New Indonesia coal company to shake up world

Rothschild said the combined entity aims to raise cash from the likes of Chinese sovereign wealth fund China Investment Corp. - which bought 1.9 billion dollars of Bumi Resources' debt last year.

"This could become a global coal company, as opposed to an Indonesia-focused coal company," Rothschild said.

Rothschild designed the Bumi-Berau deal through his investment firm Vallar PLC. Vallar listed on the London Stock Exchange in July after raising about 1.1 billion dollars from investors.

It completed a "reverse takeover" deal worth US$3billion dollars on November. 16, giving it 25 percent of Bumi Resources, Indonesia's biggest coal miner by output, and 75 percent of Berau, the fifth biggest.

Indonesia's powerful Bakrie family, which controls Bumi Resources, will own 43 percent of Vallar, and Indra Bakrie will become its chairman. The family also includes billionaire Golkar Party chief Aburizal Bakrie.

Analysts have said the move looks like a good way to take advantage of Indonesia's position as a key raw materials supplier to the booming Asian economies of India and China.

But they have also raised red flags over allegations of corruption and poor governance in Bakrie-related companies.

Rothschild said the Indonesian market was "very, very undervalued" compared to other major emerging countries like Brazil, Russia, India and China.

"And whether the naysayers like it or not, it's a democracy," he added.

Bumi Resources and Berau this year will produce about 78 million metric tons of thermal coal used in power plants in China and India.

"What I like about this industry is that you're effectively selling dirt," Rothschild told Dow Jones.