Investors to reclaim Cemex shares in SG

Investors to reclaim Cemex shares in SG

Rendi A. Witular, Jakarta

Due to a projected boom in cement demand in the next couple of
years, foreign and local investors have expressed their interest
in acquiring the shares of Mexican cement giant Cemex SA in
state-owned cement producer PT Semen Gresik (SG), a minister
said.

State Minister of State Enterprises Laksamana Sukardi said the
government had been approached by local and overseas investors,
mostly cement producers, to buy shares in the country's largest
cement-maker.

"There are several local and international cement producers
interested in buying Cemex shares in SG, due to the projected
strong demand for cement," said Laksamana after a hearing with
the House of Representatives Commission IX for financial affairs
on Monday.

"However, they are currently still waiting for the settlement
of legal dispute between Cemex and the Indonesian government at
the arbitration court, in order to ensure legal certainty of
their future investment here," he said.

The plan by new investors to acquire Cemex's shares in SG fits
in with the government's earlier proposal to repurchase the Cemex
ownership as a way to resolve the investment dispute faced by the
Mexican firm here.

The government is currently seeking third-party investors to
finance the buyback plan since the government does not have
sufficient funds. Laksamana previously said his office had asked
state pension fund PT Jamsostek to lead funds to a consortium
that would carry out the buyback program.

"If the investors are still reluctant to buy Cemex shares, the
government has already provided a standby buyer which consist of
pension funds such as Jamsostek," Laksamana said.

Cemex has a 25.53 percent stake in the publicly listed SG
while the government has a 51.01 percent stake, with the
remainder held by the public.

A source at the Office of State Minister of State Enterprises
said Cemex had asked the government to buy back its shares at a
price of at least Rp 14,500 per share, or about Rp 4.5 trillion
(US$500 million) for its stake.

The Cemex investment dispute emerged after the West Sumatra-
based PT Semen Padang, a unit of SG, and local politicians
opposed plans by Cemex to buy more shares in SG to become a
majority owner, as stipulated under a 1998 investment deal made
with the government when the Mexican firm first bought the SG
shares.

Attempts to resolve the problem have been unsuccessful,
leaving Cemex's investment in limbo. The company has taken the
case to the International Center for the Settlement of Investment
Disputes to act as an arbiter in its dispute with the government
and SG, Indonesia's largest cement producer.

The Indonesian Cement Association (ASI) has previously
projected cement demand at home would soar to 46.5 million tons
per year in the next couple of years, compared with the current
27.5 million tons, while exports would jump to 12 million tons to
15 million tons.

It said the existing capacity of local cement producers would
not be able to meet such high demand, due to the robust growth in
the construction and property sector, unless there was an
expansion in production.