Indocement to sell power plants to repay debts

JAKARTA (JP): Publicly listed cement producer, PT Indocement Tunggal Prakarsa, said yesterday it would sell its majority stake in two power companies to repay mounting foreign debts.

The company's director Daddy Hariadi said yesterday the divestment from power generating activities was part of its financial restructuring program.

"Our restructuring plan is to sell non-core assets," Daddy told reporters after the company's annual general shareholders meeting.

Daddy said Indocement, a subsidiary of the giant Salim Group, had not yet decided how much of its stake in the two power companies would be sold.

But he said the country's largest cement producer would retain at least 30 percent stake in the two companies, which operate two power plants located in Citeureup (West Java) and Kalimantan.

The Citeureup plant, which supplies the company's eight cement plants in the area, has the capacity to produce 267 megawatts.

The other plant is located in South Kalimantan to supply power to the currently under-construction PT Indo Kodeco Cement, in which Indocement indirectly owns 71.4 percent stake.

Indo Kodeco plant is expected to start operation in the middle of next year.

Daddy said the two plants were worth about US$200 million to $250 million.

Loans

He said the company's foreign loans amounted to $649 million, as of last year, excluding the $253 million owed by Indo Kodeco.

But he said about 53 percent of the $649 million debt had been hedged at a rupiah level of 3,225 and 3,295 against the dollar.

The rupiah closed at 14,650 to dollar yesterday, compared to about 2,500 last July.

Daddy said the loans were mostly used to finance plant construction, and their maturity terms ranged from seven to 11 years.

Indocement suffered Rp 378 billion ($27 million) in net losses last year, due to high foreign exchange losses resulting from the rupiah's sharp depreciation against the U.S. dollar.

It said production costs rose to 32.7 percent last year, causing the company's operating profit to drop 10.2 percent to Rp 530 billion.

The company's foreign exchange losses reached Rp 1.48 trillion last year.

In 1996, it booked Rp 551 billion in net profit.

The company's finance director Benny Santoso said yesterday the company predicted that it would face harder times this year, as cement demand is forecast to drop by 45 percent.

There would be 6.5 million tons of cement oversupply in domestic markets due to the slowdown of construction activities, he said.

Benny said the company planned to export up to two million tons of cement this year to boost its cash flow.

"We have exported around 600,000 tons so far," he said.

He said export figures last year were not significant as the government had previously discouraged local cement producers from exporting because the country was suffering a shortage of the material.

Benny said the company would benefit from healthy margins between the export price and production price.

The export price is currently between $25 and $28 per ton, while production costs run at around $10 to $12 per ton. Currently, cement is priced at about Rp 200,000 a ton or between $13 and $14 domestically, he said. (das)