Financially-strapped Inalum gets Japan aid<\/p>\n
JAKARTA (JP): The Japanese government said yesterday it will
\nprovide financial assistance to Indonesia to help restart a
\nstalled joint aluminum smelter at Asahan in North Sumatra, Kyodo
\nreported from Tokyo yesterday.<\/p>\n
The joint smelting company -- PT Indonesia Asahan Aluminum
\n(Inalum) -- which began production in 1982 has been stalled due
\nto falling aluminum prices and increasing financial burden on the
\nIndonesian side, according to the Japanese news agency<\/p>\n
Kyodo said Japan will lower interest rates on its lending
\nextended to the Indonesian government for the project -- from 5.0
\npercent to 4.1 percent for the portion provided by the Export-
\nImport Bank of Japan and from 5.3 percent to 4.4 percent for
\nloans from private financial institutions.<\/p>\n
The joint venture's capital will be expanded by 13 billion
\nyen, of which the Japanese side will put up 7.66 billion yen and
\nIndonesia 5.34 billion yen, the government said.<\/p>\n
Inalum has been beset with financial problems since the early
\n1980s. When the smelter began production at its full designed
\ncapacity of 225,000 tons in 1984, the international aluminum
\nprice had collapsed to $1,000 from as high as $2,000\/ton in 1980.<\/p>\n
Its debt burdens, which are denominated entirely in the
\nJapanese yen, increased sharply when the yen appreciated by more
\nthan 50 percent in 1985 against the dollar, in which the
\ninternational aluminum price is quoted. Therefore, Inalum lost
\nmoney steadily between 1982 and 1986.<\/p>\n
In response, the Japanese shareholders, consisting of 12
\ncompanies and the government, injected 12 billion yen ($79
\nmillion at the rate prevailing at that time) in additional equity
\ncapital and reduced the interest rate on Inalum's 220 billion yen
\ndebts.<\/p>\n
The company made a sharp turnaround in 1987 with a profit of
\n$50 million which doubled to $100 million in 1987. But this
\nbullish era was soured by the decline in the smelter's production
\ndue to the decrease in the power supply from its power stations
\nwhich was caused by the dropping of the water level in the lake.<\/p>\n
The bottom line of the 12 years of Inalum's operations is
\ncumulative losses of $230 million. (vin)<\/p>",
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