28th Edition - The President Post

B4
October 12, 2011
The President Post
www.thepresidentpost.com
Executive Highlights
The rupiah broke the
psychological level of
Rp 9,000 to the dollar
in the third week of
September
amid global risk aversion arising
from the debt crisis in Europe and
a weak U.S. economy. The rupiah,
which dropped to a low of
Rp9,365 to the dollar at one time,
was trading at a high of around
Rp8,500-8,600 to the dollar just
several weeks ago. Foreign ownership
of Indonesian government
bonds have fallen to Rp234 trillion
as of 19 September (the latest
data available), down 5.3% from
the start of the month. The yield
on the 10-year government bond
has jumped 18 basis points (bp) to
7.3%. Overseas investors, meanwhile,
have sold a net Rp4.5 trillion
in Indonesian stocks as of 21
September from the start of the
month. The Indonesian Stock Index
(IDX) has also plunged more
than 20% since reaching a record
high of nearly 4,200 in early
August. Traders say the current
volatility is a textbook example
of global funds leaving Indonesia
and other emerging markets
for dollar assets in risk-off mode.
Bank Indonesia monetary policy
director Hendar said the central
bank would intervene in the
markets regularly to keep the rupiah’s
movement in line with regional
currencies. He expects the
rupiah’s recent decline to be temporary.
Finance Minister
Agus Martowardojo
said the government
could introduce
a fiscal stimulus
package next year
as concerns mount that a slowdown
in global growth could impact
the Indonesian economy.
Taking lessons from the 2008
global financial crisis, the minister
emphasized that the country
needed to actively anticipate
a possible slowdown in global
growth. No details have been put
forth on the possible fiscal stimulus
package. Nonetheless, the
finance ministry’s chief of fiscal
policy Bambang Brodjonegoro
said it would likely combine “fresh
money and policies” and emphasize
creating sources for domestic
growth both in terms of consumption
and investment. As a comparison,
in 2008 the government
launched a Rp73 trillion stimulus
package to mitigate the impact of
the global economic slowdown.
The package involved government
spending and fiscal incentives in
the form of government-born import
duties, value-added and income
taxes to revive business
activity. At the time Indonesian
growth declined from 6.1% y-o-y
in 2008 to 4.5% in 2009. The government
has yet to revise its official
forecast of 6.5% y-o-y growth
this year and 6.7% growth in
2012. However, a worst case scenario
projection by the trade ministry
has growth slowing to 6.2%
this year and 5.2% in 2012.
Investors from China’s
Jilin Province signed
nine deals worth
US$9.5 billion in
Indonesia
during an economic and trade
conference earlier this month.
The signing was witnessed by
chief economic minister Hatta
Rajasa and investment board
(BKPM) chairman Gita Wirjawan.
The deals included a US$6 billion
nickel smelter facility in Southeast
Sulawesi by Jilin HOROC
Nonferrous Metal Group. This
project will include a smelter with
a capacity of 100,000 tons of nickel-in-matte
and a 1,000 MW coalfired
power plant to support the
smelter. Construction of the facility
will be financed by the Bank of
China. Other projects signed during
the conference included investments
in the mining, agricultural,
pharmaceuticals and food
and beverages sectors. Jilin provincial
government representative
Sun Zhengcai said the deals
reflected efforts by businesses in
Northeast China to expand into
Southeast Asia’s largest economy.
State power utility
PLN has appointed
Barclays Capital and
Citi to arrange a
planned US$2 billion
global bond issue.
PLN finance director Setio Anggoro
Dewo said the firm was looking
to raise the funds this year,
and plans to meet with a number
of global fixed income investors in
a road show starting 27 September.
He said a final decision on
whether to issue the global bonds
would depend on demand and
conditions in the currently volatile
global financial markets. The
funds will be allocated to finance
a 10,000 MW power plant expansion
program that PLN is currently
undertaking. Projects in the
pipeline include the Indramayu
2,000 MW coal-fired power facility
in West Java; the 110 MW Hulu
Lais coal-fired plant in Bengkalis,
Riau; the 110 MW Sungai
Penuh coal-fired facility in Jambi;
the Kotamobagu 80 MW coalfired
plant in North Sulawesi; and
the Tulehu 20 MW coal-fired facility
in Ambon, Maluku. PLN has a
credit rating of BB from Standard
& Poor’s, Ba1 from Moody’s and
BB+ from Fitch.
Engineering firm
Petrosea has signed
an eight-year coal
mining contract with
Admitra Baratama
Nusantara worth
US$930 million.
The new contract is a revision to
an earlier five-year deal signed in
2009, worth around US$200 million,
for mining services at Admitra’s
mine in Sanga-Sanga, East
Kalimantan. Admitra produced
three million tons of coal in 2010
from Sanga-Sanga and is looking
for Petrosea to help boost production
to four million tons this
year and five million tons in 2012.
Petrosea said the latest deal represented
its largest contract to
date and would provide a significant
boost to its revenue stream
from mining services. The company
also provides mining services
to coal miners Gunung Bayan
Pratama and Santan Batubara.
Petrosea is a subsidiary of integrated
energy firm Indika Energy.
India’s GMR Energy
has acquired a 30%
stake in local coal
miner Golden Energy
Mines in a deal worth
US$550 million.
As part of the agreement, GMR
Energy will be able to purchase
up to 10 million tons per year over
the next 25 years. GMR Energy
chief executive officer Raaj Kumar
said the deal would provide
the Indian firm access to quality
coal from one of the lowest cost
producers in Indonesia. He added
that the deal would also provide it
with fuel security for its plants in
India that are under construction.
Golden Energy Mines has three
coal blocks in Kalimantan and
two blocks in Sumatra with coal
reserves totaling more than 860
million tons and coal resources
estimated at more than 1.9 billion
tons. It currently exports
coal to China and India with a client
base that includes Sumitomo
Corp., Glencore International and
Ace Trading Group. Golden Energy
Mines is affiliated with Indonesian
conglomerate the Sinar Mas
Group.
Thailand-based
Siam Cement will
acquire a 30% stake
in top petrochemical
producer Chandra
Asri for US$442
million.
Siam Cement will purchase a 23%
stake in Chandra Asri from Singapore
sovereign wealth fund Temasek
Holdings. The remaining
7% stake will be purchased from
diversified conglomerate Barito
Pacific. The latter will retain
a majority 65% shareholding in
Chandra Asri following the deal.
Siam Cement said the acquisition
represented a unique opportunity
to invest in Indonesia’s leading
petrochemical franchise and
further expand its business in a
highly attractive growth market.
The Thai firm also owns a polyvinyl
chloride (PVC) plant in Indonesia
with a capacity of 120,000 tons
per year. Chandra Asri currently
operates Indonesia’s only cracker,
producing 520,000 tons of petrochemical
products including polyethylene,
polypropylene, styrene
monomer and various other olefins.
Siam Cement is also reportedly
in talks to purchase Indonesian
chemical producer Sulfindo
Adiusaha in a potential US$700
million deal.
Scorpa Pranedya
has been awarded
an engineering,
procurement and
construction (EPC)
contract worth
US$255 billion for
the Cepu Oil and Gas
Block.
The contract was announced by
upstream oil and gas regulator
BP Migas, and is for one of five
supporting infrastructure facilities
needed to take the block to
full production capacity. Cepu
operator Exxon Mobil has already
awarded a US$750 million EPC
contract to a consortium led by
Samsung Engineering and Tripatra
Engineering to support infrastructure
development at the oil
and gas field. Cepu currently produces
around 20,000 barrels per
day (bpd) of crude oil. The new
infrastructure facilities are slated
to boost Cepu’s production to
165,000 bpd over the next several
years.
French oil and gas
giant Total has signed
a deal with canadian
producer Talisman
Selected Instant Indicators
Energy to farm into
three deep-water
blocks in Indonesia.
Under the agreement, Total will
a acquire a 50% interest in the
Sageri production sharing contract
(PSC), a 35% interest in the
South Sageri PSC and a 20% interest
in the Sadang PSC. All
three blocks are located in an area
of 10,700 km in the Makassar
Straits between Sulawesi and Kalimantan,
in water depths ranging
from 400-2000 m. The deal
sees Total committing to extensive
seismic plans and a program
of exploration wells with an initial
spud expected before the end
of the year. Jean-Marie Guillermou,
Total’s senior VP for Asia Pacific
exploration and production,
said the latest acquisition reflects
its strategy to further expand its
acreage in new exploration areas
in deep offshore and to continue
investing in Indonesia. Total
is the largest gas producer in
Indonesia, with the bulk of production
currently coming from its
Mahakam PSC offshore East Kalimantan.
State miner Tambang
Batubara Bukit
Asam has secured a
US$220 million loan
facility from Bank
Negara Indonesia
(BNI).
Company spokesman Achmad
Sudarto said the funds would be
used to construct the Banjasari
2x110 MW coal-fired power facility
near Lahat, South Sumatra.
The power facility will be used to
support Bukit Asam’s coal mine
expansion in the area. Achmad
said the China National Electric
Engineering Co. has been awarded
the engineering, procurement
and construction (EPC) contract
for the power facility. Local engineering
firm Citracontrac has
been awarded the contract to
build the plant’s transmission infrastructure.
The Banjarsari facility
is scheduled to start commercial
operations in 2014. Bukit
Asam is looking to boost coal production
to 50 million tons per
year over the next five years from
around 12 million tons per year
currently.
Leading Chinese
heavy equipment
manufacturer Sany
Group said it would
invest US$200
million for a new
production facility in
Indonesia.
The group said it plans to make
Indonesia its base for manufacturing
mining, construction and
heavy equipment for the Southeast
Asian and Australian market.
The plant will be built in the
Karawang industrial estate in a
venture with local firm Jakarta
International Machinery Center
(Jimac). The latter is also the
authorized distributor for Sany’s
products. The Chinese firm
said the Karawang facility would
produce a range of items including
concrete machinery, excavators,
crawler and truck cranes,
pile driving machinery, machinery
for highway construction and
machinery for the ports. Jimac
president director Benny Kurniajaya
said the venture aimed to sell
300-500 units per year in the domestic
market over the next several
years.
Astratel Nusantara
has acquired a 95%
stake in an East Java
toll road in a Rp750
billion deal.
The 40.5-km toll road links Kertosono
and Mojokerto, two cities
located near East Java’s major
urban center Surabaya. The
controlling stake was acquired
from local firm Natpac Graha
Arthamas. The Kertosono-Mojokerto
toll road forms part of the
Yogyakarta-Solo-Surabaya corridor
of the Trans Java highway.
The acquisition adds to Astratel’s
current portfolio of toll roads,
which includes the 72.5-km toll
road linking Merak and Serpong
in Banten and the 12.5-km toll
road linking Serpong and Kunciran
near Tangerang. Astratel
is a subsidiary of diversified conglomerate
Astra International.
Company spokesman Arief Istanto
said the acquisition reflects the
Astra Group’s strategy to expand
into the toll road and infrastructure
sectors.
British American
Tobacco (BAT) raised
Rp740 billion from
its 13.4% stake sale
in cigarette producer
Bentoel Internasional
Investama to UBS AG.
BAT will retain an 86% stake in
Bentoel following the deal. BAT
acquired the cigarette maker from
the Rajawali Group in 2009. Bentoel
is currently Indonesia’s thirdlargest
cigarette producer, representing
around eight percent of
Indonesia’s 300 billion cigarettes
per year market. The company
reported revenues of Rp4.7 trillion
for the first half of the year,
up 8% from a year earlier. Bentoel’s
profits for the period totaled
Rp235 billion, more than double
the Rp113 billion posted in 2010.
Business Highlights
are contributed to
The President Post
by CASTLEASIA/
PT Jasa Cita from
information supplied
to members of their
CEO Forum, the
Indonesia Country
Program. They are
reprinted here with
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