Corporate Governance Fact Sheets

Consistent adherence to the GCG principles is important to ensure business growth and create a favorable climate for investment. AEI strives to apply the GCG principles on a day-to-day basis in all its business units. Together with the Adaro Values of “Integrity, Meritocracy, Openness, Respect and Excellence”, this will keep AEI a trustworthy, transparent, and sustainable company for all its stakeholders.

ARTICLES OF ASSOCIATION

The Articles of Association is a fundamental document that serves as the legal basis for the company's business activities. It regulates the company's governance and organizational structure, the rights and obligations of shareholders, as well as the Board of Commissioners and Board of Directors, including the procedures for decision-making within the company.

CODE OF CONDUCT

AEI always runs its business by applying the Adaro Values of “Integrity, Meritocracy, Openness, Respect and Excellence” and strengthens GCG implementation in order to stay ahead of the increasingly stronger attention to the standards of corporate governance in Indonesia. To support this commitment AEI has issued an official Code of Conduct, which is applicable to all members of the BoC, BoD, supporting organs, senior management, and all employees at all levels without exception. This Code of Conduct is presented on AEI’s website www.adaro.com.

The Code of Conduct sets forth the principles and behaviors that must be upheld in interacting with the stakeholders in a fair and balance manner. This guidelines cover:

1. the Adaro Values;
2. how the company and every individual of the company must comply with the applicable laws and regulations, as well as GCG principles;
3. how every individual in the company must interact with various stakeholders, including the shareholders, customers, suppliers, communities, creditors, and other employees;
4. the communication with the shareholders and investors;
5. insider trading, anti-corruption and anti-fraud, and transactions with a conflict of interest; and
6. the company’s information disclosure.

The company has promulgated the Code of Conduct to all Executives in Charge (EIC) of the company’s subsidiaries. After such promulgation, the EIC will continuously disseminate the Code of Conduct to all employees at the Adaro Group.

The Company's official code of ethics guidelines can be found here.

INSIDER TRADING, ANTI-CORRUPTION AND ANTI FRAUD

In line with the Adaro Value of “Integrity”, all personnel within the Adaro Group are obliged to prevent the occurrence of insider trading, corruption and fraud. This obligation has been included in AEI’s Code of Conduct and BoC and BoD Charter.

In those documents, it is clearly stated that the BoC, BoD, supporting organs, and all employees at all levels are obligated to avoid and prohibited from buying and/or selling the company’s shares when receiving information, whether directly or indirectly, from the company’s insider(s), being involved in any activity conducted to manipulate the company’s share price, and using the company’s confidential information to gain personal benefits and/or benefits for any other parties.

In addition, AEI has issued a gratification policy that prohibits each employee of the Adaro Group from accepting any gifts or gratuities which is considered an act of bribery.

TRANSACTIONS AND BALANCES WITH RELATED PARTIES

In the normal course of business, AEI engages in transactions with related parties. The transactions primarily consist of services and other financial transactions.

In dealing with related parties, the company ensures that all transactions are fair and at arm’s length by doing the followings:

1. determining the pricing policies of coal sales to related parties based on international benchmarks, adjusted for coal specifications; and
2. treating our mining services, logistics, and other subsidiaries as third-party service providers and benchmarking the fees for their services (to the extent available) to that of service providers external to the Adaro Group which perform similar activities for the group.

In 2023, all related party transactions has been reported and disclosed based on the provisions of OJK regulations.

AEI has investments in joint venture companies, i.e. PT Tanjung Power Indonesia (TPI), PT Bhimasena Power Indonesia (BPI) and Kestrel Coal Resources Pty Ltd. In 2023, AEI recorded revenue from sales of coal to TPI amounting to US$22.33 million, revenue from sales of coal to BPI amounting to US$185,2 million, and revenue from management and consulting services to TPI and BPI of US$0.33 million and US$1.06 million, respectively. Total revenue from related parties was US$209.08 million, or 3.21% of AEI’s revenue.

AEI’s related parties transactions in 2023 has been disclosed in 2023 Financial Statement attachment 5/120 to 5/123.

MERGERS, ACQUISITIONS, AND TAKEOVERS

In the cases of mergers, acquisitions, and/or takeovers, which require shareholders’ approval, the BoC and BoD appoint an independent party to evaluate the fairness of the transaction price. In accordance with OJK regulations number 17/POJK.04/2020 concerning the material transactions and changes in business activities, the transactions amounting more than 50% of the equity must obtain the shareholders’ approval through GMS

In December 2023, AEI acquired five companies. These companies are PT Indoprima Niaga Sejahtera, PT Indotama Semesta Manunggal, PT Indovisi Sentosa, PT Mitra Rimba Indoprima, and PT Indo Mitra, each owned by AEI at a 65% stake.

COMPLIANCE WITH CREDITOR’S RIGHTS

AEI stakeholders, including creditors, are entitled to obtain fair and equal treatments in accordance with its business relationship with the company. AEI has complied with and committed to fulfilling the creditors’ rights according to the terms agreed in the respective contracts, in accordance with AEI’s Code of Conduct.

PROCUREMENT POLICY

AEI implements a procurement policy for goods and/or services throughout the Adaro Group, aiming to enhance capability and standardize the procurement process for goods and/or services. One aspect of the procurement policy involves the use of information technology and enhancing the implementation of good corporate governance in the procurement process for goods and/or services. Some of AEI's subsidiaries have adopted an E-Procurement application system to support the procurement process for goods and services. This application ensures transparency and equality throughout the procurement process, from supplier registration, procurement selection processes, and contract management to supplier performance evaluation.

CUSTOMER WELFARE

AEI has treated its customers equally and responsibly as stated in its Code of Ethics, which includes prioritizing customer satisfaction, providing accurate information regarding the company's products and/or services, and complying with and respecting all agreed terms, conditions, and regulations.

CUSTOMER COMPLAINT HANDLING MECHANISM

AEI consistently strives to maintain and enhance its reputation in providing high-quality products and services to its customers. The company is committed to being responsive to the needs and complaints of its customers and handling all complaints promptly. The company also conducts customer satisfaction reviews every two years to ensure that the services and products provided meet customer needs.

AEI's subsidiary, PT Adaro Indonesia, has Standard Operating Procedures for complaint handling mechanisms to accommodate customers who wish to report dissatisfaction with the quality of products to the marketing team. AEI appreciates every complaint from customers and endeavors to develop and maintain a transparent and effective process for handling complaints. All customer complaints will be investigated by the Operations, Marketing, and Logistics teams, which will coordinate with the marketing team to formulate corrective actions for addressing the complaints. The marketing team will communicate the investigation results to the customer and seek the best possible solution.

LONG-TERM INCENTIVES FOR BOD AND EMPLOYEES

AEI is still conducting analyses to determine the form of the most appropriate long-term incentives for the BoD and employees.

EXTERNAL AUDITORS

According to the 2023 Annual General Meeting of Shareholders (RUPST) resolutions, the shareholders approved the appointment of Tanudiredja, Wibisana, Rintis and Rekan, a member firm of the PwC global network in Indonesia, as the Public Accounting Office to audit AEI's financial statements for the current fiscal year ending on December 31, 2023. The total cost for auditing the consolidated financial statements for the fiscal year 2023 and for reviewing the mid-year financial report is Rp2,548,000,000.

INFORMATION TECHNOLOGY

Information technology has become a crucial part of the growth and smooth operation of companies, especially for companies as large as the Adaro Group. With rapid developments both in scale and business sectors, the integrated business of the Company from mining to power generation has a high level of complexity, demanding standardization and best practices in the application of information technology (IT) to enable simpler, structured, and faster workflows, thus achieving targets more efficiently and effectively through optimal productivity.

This thinking has led the company to integrate an Enterprise Resource Planning (ERP) system, consisting of several different systems, into 1Adaro ERP, providing the company with a centralized and standardized ERP. This 1Adaro ERP system is integrated with an Executive Dashboard consisting of Microsoft Axapta 2012 and SAP S/4HANA. The migration of these systems began with the implementation of Microsoft Axapta 2012 for the Company in December 2017, with over 25 companies already integrated, followed by the implementation of SAP S/4HANA in SIS, AMC Group, BC Group, AL Group, AI, AMI groups, KPI, and ABI.

The rapid development of information technology also urges the company to enhance and optimize IT infrastructure and facilities to continually accommodate needs and comply with internal regulations and applicable laws. One aspect prioritized is protection against cybercrimes. Therefore, the Company will continue to monitor, review, and implement the latest security measures to protect the interests and needs of stakeholders, including anticipating potential information system disasters.

MATERIAL LITIGATION FACED BY THE COMPANY

AEI has disclosed the legal proceedings of the company in the Notes to the Consolidated Financial Statements for the year ending on December 31, 2023 – Schedule 5/148.

ADMINISTRATIVE SANCTIONS AND SUSPENSION

No suspensions or administrative sanctions were imposed on any of our BoC or BoD members by the regulators in 2023.