ASEAN governments liquidate AAF

ASEAN governments liquidate AAF

Zakki P. Hakim, The Jakarta Post, Jakarta

Several members of the Association of Southeast Asian Nations
(ASEAN) decided over the weekend to liquidate the ailing PT ASEAN
Aceh Fertilizer (AAF) in Aceh due to natural gas supply
uncertainty -- crucial to the plant's operations.

"Due to the uncertainty of natural gas supplies to PT AAF, an
extraordinary shareholders meeting on Saturday decided to
liquidate the fertilizer plant," Minister of Industry Andung A.
Nitimihardja said in a session with the House of Representatives'
Commission VI overseeing industry, trade and investment on
Monday.

Indonesia, through PT Pupuk Sriwijaya (Pusri), holds 60
percent of AAF's shares, while Malaysia, the Philippines and
Thailand have 13 percent each and Singapore owns 1 percent
through Temasek Holdings Pte.

At the moment, AAF still has 800 workers and their fate is not
yet clear.

AAF president director Rauf Purnama declined to give any
comment to The Jakarta Post, saying he was not authorized by the
shareholders to do so. PT Pusri president director Dadang Heru
Kodri could not be reached for comment on Monday.

Established in 1979, AAF reached its peak capacity in 1997,
producing 695,826 tons of Urea fertilizer. The joint venture
company prioritized its market in ASEAN countries and other Asian
countries such as China, India, Japan and Taiwan.

The previous government last October decided to shut down AAF,
which stopped operating in August 2003, due to an insufficient
supply of natural gas, which is a key raw material for a
fertilizer plant, in Aceh to cover both export commitments and
the needs of other manufacturers there.

The government at that time, however, committed to keeping PT
Pupuk Iskandar Muda (PIM) as the main fertilizer supplier for
Aceh and North Sumatra provinces.

It also said that AAF's closure would not have a direct impact
on agriculture in the northern parts of Sumatra as it exported
almost all of its products, while fertilizer from PIM-1 and PIM-2
plants supplied the domestic supply.

Andung said the government was still committed to saving PIM
by purchasing two cargoes of liquefied natural gas (LNG) from the
Middle East, while South Korea, a key buyer, would agree to
cancel some orders. It is expected that it would help PIM survive
until the end of the year.

In the mid-term, the government is seeking seven LNG cargoes
to substitute orders to Japan and Korea, using international
prices of US$10 per million British thermal unit (mmbtu) or $29
million per cargo.

In the longer term, the government expected the fertilizer
plant to have regular supplies of natural gas by 2008 when the
Block A gas field in Lhokseumawe, Aceh, goes on stream.

Commission VI deputy chairman Ade Komarudin suggested that the
government should help PIM acquire AAF assets and possibly hire
its workers.

"The government could acquire AAF through PIM, fix it and sell
it later after revitalizing it for a better price," he said.