Key Takeaways
- Indonesia’s recent coal-sector recovery does not alter its underlying structural risks materially. Risk mitigation strategies, particularly business diversification, are therefore increasingly important to reduce dependence on coal earnings and build more resilient revenue streams with stronger long-term growth potential.
- Six of the 13 coal producers assessed remain at a stage where diversification is more narrative than measurable. These strategies need clearer targets, concrete investments, operational execution, and evidence that non-coal activities can become meaningful economically.
- The sector is pursuing three broad growth areas: coal-related businesses, minerals and metals, and energy transition and waste-related business. However, not all pathways reduce coal risks.
- Diversification has not yet strengthened profitability, as most businesses remain at the investment stage and rely on coal cash flows to fund repositioning. The key test is whether they can become material and profitable earnings sources that reduce coal dependence over time.
Executive Summary
As the world’s largest coal exporter, Indonesia remains highly dependent on coal for export earnings, employment and corporate profits, with the sector ranking among the country’s most profitable.
Despite a recovery since February 2026 amid energy supply disruptions, the sector faces growing structural risks from shifting export demand, domestic policy uncertainty and rising costs, clouding its long-term growth outlook.
Against this backdrop, coal companies need to adopt risk mitigation strategies that can strengthen their long-term resilience. While these strategies may include customer diversification and improved operational efficiency, business diversification is increasingly seen as a way to reduce reliance on coal earnings while building more resilient revenue streams with greater growth potential.
The Energy Shift Institute has formulated a seven-step diversification framework that helps assess whether diversification is merely a strategic message or starting to change a company’s revenue mix, earnings base and risk exposure materially (Figure 1).
For most Indonesian coal companies, diversification remains more narrative than measurable.
The framework shows that six of the 13 companies remain at the narrative stage, which display limited evidence of clear targets, committed capital allocation, or operational build-out.
By contrast, Harum and TBS are the clearest diversification leaders which reflected in non-coal revenue contribution of 69% and 41%, respectively. Other companies, including Bumi and Indika have set targets to achieve 50:50 coal and non-coal revenue, and Bukit Asam’s aim for 30% revenue to come from energy sector.
Granted, permit status and coal reserve conditions may be driving these diversification strategies. The coal reserves of Harum and TBS are relatively low and declining. Although they could have doubled down on coal, both companies have instead directed capital towards non-coal sectors.
Meanwhile, Bumi and Indika face more limited permit extension options, with only one additional 10-year extension available. By contrast, other companies on the list still have substantial coal reserves and greater permit flexibility, which may partly explain their weaker diversification drive and slower progress.
Diversification should not be assessed solely by whether a company has entered new sectors or announced future growth plans. The company needs to support its strategies with clear targets, concrete investment, operational execution, and evidence that non-coal activities can become meaningful economically.
Parent-level diversification does not necessarily reduce coal exposure.
Diversification is most effective when pursued at the level of the coal company, where coal-related risks are concentrated. Coal companies often cite non-coal businesses within their parent group as evidence of diversification. However, a diversified corporate structure does not necessarily produce diversified financial performance. The coal company may still remain the group’s main source of revenue, profits, liquidity and dividends.
In Indonesia, limited disclosure makes parent-level diversification difficult to assess. Several parent companies are privately held, owner-controlled, or part of complex corporate structures with limited disclosure.
Among the identifiable parent companies or related listed entities assessed in this report, coal accounts for 69% or more of group revenue.
This percentage indicates that coal may continue to dominate group earnings, restricting the extent to which parent-level diversification reduces coal-related risk.
The type of diversification also matters.
Indonesian coal mining companies are pursuing three broad growth areas: coal-related businesses, minerals and metals, and energy transition and waste-related businesses. However, not all pathways reduce coal risk in the same way.
Expansion such as coal-fired power and coal downstream development may strengthen the core business, but it does not necessarily reduce coal dependence and may introduce more operational and financing risks.
By contrast, businesses in minerals and metals, the energy transition and waste could provide other earnings bases and offer potential over the longer term to reduce coal market exposure, given their different market structures.
The companies’ long-term value will depend on whether they can move beyond strategic intent, achieve meaningful scale and profitability, and reduce reliance on coal-linked cash flow
Diversification has not yet translated into stronger profitability.
The current margin profile suggests that companies with higher operating margins remain largely coal-focused, while more diversified companies, including TBS and Harum, report lower margins (Figure 2).
This does not mean diversification is failing. Rather, it indicates that diversification can create near-term execution and profitability pressure, especially when the new businesses are still in the investment, ramp-up or integration phase and do not yet contribute meaningfully to earnings.
Coal still plays an important funding role in diversification even as its structural risks increase. As a mature and cash-generating business, coal remains necessary to support profitability while the company absorbs the near-term costs of diversification.
Indonesia has long relied on coal as a source of export earnings, fiscal revenue, employment and regional economic activity. If coal-related revenues weaken as fundamental risks grow before companies and the wider economy have built credible alternative earnings engines, the adjustment could become more difficult for both coal producers and the country.
The current earnings window, supported by stronger coal prices and potentially higher production, should therefore be used to develop non-coal businesses that are material, profitable and capable of reducing dependence on coal-linked cash flow over time.
Idham Muhammad Fachri is Senior Analyst of the Energy Shift Institute
Hazel Ilango is Principal and Coal Transition Lead of the Energy Shift Institute
The Energy Shift Institute is an independent non-profit energy finance think tank driving context, clarity and credibility for Asia’s energy transition pathways.