Kiani Lestari gets reforestation funds for its pulp factory

Kiani Lestari gets reforestation funds for its pulp factory

JAKARTA (JP): Minister of Forestry Djamaludin Suryohadikusumo
confirmed yesterday that his ministry had lent Rp 250 billion
(US$108.70 million) in reforestation funds to PT Kiani Lestari
for its pulp and paper factory.

Djamaludin said the loans were given to the company "to save
state funds" in Kiani Lestari's pulpwood estate, which was ready
for harvest.

"If we don't help (the factory), the seven-and-eight-year-old
timber at Kiani Lestari's pulpwood estate cannot be harvested and
the government will suffer losses, because it has a 40 percent
stake in the timber estate," he told reporters.

He said the ruling did not only apply to Kiani Lestari, which
is controlled by timber baron Mohamad "Bob" Hasan.

"The government may provide loans from reforestation funds to
pulp and paper companies whose pulpwood estates were built
(partly) using reforestation funds," Djamaludin said.

But he said the funds should be complementary.

"Eighty percent of a factory's construction should be paid for
by a company's own sources... so it does not rely too much on
reforestation funds," he said.

Reforestation funds would comprise only 20 percent of the
total investment in a factory, and they would be granted after
construction has been completed, he said.

According to regulations, reforestation funds -- which are
raised from concessionaires' fees -- should only be used for
developing timber estates.

Bob Hasan signed a syndicated loan last May to finance the
construction of Kiani Lestari's pulp plant in the East Kalimantan
village of Mangkajang in Berau regency.

Bank Negara Indonesia 1946 arranged the US$410 million
syndicated loan, and Bank Dagang Negara and Bank Umum Nasional
were co-arrangers.

According to reports, President Soeharto issued a presidential
decree earlier this month instructing the Ministry of Forestry to
loan reforestation funds to Kiani Lestari's pulp factory.

Djamaludin acknowledged yesterday that the decree existed.

Bob Hasan said the loan would help pay for the $930 million
factory: $520 million of the would be self-financed by the
company.

The 3,400-hectare factory, expected to produce up to 1,500
tons of pulp a day or 500,000 tons a year, is to start production
in early 1997.

Raw material for the Kiani Kertas factory is expected to come
from Kiani Lestari's 180,000 hectares of pulpwood plantations in
East Kalimantan.

Djamaludin said the loans to Kiani Lestari would have an
annual interest rate of 6.7 percent and a maturity of eight
years, including a three-year grace period.

"This is not government equity participation or a joint
venture," he stated.

He said the government would not provide loans for the
factory's construction if the company's pulpwood estates did not
use reforestation funds.

"Factories such as (those belonging to) PT Riau Andalan Pulp
and Paper and PT Indah Kiat cannot get the loans because they
built their timber estates with their own resources," he said.

Riau Andalan and Indah Kiat are owned by Sukanto Tanoto and
Eka Tjipta Wijaya, respectively.

Djamaludin denied that the government was favoring Bob Hasan
who has close ties with President Soeharto.

"It's only because they have the factory... If Barito Pacific
has a factory, it may ask for the same facility," he said.

But he acknowledged there were no ministerial decrees to
regulate loans from reforestation funds. (pwn)