Cemex may offer new deal if put option expires

Berni K. Moestafa and Kasparman, The Jakarta Post, Jakarta and Padang

Mexican cement producer Cemex SA de CV gave the cash-strapped government a breather on Wednesday, when it hinted at renegotiating a US$520 million put option (shareholder's right to sell its holding) with PT Semen Gresik, should the current one expire this Friday without being implemented.

PT Cemex Indonesia president Francisco Noriega suggested Cemex offer a new put option deal, should the government miss the Oct. 26 deadline.

"If we don't implement the put option, then it's going to be something different; we would have to renegotiate it," Noriega told reporters on the sidelines of a discussion on privatization, organized by business consultancy firm CastleAsia.

"It could be a new deal, it could be a new put option, it could be something else," he said, when asked whether "renegotiating" meant seeking a new put option.

He declined to specify the consequences of missing the put option deadline, but gave an assurance that Cemex remained committed to Indonesia.

The put option enables Indonesia to sell a 51 percent stake, worth $520 million, in state cement maker PT Semen Gresik, to Cemex. The Mexican firm must purchase Semen Gresik for that amount.

Yet, for three years since its signing, the deal has been left to gather dust by the government. If executed, it could cover some 80 percent of the government's privatization target this year, of Rp 6.5 trillion (about $643.5 million).

What has been obstructing the deal is opposition from locals in Padang and Tonasa. They reject foreign control of PT Semen Padang and PT Semen Tonasa, the two units of Semen Gresik.

In Padang on Wednesday, some 2,000 people took to the streets, demanding Semen Padang be spun off from Semen Gresik to ensure the company remained under local control.

Their protests received the backing of legislators, who also warned the government against a fire sale of Semen Gresik.

Cemex responded to these charges through advertisements in several media, including Tuesday's edition of The Jakarta Post.

However, that backfired, as some legislators said the ad was interference in the country's internal affairs.

"What we were aiming at was simply to inform the public and to try and give the information the way we saw it: the facts," Noriega argued.

With time running short, he said, Cemex and the government were still in discussion over ways of implementing the put option.

Earlier, the government had said it was seeking to extend the put option deadline and, if possible, raise the price to Semen Gresik.

But according to Noriega, the current deadline still stood. He also refused to speculate about raising the price offered for Semen Gresik.

"The key thing here is the put option, because it will expire on Oct. 26, and that's what is on the table," he said.