Humpuss breaks ground for new methanol plant

Humpuss breaks ground for new methanol plant

BONTANG, East Kalimantan (JP): The Humpuss Group, through its
subsidiary PT Kaltim Methanol Industry, yesterday started
building the country's first privately-owned methanol plant in
the Kaltim Industrial Estate here with an investment of US$300
million.

State Minister of Investment Sanyoto Sastrowardoyo officially
broke ground for the plant, which will have an annual production
capacity of 660,000 metric tons.

"I hope the presence of this plant in this industrial estate
will encourage other private investors to come to this area and
other parts of the eastern provinces," Sanyoto said.

Hutomo (Tommy) Mandala Putra, chief commissioner of the
Humpuss Group, said 60 percent of the plant's products would be
exported to Japan, South Korea and Taiwan.

The company, the second of its kind in Indonesia, is scheduled
to start commercial production in 1997 and start exports in 1998.
Its raw material, natural gas, will be supplied from the nearby
gas fields of the state-run oil company Pertamina, Total
Indonesie, Unocal and Vico.

So far Indonesia has only one methanol plant with a production
capacity of 330,000 tons per year, operated by Pertamina on Bunyu
island, East Kalimantan.

Indonesia currently still imports some 140,000 tons of
methanol as Pertamina's methanol plant produces only 260,000 tons
per annum, while domestic demand stands at some 400,000 tons.

Sanyoto predicted that domestic demand for methanol would
increase by an average of nine percent per annum. "By the year
2,000, we will need between 650,000 tons and 700,000 tons of
methanol per annum."

Methanol is used as a solvent, anti-freeze, refrigerant and
chemical intermediate and is a major component in the production
of plywood glue. One third of world methanol consumption is for
the production of formaldehyde, the major use of which is in the
production of phenol, urea, melamine resins and plastics.

Debt

When asked about the ratio of the company's debt to its
equity, Tommy said 70 percent of the investment came from loans
from the Japan's Exim Bank and a number of Japanese commercial
banks, with Nissho Iwai Co. as the lead arranger.

Initially, the state-owned PT Pupuk Kaltim, the owner and
operator of the Kaltim Industrial Estate, took 20 percent of
Kaltim Methanol shares.

However, the government team which controls offshore borrowing
barred Pupuk Kaltim from acquiring any share in the company
because it would use a large portion of offshore loans. Because
of this, the construction of the plant, which was initially
scheduled to commence in 1991, was postponed until yesterday.

Abdul Wahab, president of Kaltim Methanol, explained that the
loans from Japan would mature in 13 years, including a grace
period of three years, and carry an interest rate of two percent
to three percent per annum.

"I'm sure if the price of methanol on the international market
bounces back to last year's level, we can recover our investment
in five years," Wahab said, adding that last year methanol sold
at $500 per metric ton. However, he declined to mention the
current price.

In addition to Kaltim Methanol, the Humpuss Group has PT
Humpuss Karbometil Selulosa and PT Humpuss Aromatik in its
petrochemical division.

"Next month, we will start the construction of our aromatic
plant in Aceh," Tommy said, adding that the plant would cost some
$850 million. (rid)