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)