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)