Barito's subsidiary to raise $750m in loan for pulp mill
JAKARTA (JP): PT Tanjung Enim Lestari, a newly established subsidiary of the Barito Group, plans to raise offshore loans of around US$750 million to finance the construction of a pulp mill in Muara Enim, South Sumatra.
Jansen Wiraatamadja, a commissioner of the Barito Group, said here yesterday that the financing will be in the form of a non- recourse financing facility, that is, a loan in which sales of the product will serve as the security for the loan.
The loan facility will be arranged by Morgan Grenfell of the United States and Marubeni Corporation of Japan.
The payback period of the loan facility will be between six and seven years.
"The construction of the mill, estimated to cost $1 billion, will be partly financed by the subsidiary's own equity, which is expected to reach around $300 million," Jansen told newsmen following the signing of the agreement on the establishment of the company.
Barito Pacific Timber, a timber company listed on Jakarta and Surabaya stock exchanges, will have a 40-percent stake in the new company. Two local partners, PT Mukti Lestari Kencana, also a subsidiary of the Barito Group, and a company controlled by President Soeharto's eldest daughter Siti Hardiyanti Rukmana, will also have combined shares of 40 percent. The remaining 20 percent will be controlled by two Japanese companies, Marubeni Corporation and Nippon Paper Industries.
"The composition of foreign shareholders in the new company is not yet final as the entry of two European companies is still being negotiated," Jansen said. He added that the foreign partners are expected to form a consortium to represent their ownership in the new joint venture firm.
Capacity
He said that the planned pulp mill will have an annual production capacity of 450,000 tons and it is scheduled to start commercial production in 1997.
Nippon Paper will provide technical assistance in the management and the operation of the pulp mill for 10 years after commercial production is first begun, he said.
Jansen explained that all the pulp products will be exported and their marketing will be handled by Shellmark, a European distributor of pulp and paper, and Marubeni.
"Our world market share will be around six percent," he said.
Jansen was optimistic that the prospect of the pulp market overseas will be more promising in the future, due to a continued decline in the supply of pulp raw materials.
"The pulp price, which is now hovering to around $500 per ton, is expected to reach around $700 per ton in 1997," he said.
The pulp plant will be fed with materials from around 130,000 hectares of acacia plantations developed by the Barito Group in South Sumatra, he said.
According to Jansen, this mill will be the first Indonesian pulp producer whose whole supply of raw materials will come from timber estates.(hen)