Indorayon to restart pulp plant operation

JAKARTA (JP): Publicly listed pulp and fiber rayon firm PT Inti Indorayon Utama expects to resume the operation of its pulp plant in Porsea, North Sumatra, next month following the government's recent decision to allow it to reopen the factory.

Company finance director David Pile said on Tuesday that the pulp plant was expected to reach its full production capacity of 240,000 metric tons of paper pulp per annum in a three-month period.

He said Indorayon was currently working with the government to approach locals and interest groups to inform them about the government's decision on the reopening of the pulp plant in an attempt to avoid protests.

"So everyone will understand that the reopening of the plant is the government's decision. Hopefully, the plant will start running next month without any problems," he said on the sidelines of a hearing between Indorayon and House Commission V for industry and trade affairs.

The government allowed Indorayon to reopen its pulp plant last month, but it must keep the fiber plant closed pending an environmental audit to be done by the government.

Indorayon's pulp and fiber factories have been closed since mid-1998 when then president B.J. Habibie decided to suspend the plants' operations following prolonged protests from local residents who complained of alleged environmental damage.

Pile said the company was upbeat about seeing good business with the reopening of the pulp plant.

"Prospects are good ... In a year's production we should have an Ebitda (earning before interest, tax, depreciation and amortization) in the range of US$100 million and $110 million."

He said Indorayon would still be able to earn enough profit although it would only operate the pulp plant and keep its 60,000 ton capacity fiber plant closed.

The fiber business is not very promising at the moment since the market price for the commodity is still depressed, he added.

"The price of fiber is not as high as it used to be. The market has turned around and we hope to make sufficient money on pulp. I would expect we break even this year, providing that we start operating soon," Pile said.

Meanwhile, foreign shareholders of the company have dropped a plan to file suit against the government of Indonesia at the International Center for Settlement of Foreign Investment Disputes in Washington D.C. over the mid-1998 suspension of the factory's operations, said lawyer Todung Mulya Lubis, the trustee of foreign shareholders in the company.

He said immediately after the government's decision to reopen the plant the foreign shareholders decided to cancel the litigation plan.

"Even though we can only reopen the pulp plant, it gives hope to the company that it will remain listed on the stock market," he said on the sidelines of the hearing.

The company said earlier it was afraid a prolonged suspension of its factory's operations would damage its image on the stock markets due to its worsening financial performance.

Indorayon, which is listed on the Jakarta Stock Exchange and a U.S. stock exchange through American depository receipts, said its inability to operate since mid-1998 had resulted in a sharp drop in its market capitalization from about $1.4 billion in 1996 to only about $40 million at present.

Company chief commissioner Palgunadi T. Setyawan told commission members at the hearing that in order not to fall on the same problems Indorayon would register with an ecolabeling program as soon as it restarted the operation of its pulp plant.

He said the ecolabeling program would allow a regular audit on the company's waste management as well as timber usage to avoid possible environmental problems in the future.

"From now on, we want to live a normal life, meaning that we will not do anything unconventional in our business operations," he said. (cst)