Govt won't compensate Cemex in cash

Govt won't compensate Cemex in cash

JAKARTA (JP): The government said on Friday that it would not
pay Mexico-based cement company PT Cemex Indonesia compensation
in cash when the government spins off PT Semen Padang from its
parent company, the state-owned Semen Gresik Group (SGG).

Finance minister Prijadi Praptosuhardjo said that instead the
government would consider raising Cemex's stake in SGG.

"Our principle is that if there is a spin off, the government
need not compensate in cash. Transfer of shares is an option,"
Prijadi told reporters after a meeting with members of the House
of Representatives' Commission IX for financial and development
planning affairs.

The government has a 51 percent stake in SGG. Cemex has a 25.5
percent stake, while the investing public owns the rest.

In 1998, Cemex paid the government US$114.2 million for its
stake in SGG, a holding company comprising publicly listed PT
Semen Gresik and its subsidiaries Semen Padang and PT Semen
Tonasa.

By spinning off Semen Padang, the government must compensate
SGS' shareholders for the decline in their share value in SGS.

Semen Gresik paid Rp 1.06 trillion (about $111.57 million) for
a 100 percent stake in Semen Padang and Semen Tonasa.

Cemex has long urged the government to allow it to raise its
stake in SGG.

But the government has hesitated mainly because of the Padang
people's resentment of foreign ownership in SGG.

The Padang people claim that Semen Padang's plant is built on
land that they have willingly surrendered to the government
without asking for compensation.

However, Cemex argued that it had signed the shares purchase
agreement with the government, under the understanding that the
Mexican company would gradually become the majority shareholder
of SGG.

With SGG's total annual production capacity of 17.5 million
tons of cement, Cemex plans to establish Indonesia as its
headquarters for the company's Southeast Asian operation.

Cemex president Francisco Noriega declined to comment whether
SGG will still be attractive without Semen Padang, which has an
annual production capacity of 5.5 million tons.

He said his company preferred to wait for the government's
spin off proposal, adding that Cemex would be flexible.

In 1995, the government merged the three companies into SGG to
prevent private cement producers from controlling the domestic
market.

Cemex estimated that last year's total cement sales Indonesia
reached about 21 million tons.

Based on data from the Indonesian Cement Association, Semen
Gresik's cement sales reached 11.8 million tons during the first
10 months of 2000, compared to 10.6 million tons during the same
period the year before.(bkm/rei)