Australia's Orbital strengthened by Indonesia deal

Australia's Orbital strengthened by Indonesia deal

SYDNEY (Reuter): Orbital Engine Corp Ltd said yesterday the
planned supply of its combustion process engine to power the
planned Indonesian national car was "a pot of gold" and the
largest deal in the company's history.

"On the Indonesian front it certainly is high volume
production in the automotive market, a pot of gold at the end of
the rainbow for Orbital," Orbital investor relations officer
Steve Hill told Reuters from Chicago.

"It is really the first time the market has seen of any high
volume motor vehicles deals with Orbital technology," Hill said.

On Thursday, Orbital said in an announcement to the New York
Stock Exchange that its Orbital Combustion Process Engine had
been selected by an Indonesian government group for use in the
Maleo car project.

Hill said he could not comment on revenue forecasts from the
deal. But Orbital said in the announcement it would receive
royalties for each engine used, and from engineering support.

Hill said the company was in talks with other groups about
using the Orbital technology in cars.

Until the Indonesian deal, Orbital's engines had mainly being
used in outboard motors on boats.

Orbital shares hit a two-month high yesterday after the Maleo
car deal announcement. At 3.50 p.m. (05:50 GMT), Orbital shares
were 13 cents or 12.74 percent higher at A$1.15.

"There are some extremely exciting discussions taking place in
other markets, not just in Asia, although they are happening in
Asia as well but also Europe and North America on automotive
four-stroke engines as well as two-stroke engines," Hill said.

Hill said Orbital Engine was in talks with 10 manufacturers
currently about using the company's directly injected four-stroke
and automotive two-stroke engines.

The Maleo car project is the brainchild of Indonesia's State
Minister of Research and Technology B.J. Habibie, and is separate
to another Indonesian national car project -- the Timor car.

Indonesia production of the Maleo has been set for 1998, with
a target production of more than 100,000 units.

Orbital had been working with the Indonesian government and
the Maleo engineering team since mid-1995.

"Negotiations are at an advanced stage to establish a
consortium between Orbital and its Indonesian partners to mass
produce the engine for Maleo in Indonesia," Orbital said in the
statement to the New York Stock Exchange.

Hill said he and Orbital's chief executive Kim Schlunke were
in Chicago to attend the International Marine Motors Exhibiters
Congress there. He said Orbital executives would also be
traveling to Detroit, the United States car making capital.

He said two new outboard engines had been unveiled at the
Chicago exhibition by Mercury Marines, a unit of U.S. marine
product maker Brunswick Corp.

The Orbital engine was invented around 1969 by Ralph Sarich
and in 1972 the technology was backed by Australia's largest
company The Broken Hill Pty Co Ltd, which now holds around 25
percent of the Perth-based company.

However, Sarich fully sold out of Orbital last year and no
longer has any association with the company that markets his
engine design.

Despite the healthy rise in Orbital's shares price yesterday
they are a long way short of the record of A$5.37 hit in November
1991.