Market positive about RI privatization plan

Market positive about RI privatization plan

JAKARTA (JP): The international market is positive about
Indonesia's plan to privatize state firms, according to
investment bank Goldman Sachs.

Goldman Sachs (Asia) L.L.C. managing directors Peter G.C.
Mallinson and Timothy D. Dattels told journalists here yesterday
state-owned "quality companies" would sell well.

"Very high quality companies could meet good interests.
Whether PT Telkom or Indosat... plus other unlisted companies,
at the moment there are investors who are willing to put a
substantial amount of money into an attractive Indonesian equity
or equity-linked issue," Mallinson said.

He was referring to the government's recent announcement to
make additional divestment in five state listed firms and float
seven more state firms.

The five listed firms which the government will divest more of
its stake are local telephone operator PT Telkom, satellite
operator PT Indosat, cement producer PT Semen Gresik, tin mining
firm PT Tambang Timah and nickel and gold mining company PT Aneka
Tambang.

The seven companies being prepared for initial public offering
are PT Krakatau Steel (steel maker), PT Pelindo II and PT Pelindo
III (port infrastructure and management), PT Jasa Marga (toll
roads), PT Perkebunan Nusantara IV (oil palm plantations), PT
Tambang Batubara Bukit Asam (coal mining), and PT Angkasa Pura II
(airport management).

Dattels, the head of Goldman Sachs' investment division for
Asia, excluding Japan, added: "We have a lot of confidence in
Tanri Abeng and his team. They have deep understanding on the
issue of privatization."

Tanri Abeng is the state minister of the empowerment of state
enterprises.

Dattels noted that the "successful" offering of Asia Pulp and
Paper (APP)'s US$500 million convertible bonds indicated that
confidence was building up on Indonesia's economy.

"Somebody investing in APP is ultimately investing in
Indonesia. To us, this transaction is a major vote of confidence
on Indonesia's economy," he said.

He said APP's offering size was initially indicated at $250
million. However, because of strong demand from the market, with
oversubscription of six times the offer, the final deal totaled
$500 million.

About 80 percent of the total were U.S.-based investors,
European investors accounted for 15 percent and Asians 5 percent.

Some critics, however, have said that the success of APP's
$500 million issue should not necessarily reflect the return of
foreign investors' confidence in Indonesia as APP is basically a
Singapore company listed on the New York Stock Exchange.

Dattels dismissed such criticism, saying that although APP is
incorporated in Singapore, the market viewed it as an Indonesian
company as most of its assets are in Indonesia.

APP, a forest product group, is 86.2 percent owned by APP
Global Ltd., a company controlled by the Sinar Mas Group.

APP has integrated operations of forestry management, pulp
manufacture, fine paper and industrial paper manufacture and
paper distribution.

Its subsidiaries include PT Indah Kiat and Paper, PT Pabrik
Kertas Tjiwi Kimia, PT Lontar Papyrus Pulp and Paper Industry and
PT Pindo Deli Pulp and Paper Mills -- all in Indonesia.

While well established on several large-scale sites in
Indonesia, the APP group more recently has expanded its
operations to India and China and is committed to a large pulp
mill in Malaysia.

Mallinson, the head of Goldman Sachs' equity division for
Asia, excluding Japan, noted that APP happened to be in an
industry which had been enjoying increasing sales prices in
dollar terms.

He said the sales of such export-oriented companies would be
warmly welcomed by the market. Besides, state companies in
strategic industries or those with large domestic franchises and
strong management teams would also sell well in the market,
provided they had a healthy level of debt. "Investors are very
sensitive about debt levels." (rid)