Indocement to sell power plants to repay debts

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)