Govt says Semen Padang spin-off plan unviable
Govt says Semen Padang spin-off plan unviable
JAKARTA (JP): Spinning off PT Semen Padang from the Semen
Gresik Group was an unviable option, the government said on
Tuesday, citing it as costly and detrimental to privatization
plans.
The Ministry of State Enterprises' director of state
enterprises restructuring and privatization, Parkesit Soeprapto,
urged legislators and regions backing the spin off plan to
reconsider their stance.
"Because of the dilemma the government would face from the
consequences of a spin off, there must be careful consideration
to the (spin off) demands from the regions," Parkesit told
legislators in a hearing with the House of Representatives' state
budget commission.
Semen Gresik Group comprises Semen Padang and PT Semen Tonasa,
which the government merged into PT Semen Gresik in 1997.
Demands to spin off Semen Padang from the publicly listed
Semen Gresik followed plans to privatize a 51 percent share
in Semen Gresik to a foreign cement company.
Mexican-based Cemex SA de CV is set to purchase the share,
after already owning 25.53 percent.
But Cemex's plan to increase its ownership is facing
resistance, with a surfacing of antiforeign sentiment in the
province of Padang, as well as in Tonasa.
The local people of Padang said Semen Padang was built on
their ancestral land and have demanded it remain under Indonesian
control.
They warned that separatism movements in the province would
surge should the government ignore the province's demand.
In response, the government considered a spin off of Semen
Padang from Semen Gresik before selling the latter to Cemex.
But Parkesit said a spin off could prove costly, as the
government must pay compensation to Cemex for the lost of Semen
Padang and Tonasa's shares.
He said the government would have to buy back Cemex shares in
Semen Padang and Tonasa, at a value of between Rp 2.5 trillion
(about US$263.15 million) and Rp 3 trillion.
"It is impossible we'd use state funds considering our budget
is running at a deficit," he said.
Another option, he said, was to swap the government's shares
in Semen Gresik with those in Semen Padang and Tonasa.
But the value of the state shares in Semen Gresik would not be
enough to cover Cemex's lost shares in Semen Padang and Tonasa,
he said.
Parkesit also argued that the spin off plan would hurt
Indonesia's credibility before foreign and local investors.
"The government would be viewed as not being consistent in its
policy at a time it is promoting the privatization of state
enterprises," he explained.
He further warned that pushing ahead with the spin off plan
would cancel a put option agreement between the government and
Cemex.
Under that deal, the government owns the right to sell its 51
percent share in Semen Gresik for $520 million to Cemex.
Cemex must buy the shares at the agreed price, should the
government decide to exercise its put option right.
The put option agreement is valid until Oct. 26.
Selling Cemex on time could rescue the government from an
embarrassing shortfall in this year's privatization proceeds.
With only three months remaining to the year's end,
privatization proceeds still stands at zero from a targeted Rp
6.5 trillion.
The proceeds pose a vital revenue source to help plug the
state budget's gaping deficit.
Securing the privatization target is also part of the
government's reforms targets agreed with the International
Monetary Fund (IMF).
But the Cemex put option deal could meet opposition from
legislators warning against foreign domination of the national
cement industry.
Backers of the spin off plan argue Indonesia would have no
control over local cement prices if cement production falls into
foreign hands.
Debt-restructuring deals are forcing publicly listed PT
Indocement Tunggal Prakarsa and PT Semen Cibinong to secure the
entrance of foreign cement companies.
They are Swiss-based cement group Holcim Ltd, and German-based
cement firm Heidelberger Zement AG.
Together with Cemex, the three are among the world's largest
cement producers.(bkm)