BP Amoco eyes ownership of Chandra Asri

BP Amoco eyes ownership of Chandra Asri

JAKARTA (JP): British Petroleum Amoco Chemicals (BP Amoco),
one of the world's biggest petrochemical companies, has shown an
interest in entering debt-ridden PT Chandra Asri Petrochemical
Center, Minister of Industry and Trade Rahardi Ramelan said on
Thursday.

Rahardi said BP Amoco's top executives told him during his
visit to Britain last week that they wanted to build the biggest
integrated olefin industry in Southeast Asia by acquiring Chandra
Asri.

"BP Amoco's executives told me that they are interested in
helping Chandra Asri settle the company's financial problems,"
Rahardi said in a news conference.

Rahardi said BP Amoco could help mend Chandra Asri's financial
position by acquiring a stake in the latter or by other means.

"By acquiring Chandra Asri, they said they could build the
biggest integrated olefin industry in Southeast Asia," he said.

He added that both British Petroleum and Amoco of the United
States owned olefin companies in Southeast Asia before they
merged at the end of last year.

Chandra Asri is a joint venture between Marubeni Corp, Showa
Denko KK of Japan and Indonesian partners, including the
Bimantara and Barito groups.

Chandra Asri, the only olefin producer in Indonesia, is
currently under the Asset Management Unit of the Indonesian Bank
Restructuring Agency (IBRA).

IBRA spokesman Christovita Wiloto said Chandra Asri had
defaulted on debts to several local banks under IBRA supervision,
including some state banks.

Christovita, however, declined to mention the banks or the
amount of Chandra Asri's bank debts.

But news reports said a team of Indonesian partners in Chandra
Asri borrowed from five Indonesian state banks.

Christovita said BP Amoco's interest in acquiring a stake in
Chandra Asri would be welcomed if the former could make the
latter's nonperforming debts to local banks performing loans.

Last year, Chandra Asri reportedly asked its creditors for a
three-year moratorium on repayments of a US$850 million loan.

Lenders include the Export-Import Bank of Japan, Bank of
Tokyo-Mitsubishi and Fuji Bank and several Indonesian banks.

The venture initially expected to begin turning a profit in
1997. But it racked up a loss of $84 million in 1997 under the
weight of a huge amount of interest-bearing debts and slumping
demand for petrochemical products in Indonesia.

The $1.88 billion venture has an annual production capacity of
510,000 tons of ethylene, 270,000 tons of propylene, 300,000 tons
of polyethylene and 240,000 tons of thermal cracked gasoline.

Chandra Asri has reduced operating rates to about 80 percent
of capacity due to slumping demand and overcapacity in the
region.

Acquisition

Meanwhile BP Amoco announced Thursday that it has acquired
Atlantic Richfield Co. for US$26.6 billion in stock, paving the
way to becoming the world's second largest oil company.

The widely anticipated move will give BP Amoco a dominant
refining and marketing presence in the car-dependent western
United States, where Arco operates 1,760 filling stations.

BP Amoco also will gain additional proven oil reserves of 2.8
billion barrels, making it the world's biggest non-government oil
producer, the company said.

"For BP Amoco, the strategic rationale for this deal is the
immense potential it offers for future growth," said Sir John
Browne, the company's chief executive.

Under the terms of the deal, BP Amoco will exchange .82 of its
own stock -- worth $82.82 based on Wednesday's closing stock
prices -- for each share held by Arco shareholders, BP Amoco said.

As part of the deal, Arco's top management and board will
fully relinquish control of the company, Associated Press
reported.

The combined company would rank second in size behind the
planned Exxon-Mobil combination and would be the latest in
consolidation to take place in the rapidly changing oil industry.

BP Amoco has been a leading force in that consolidation as the
former British Petroleum PLC acquired Amoco Corp. of Chicago for
$57.6 billion in December.

The combination is subject to antitrust review and shareholder
approval. The deal could run into potential problems with Alaska
statutes that limit how much exploration acreage companies and
their subsidiaries can control in that state.

"The actual assets being acquired are very complementary,"
said Mark Horn, head of European research for the brokerage T.
Hoare and Co.

BP Amoco, he said, "has come from being a third-rank player to
challenging No. 1 in a short space of time, and it has done so in
a way that has not harmed its structure financially. It has
improved its assets and given itself a whole new range of choices
and opportunities." (gis/rid)