Indorayon allowed to reopen pulp, rayon mills

Indorayon allowed to reopen pulp, rayon mills

JAKARTA (JP): The government has allowed publicly-listed
rayon and pulp producer PT Inti Indorayon Utama to reopen its
pulp and rayon mills in North Sumatra, which have been shut down
for almost four months due to security disturbances by protesters
who accused the company of damaging the environment.

Hakimil Nasution, chief of the North Sumatra Environmental
Agency, notified Indorayon in Medan on Monday that Indorayon
could now reopen its mills in Porsea, near Lake Toba, as an
overall audit program for the company would be decided on
Thursday.

Nasution said an inter-ministerial team would meet at the
governor's office in Medan on Thursday to finalize preparations
for an overall audit of Indorayon.

"The audit will be conducted by an independent team, which
will be appointed by the inter-ministerial team." Nasution said
in a letter, a copy of which was sent by Indorayon's Finance
Director David Pile to The Jakarta Post.

Around 3,000 Indorayon workers have been demonstrating in
front of the North Sumatra governor's office since last Thursday,
demanding that the governor reopen the mills. The demonstrators
doubled to around 6,000 on Monday.

Pile said on Tuesday the North Tapanuli regent was holding a
meeting with 59 village heads informing them of the government's
latest decision for the mills to recommence operations for the
environmental audit to take place.

"As a result of this, deliveries will start to the mills
during the course of this week," Pile said in a statement
welcoming the government decision.

"We hope the government will enforce relevant law and order to
facilitate this process should the need arise," he added.

He said demonstrating workers had started returning to the
mill in preparation for the startup.

Indorayon, which is traded on the Jakarta and Surabaya stock
exchanges, is 62 percent owned by Singapore-registered Asia
Pacific Resources International Holdings Ltd. (APRIL), which is
listed on the New York Stock Exchange.

The other 38 percent of Indorayon is owned by the investing
public, cooperatives and several other foreign institutional
investors.

Before the operation suspension in early July, Indorayon mills
exported 70 percent of their annual production of 240,000 tons of
hardwood pulp and 60,000 tons of rayon fiber.

Pile said last week that his company had continued fully
paying all the employees between July and September despite the
stoppage of production.

"But our severely-affected cash flow will force us to halve
their pay for this month, and unless the mills reopen soon, we
may have to dismiss them all next month," he said.

Pile said Indorayon had lost about $20 million monthly in
revenue since July, after some 100 to 200 local protesters
blocked the main public access roads to the mills, disrupting
deliveries of supplies and materials.

Pile said that in response to the worsening situation
surrounding the mill, Indorayon had Friday sent a letter to North
Sumatra Governor T. Rizal Nurdin and President B.J. Habibie.

The letter, he said, presents shareholder concerns over the
apparent lack of support from the local government in protecting
the substantial investment of $600 million that has been made in
the Porsea facility.

"In addition the company's management expressed concern over
the lack of government assistance and the negative impact that
the closure of its Porsea operation would have on investment
within Indonesia and in North Sumatra and the Tapanuli district,
in particular," Pile added. (vin)