Government considers Cemex ownership in Semen Gresik

Government considers Cemex ownership in Semen Gresik

JAKARTA (JP): The government is considering raising the
ownership of Mexican-based cement producer PT Cemex Indonesia in
state-owned Semen Gresik Group (SGG), as part of a compensation
scheme for spinning off SGG's subsidiary PT Semen Padang,
according to a senior government official on Monday.

"One of our ideas is to raise Cemex's stake in Gresik," Nyoman
Tjager told reporters following a post-Idul Fitri gathering.

He said that Cemex must be compensated for relinquishing Semen
Padang, but he declined to reveal any details on the compensation
schemes currently under consideration.

"We will have a decision on a compensation scheme quite soon,"
Nyoman said.

He said he had yet to present the proposed scheme to the
related ministers who would decide on the divestment of Semen
Padang.

The government is mulling spinning off Semen Padang from its
parent company, partly due to local sentiment of the Padang
people against Cemex's ownership in the company.

In 1998, Cemex paid the government US$114.2 million for a 25
percent stake in SGG, a holding company comprising of PT Semen
Gresik, Semen Padang and PT Semen Tonasa.

Cemex plans to become a majority owner in SGG and, according
to the company, the 1998 agreement with the government included a
gradual rise in Cemex's stake in SGG.

But because of local resentment against foreign control in
Semen Padang, the government never divested more of its stake to
Cemex.

Spinning off Semen Padang from SGG would pave the way for
Cemex to become a majority shareholder in SGG.

Finance Minister Prijadi Praptosuhardo confirmed plans to
divest Semen Padang from SGG.

"We want to spin off Semen Padang, but we don't know how," he
told reporters.

SGG, a publicly listed company on the Jakarta Stock Exchange
has a combined annual production capacity of 18.2 million metric
tons of cement.

The group was formed in 1995 by the government, in an effort
to prevent private cement producers from controlling the domestic
market.

Semen Gresik paid Semen Padang and Semen Tonasa a total of Rp
1.06 trillion for their stakes.

Head of the Capital Market Supervisory Agency (Bapepam)
Herwidayatmo said that the government must also pay compensation
to SGG for spinning off Semen Padang.

"There will be no problem if all compensation payments are
clear. By releasing Semen Padang there must be compensation to
the current shareholders of Semen Gresik," he explained.

Meanwhile, Semen Gresik said it expected output to rise by 10
percent in 2001, President Director Urip Timuryono was quoted as
saying by the Dow Jones news agency.

"Total production volume this year will be 10 percent higher
than last year because the market is getting better," Urip said.

He didn't offer figures, but the latest data from the
Indonesian Cement Association shows that Semen Gresik's cement
sales reached 11.8 million metric tons during the first 10 months
of 2000, up from 10.6 million tons during the same period in
1999.

Urip also said he expected Semen Gresik's 2000 net profit to
be higher in 2000 than in 1999, but didn't offer further details.
Semen Gresik's full year results have not been announced, but the
company posted a net profit of Rp 301.83 billion in the first
nine months of 2000.

The nine month profit -- up from Rp 104.03 billion for the
same period in the previous year -- was due largely to a rise in
net sales to Rp 2.719 trillion from Rp 2.315 trillion. (bkm)