other ideas under consideration are changing blasting methods in the pit, since a portion of the mine now has to be closed for safety reasons.

Thohir, 45, comes from a distinguished background. He is the son of Mochamad Teddy Thohir, now 76, who was the highest-ranking Indonesian in Union Carbide's country office before becoming one of the founders of Astra International, which grew into the nation's largest car dealer (now part of Hong Kong's Jardine group).

Named Garibaldi after the Italian war hero, Thohir recalls being advised by his father, "If you can make it, good, but if you cannot make it, too bad. It's up to you." After getting an M.B.A. at the former Northrop University in California, in 1991 he ventured into his first mine, Allied Indo Coal, which failed. He had better success with Wahana Ottomitra Multiartha (WOM Finance), a motorcycle-financing company. With an investment of $500,000 in 1997 Thohir built the company to the point where it was worth $150 million when he took it public in 2004. A year later Bank Internasional Indonesia acquired 67%. Thohir got $20 million, sharing half with his family and reinvesting the other half in Adaro. "I thought that [WOM Finance] was my best investment ever, until I invested in Adaro," he says.

The Adaro acquisition did not come without controversy. Thohir and the four other investors--Benny Subianto, Edwin Soeryadjaya, Sandiaga Uno and Theodore Rachmat (now all among Indonesia's 20 richest)--bought 40% of Adaro from Deutsche Bank for $46 million. The original owner of the stake, fellow billionaire Sukanto Tanoto, filed a lawsuit in Singapore to prevent the sale (he had lost ownership after defaulting on a loan from Deutsche Bank). He lost the suit in 2007 and the next year Adaro went public.

What brought together these five investors? Except for Uno, there is the Astra connection: Subianto, Soeryadjaya, Rachmat and Thohir's father all worked there. Then there are family ties: Thohir, Soeryadjaya and Rachmat are related. All of them are now Adaro officials, and Rachmat's son Christian is a director. The close-knit group has deep experience. "We want to make Adaro as good as Astra; that is one of our dreams," says Thohir.

Adaro has no plans to go regional or global. "We won't look at assets outside of Indonesia, at least not in the near future," says Thohir. "I'm bullish on Indonesia."