Bakrie shifts business focus to infrastructure industry

JAKARTA (JP): Publicly listed PT Bakrie Brothers will focus its business on the steel-based and telecommunications infrastructure industry following the approval of its debt restructuring deal.

Bakrie president Irwan Sjarkawi said that under its debt to equity restructuring deal, Bakrie had relinquished most of its stakes in non-infrastructure subsidiaries.

These include plantation estate and rubber producer PT Bakrie Sumatra Plantations; chemical firm PT Bakrie Kasei Corporation; electronics firm PT Bakrie Electronic Company; and coal mining firm PT Arutmin Indonesia.

Irwan said Bakrie's core business would be in infrastructure.

"By core business we mean a business where we can do well, even if it means selling vegetables," Irwan told The Jakarta Post following the company's extraordinary shareholders' meeting to approve its debt restructuring plans.

The majority of Bakrie's shareholders had approved the debt restructuring deal, under which the company would swap US$1.068 billion in debts for equity and assets in the company's subsidiaries.

Bakrie secured the creditors' approval on its debt restructuring proposal through the Jakarta Commercial Court last year.

The company was, in particular, strong in the pipe industry, he said, adding that Bakrie was still the leading pipe producer in the local market.

"With a total production capacity of 600,000 tons (in pipes), there is no one here that can match us," he explained.

He said that because local demand last year was only 200,000 tons, Bakrie was focusing its sales on foreign markets.

He said the company was cooperating with the world's largest pipe producer, Dalmine Siderca Tamsa from Argentina, by utilizing its extensive global network.

To date, Bakrie owned three subsidiaries manufacturing pipes: PT Bakrie Pipe Industry, PT Seamless Pipe Industri Jaya, and PT Southeast Asia Pipe Industry.

Irwan was also upbeat about Indonesia's increasing demand for pipes on the back of a promising gas industry.

Although using fuel is cheaper than gas, the government plans to gradually scrap fuel subsidies thus creating more demand for gas.

The more industries that use gas, the more pipelines that would be required to connect them with the country's gas reserves, Irwan said.

Indonesia is about to sign two gas deals worth billions of U.S dollars with Malaysia and Singapore within the next few months.

Irwan expressed confidence that Bakrie would supply these projects with its pipes. "But as regards which part of the project, that I don't know yet," he said.

Bakrie, he added, might not build the submarine pipelines connecting Indonesian gas reserves with the two countries, but it could still supply the pipe requirements.

Bakrie's telecommunications business, he said, also had bright prospects.

Through Bakrie Communications Corporation, the company is operating its telephone service, Ratelindo, the only local telephone operator next to PT Telkom Indonesia.

"We have a customer base of over 200,000 people, and what is stronger than having customers," he said.

Under the debt to equity deal with its creditors, Bakrie would issue new shares amounting to 36 billion for their entrance.

Bakrie corporate secretary Lalu Mara Satriawangsa said that creditors had formed a special purpose vehicle to accommodate their stake in Bakrie, before the debt restructuring deal comes into effect sometime in the second quarter of this year.

Most of the company's creditors are foreign institutions. But Mara declined to estimate which of them would become the majority shareholder in Bakrie.

According to him, the U.S.-owned Export Import bank is Bakrie's largest creditor.

Loans from local banks under the Indonesian Bank Restructuring Agency (IBRA), made up 10 percent of Bakrie's debts, he added. (bkm)