Barito subsidiary gets $991m to build pulp mill

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)