Hashim hopeful of reviving Trans-Pacific project

JAKARTA (JP): New investors are likely to revive the construction of a partly built US$2.3 billion petrochemical complex in Tuban, East Java, later this year, according to its major shareholder.

Hashim Djojohadikusumo said on Tuesday the investors would be offered majority control of PT Trans-Pacific Petrochemical Indotama (TPPI).

"But it's up to them. If they want to take a majority stake, we will let them do so, but if not, we will also welcome them.

"The most important thing is to restart this project. This is a very feasible project and good for Indonesia's economy," he said.

Hashim, whose Tirtamas Group controls a 70 percent stake of TPPI, said it would need some $1.4 billion to complete the project, of which $475 million was expected to come from new investors.

Hashim said he expected a deal with new investors could be reached by late June, with construction work on the megaproject to resume later this year.

Work on TPPI's olefin-aromatic integrated project halted in January 1998, after $900 million had been spent -- about $200 million from equity and $700 million from contractors' coffers.

Hashim said the company had completed 45 percent of overall works when it ceased operating -- 64 percent in the aromatic complex, 43 percent in the olefin complex, 46 percent in tank terminals, 11 percent in ports and 15 percent in other infrastructure.

Main contractors for the project were Stone & Webster Inc for the olefin complex and JGC Corporation for the aromatic complex.

"We negotiated with the contractors, offering them a shareholders role. But they prefer to be contractors and they also want to see new investors come in," Hashim said.

He warned that if instability prevailed after the general election in June, prospective investors would most likely withdraw from the bidding process.

"I have been begging all around to restart this project. But most investors I approached said: 'your assets are very good, but they are located in the wrong country.' So, there is still a negative perception about Indonesia among investors."

He said the Tirtamas Group had been severely affected by the economic crisis and was unable to commit more funds to the project. Other non-Indonesian shareholders are also cash- strapped.

Tirtamas is one of the 20 largest debtors in Indonesia.

Tirtamas' 70 percent stake comprises a 10 percent holding by PT Tirtamas Majutama and a 60 percent share in TPPI through a Singapore affiliate, Trans-Pacific Petrochemical Ltd. A Singapore unit of Thailand's Siam Cement PCL, Tuban Petrochemicals Pte Ltd, has 20 percent, while Itochu and Japan's Nissho Iwai Corp each own 5 percent.

Hashim said compared to similar projects, the project was one of the most competitive in the world.

"If completed, we are confident we could live without protection and even compete directly with long-established plants in the region."

He said investment costs for the project were among the lowest. Investment cost for the aromatic project is $1,053 per ton and $1,026 per ton for the olefin.

Resumption of the project would take place in two stages. The first stage would restart the aromatic complex, a process that could take up to one-and-a-half-years to complete.

When completed, the complex would have an annual production capacity of 335,000 tons of reformate, 1.1 million tons of kerosene, 189,000 tons of diesel fuel, 500,000 tons of paraxylene, 100,000 tons of toluene, 120,000 tons of orthoxylene and about 1 million tons of light naphta.

When the olefin complex was completed in the second stage, the company would have the capacity to produce 700,000 tons of ethylene and 382,000 tons of propylene in addition to aromatic products and fuel products.

Most of those products would be sold to the domestic market to meet local shortages, Hashim said, adding that the majority of aromatic and olefin products were still imported.

"In a normal situation, we would save foreign exchange reserves of $900 million a year." (rid)