Barito subsidiary gets $991m to build pulp mill

JAKARTA (JP): PT Tanjungenim Lestari Pulp & Paper, a subsidiary of PT Barito Pacific Timber, secured a US$991 million syndicated loan yesterday from 25 foreign banks to finance the building of its pulp mill near Palembang, South Sumatra.

About $650 million is from export credit agencies in Germany, Canada, Finland and Sweden, while $341 million is from commercial lenders in the United States, South Korea, Japan, Scotland and Austria.

The bank syndication included AT&T Capital Corporation, Fuji Bank, Sumitomo Trust, Bank of Scotland, Bank Austria and Hanil Bank.

The president commissioner of Tanjungenim, Prajogo Pangestu, said the loan would be used to develop a pulp mill with an annual capacity of 450,000 tons by the end of its first phase in 1999.

Prajogo said the project would cost $1.2 billion, of which 30 percent would come from the company's equity and the rest from the loans.

Prajogo said Germany's Klockner Industrie-Anlagen GmbH would be the turnkey contractor, while Nippon Paper Industries would operate the mill.

The company said the loan agreement and other project-related documents signed yesterday totaled $1.2 billion.

Prajogo, who also chairs the publicly listed Barito Pacific Timber, said raw material for the mill would come from a 193,500- hectare industrial timber estate owned by Barito Pacific subsidiary PT Musi Hutan Persada.

Musi Hutan's timber estates were established in 1989 as a joint venture between Barito Pacific's PT Enim Musi Lestari and state-owned PT Inhutani II.

The president of Tanjungenim, Jansen Wiraatmaja, said the loan would have an interest rate of between 8.5 percent and 9 percent a year and would mature in 12.5 years.

He said the pulp mill's production would be entirely exported with Japan's Marubeni and Sweden's Cellmark guaranteeing the market.

He said 70 percent would go to Asia and the 30 percent to Europe.

But the syndication said some of the pulp would be marketed locally.

Jansen said the second phase of the project would increase the mill's production capacity to a million tons a year. He did not say when the second phase would begin.

He said Tanjungenim would also build an integrated paper mill but said it was a long-term project.

"We have that vision, but we are doing it step by step now," he said.

Tanjungenim is owned jointly by Barito Pacific (51 percent), Sumatra Pulp Corporation (33 percent) and President Soeharto's daughter Siti Hardijanti Rukmana, through PT Tridan Satriaputra Indonesia (16 percent).

Sumatra Pulp is owned jointly by Japan's Marubeni Corp, the Overseas Economic Cooperation Fund and Nippon Paper Industries.

The state minister of investment, Sanyoto Sastrowardoyo, who attended yesterday's signing ceremony, said Indonesia's pulp industry was bound to grow as national paper consumption increased.

"Indonesia's paper consumption currently reaches only 15.5 kilograms per capita. In Japan, it is as high as 205 kg per capita and in the United States it reaches 318 kg per capita," he said.

He said paper demand in Indonesia was growing by 13 percent a year.

Economist Christianto Wibisono said it was odd that no national bank was in the syndication.

He said domestic banks might be either too passive or the foreign syndication too strong.

"But maybe it is because (Indonesian banks) have trauma with huge projects like this, so they prefer to be more wary and conservative in distributing loans," he said.

Christianto said Indonesian banks might be taking a wait-and- see stance because they were unsure of what could happen with a long-term loan.

"I think at the moment foreign investors are more confident about the long-term business climate in Indonesia. They are convinced that nothing bad will happen despite the coming general election," he said. (pwn)