Japan urges quick deal on giant projects

Japan urges quick deal on giant projects

JAKARTA (JP): The Japanese government has called on Indonesia
to speed up the negotiation process of Chandra Asri and Tuban
petrochemical projects, and the Paiton I power plant, a senior
minister said on Monday.

Minister of Industry and Trade Luhut Pandjaitan said that
Japan's Ministry of Trade and Industry had made the request
during his visit to Tokyo last week.

Luhut said he understood Japan's concern because the future
operation of the three projects would affect Japanese investors.

"But we will prioritize completing Chandra Asri, as we've
already signed an MoU (memorandum of understanding) with Japan,"
was his only statement on the meeting.

PT Chandra Asri is a joint venture between the Indonesian
government and Japan's Marubeni Corp.

Under the MoU, Indonesia has agreed to convert all of its
US$460 million loans in PT Chandra Asri into equity, while
Marubeni agreed to convert part of its loans worth $100 million
into a 20 percent equity.

Domestically, the agreement was widely criticized as bowing to
pressure from Japan, which is one of Indonesia's largest donor
countries.

But at present, it is unclear whether Japan has managed to
secure a final deal with the Indonesian government.

The Tuban project, which is owned by the Tirtamas group, also
worries Japanese contractors, who were involved in the
construction of the project.

The development of the Tuban petrochemical center by PT Trans
Pacific Petrochemical Indotama (TPPI), came to a halt in 1998
after the country was hit by the economic crisis.

As the project is unable to generate revenue, Tuban's majority
owner, the Tirtamas Group, cannot repay its debts of $600 million
to Japanese contractors.

Upon completion of the project, Tuban would produce olefins
and aromatics.

Tirtamas chairman Hashim Djojohadikusumo said he was
prioritizing the completion of the Tuban's aromatics production,
to help pay part of the debts.

According to him, world prices of aromatics were favorable and
the product was in high demand in the local textile industry.

He said that 65 percent of the plant that would produce
aromatics was already completed, but its completion needed
another $475 million.

He said that he was seeking the support of foreign investors
to finish the plant's construction.

"We expect that with the entrance of IBRA, investors will
become more confident," he told in a press meeting after the
extraordinary shareholders' meeting of the public listed cement
producer PT Semen Cibinong.

Indonesia, through the Indonesian Bank Restructuring Agency
(IBRA) also restructured its nonperforming loans in the Tuban
project, which is owned by the Tirtamas group.

Hashim said that IBRA took over a controlling stake at the
holding company for a 10-year period after which Tirtamas must
repay its debt to IBRA.

Details of the restructuring deal are sketchy, but Hashim
denied that the government had bailed out Tirtamas' debts.

Japan through Mitsui & Co also has a 32.5 percent stake in
independent power producer (IPP) PT Paiton Energy, which operates
the Paiton I power plant in East Java.

The IPP is currently renegotiating its contract with state
owned electricity firm PT PLN.

PLN has said that Paiton's contracted power prices were too
high and that it could not afford buying them under the current
rates.

The state company is expecting a long term agreement with
Paiton in the near future.(bkm)