Financially-strapped Inalum gets Japan aid
Financially-strapped Inalum gets Japan aid
JAKARTA (JP): The Japanese government said yesterday it will
provide financial assistance to Indonesia to help restart a
stalled joint aluminum smelter at Asahan in North Sumatra, Kyodo
reported from Tokyo yesterday.
The joint smelting company -- PT Indonesia Asahan Aluminum
(Inalum) -- which began production in 1982 has been stalled due
to falling aluminum prices and increasing financial burden on the
Indonesian side, according to the Japanese news agency
Kyodo said Japan will lower interest rates on its lending
extended to the Indonesian government for the project -- from 5.0
percent to 4.1 percent for the portion provided by the Export-
Import Bank of Japan and from 5.3 percent to 4.4 percent for
loans from private financial institutions.
The joint venture's capital will be expanded by 13 billion
yen, of which the Japanese side will put up 7.66 billion yen and
Indonesia 5.34 billion yen, the government said.
Inalum has been beset with financial problems since the early
1980s. When the smelter began production at its full designed
capacity of 225,000 tons in 1984, the international aluminum
price had collapsed to $1,000 from as high as $2,000/ton in 1980.
Its debt burdens, which are denominated entirely in the
Japanese yen, increased sharply when the yen appreciated by more
than 50 percent in 1985 against the dollar, in which the
international aluminum price is quoted. Therefore, Inalum lost
money steadily between 1982 and 1986.
In response, the Japanese shareholders, consisting of 12
companies and the government, injected 12 billion yen ($79
million at the rate prevailing at that time) in additional equity
capital and reduced the interest rate on Inalum's 220 billion yen
debts.
The company made a sharp turnaround in 1987 with a profit of
$50 million which doubled to $100 million in 1987. But this
bullish era was soured by the decline in the smelter's production
due to the decrease in the power supply from its power stations
which was caused by the dropping of the water level in the lake.
The bottom line of the 12 years of Inalum's operations is
cumulative losses of $230 million. (vin)