Govt says Semen Padang spin-off plan unviable<\/p>\n
JAKARTA (JP): Spinning off PT Semen Padang from the Semen
\nGresik Group was an unviable option, the government said on
\nTuesday, citing it as costly and detrimental to privatization
\nplans.<\/p>\n
The Ministry of State Enterprises' director of state
\nenterprises restructuring and privatization, Parkesit Soeprapto,
\nurged legislators and regions backing the spin off plan to
\nreconsider their stance.<\/p>\n
\"Because of the dilemma the government would face from the
\nconsequences of a spin off, there must be careful consideration
\nto the (spin off) demands from the regions,\" Parkesit told
\nlegislators in a hearing with the House of Representatives' state
\nbudget commission.<\/p>\n
Semen Gresik Group comprises Semen Padang and PT Semen Tonasa,
\nwhich the government merged into PT Semen Gresik in 1997.<\/p>\n
Demands to spin off Semen Padang from the publicly listed
\nSemen Gresik followed plans to privatize a 51 percent share
\nin Semen Gresik to a foreign cement company.<\/p>\n
Mexican-based Cemex SA de CV is set to purchase the share,
\nafter already owning 25.53 percent.<\/p>\n
But Cemex's plan to increase its ownership is facing
\nresistance, with a surfacing of antiforeign sentiment in the
\nprovince of Padang, as well as in Tonasa.<\/p>\n
The local people of Padang said Semen Padang was built on
\ntheir ancestral land and have demanded it remain under Indonesian
\ncontrol.<\/p>\n
They warned that separatism movements in the province would
\nsurge should the government ignore the province's demand.<\/p>\n
In response, the government considered a spin off of Semen
\nPadang from Semen Gresik before selling the latter to Cemex.<\/p>\n
But Parkesit said a spin off could prove costly, as the
\ngovernment must pay compensation to Cemex for the lost of Semen
\nPadang and Tonasa's shares.<\/p>\n
He said the government would have to buy back Cemex shares in
\nSemen Padang and Tonasa, at a value of between Rp 2.5 trillion
\n(about US$263.15 million) and Rp 3 trillion.<\/p>\n
\"It is impossible we'd use state funds considering our budget
\nis running at a deficit,\" he said.<\/p>\n
Another option, he said, was to swap the government's shares
\nin Semen Gresik with those in Semen Padang and Tonasa.<\/p>\n
But the value of the state shares in Semen Gresik would not be
\nenough to cover Cemex's lost shares in Semen Padang and Tonasa,
\nhe said.<\/p>\n
Parkesit also argued that the spin off plan would hurt
\nIndonesia's credibility before foreign and local investors.<\/p>\n
\"The government would be viewed as not being consistent in its
\npolicy at a time it is promoting the privatization of state
\nenterprises,\" he explained.<\/p>\n
He further warned that pushing ahead with the spin off plan
\nwould cancel a put option agreement between the government and
\nCemex.<\/p>\n
Under that deal, the government owns the right to sell its 51
\npercent share in Semen Gresik for $520 million to Cemex.<\/p>\n
Cemex must buy the shares at the agreed price, should the
\ngovernment decide to exercise its put option right.<\/p>\n
The put option agreement is valid until Oct. 26.<\/p>\n
Selling Cemex on time could rescue the government from an
\nembarrassing shortfall in this year's privatization proceeds.<\/p>\n
With only three months remaining to the year's end,
\nprivatization proceeds still stands at zero from a targeted Rp
\n6.5 trillion.<\/p>\n
The proceeds pose a vital revenue source to help plug the
\nstate budget's gaping deficit.<\/p>\n
Securing the privatization target is also part of the
\ngovernment's reforms targets agreed with the International
\nMonetary Fund (IMF).<\/p>\n
But the Cemex put option deal could meet opposition from
\nlegislators warning against foreign domination of the national
\ncement industry.<\/p>\n
Backers of the spin off plan argue Indonesia would have no
\ncontrol over local cement prices if cement production falls into
\nforeign hands.<\/p>\n
Debt-restructuring deals are forcing publicly listed PT
\nIndocement Tunggal Prakarsa and PT Semen Cibinong to secure the
\nentrance of foreign cement companies.<\/p>\n
They are Swiss-based cement group Holcim Ltd, and German-based
\ncement firm Heidelberger Zement AG.<\/p>\n
Together with Cemex, the three are among the world's largest
\ncement producers.(bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-says-semen-padang-spin-off-plan-unviable-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}