Govt may buy back Cemex shares in Gresik
Rendi A. Witular, The Jakarta Post, Jakarta
The government is giving consideration to selling its shares in publicly listed cement maker PT Semen Gresik to the public or to new potential investors to raise funds for the buyback of shares of Mexican cement giant Cemex SA in the company, a minister has said.
State Minister of State Enterprises Laksamana Sukardi said that the option was part of government efforts to resolve its protracted dispute with Cemex out of court.
The sale of shares to the public would be via a rights issue, he said.
He explained that the option was also taken on the grounds that the government did not have enough money to repurchase the shares if Cemex remained firm on its decision to ask for its money back.
The government still has a 51 percent shareholding in Semen Gresik.
Last month, Cemex asked the International Center for the Settlement of Investment Disputes (ICSID), an affiliate organization of the Washington-based World Bank, to act as an arbiter in its dispute with the government over its investment in Semen Gresik, Indonesia's largest cement maker, with a consolidated annual output of 14 million tons.
Cemex has asked the ICSID to rescind the 1998 purchase agreement and has demanded the Indonesian government cover the company's investment outlay and pay damages.
Laksamana said that the government was now in the process of selecting lawyers to face Cemex at the ICSID.
"We are still selecting our lawyers for that, but on the other hand, the government is still working to seek the best possible solution to the case," he said.
The dispute between the government and Cemex centers on the company's failure to acquire a controlling stake in Semen Gresik, as stated in a 1998 agreement.
Cemex, the world's third-largest cement maker, reached an agreement with the government in 1998 to buy a 25.5 percent stake in Semen Gresik for US$290 million. But the September 1998 deal also provided an option for Cemex to increase its stake to 51 percent by the end of 2001.
However, the government could not deliver on its side of the deal due to strong protest from PT Semen Padang, the West Sumatra-based unit of Semen Gresik, and local politicians, who ostensibly claimed to be opposed to the idea of the company being controlled by a foreign investor. Attempts to resolve this problem have been unsuccessful, leaving Cemex's investment here facing an uncertain future.
Elsewhere, local media have reported that the government is now in negotiation with several potential investors from Japan and South Korea to buy out Cemex shares in Semen Gresik as part of the government's attempt to resolve the matter.
However, Laksamana declined to comment on the news.
He said simply that several investors were interested in the country's cement industry but were reluctant to commit themselves due to the unfavorable legislative climate and a lack of legal certainty in the country.
"A lot of investors are interested, but legal uncertainty in this country has dented their interest in proceeding. In particular, the unresolved Cemex case further undermines foreign investor confidence in the country," he said.