The decreasing of coal’s price in 2011-2015 caused by the expansion of shale gas production, oversupply, and the increasing of international clean energy campaign. It caused by the decreasing of earning before interest and tax that affected financial flexibility of coal companies. This study aims to analyse financial flexibility and the impact of external and internal factors on the financial flexibility of coal companies. This study used simulation method with simultaneous equations model consist of 10 structural equations and 13 identity equations estimated using 2SLS (Two Stage Least Squares) method. The result showed there were several coal companies that had financial flexibility. If China’s gross domestic product decreased by 2%, the exchange rate of rupiah to USD also depreciated by 2%. The company would anticipated by lowering the production cost by 5% which would affected the company’s financial flexibility by 43.51% (debt service coverage ratio of 1.51). If the international coal’s price decreased by 2% and the exchange rate of rupiah to USD depreciated by 2%, the company would anticipated by lowering the production cost by 5%. It would increased the financial flexibility of coal companies by 28.62% (debt service coverage ratio of 1.36).
Keywords: Coal Companies, Debt Service Coverage Ratio, External and Internal Factors, Financial Flexibility, Two Stage Least Squares (2SLS)
