Perhapi calls for review of mining firms' merger plan

JAKARTA (JP): The Association of Indonesian Mining Professionals (Perhapi) called on the government yesterday to reconsider its plan to merge three state mining companies as part of its privatization strategy.

Perhapi's chairman Herman Afif Kusumo said the merger plan, which was recently proposed by State Minister of the Empowerment of State Enterprise Tanri Abeng, still contained some weaknesses.

Herman said the state minister should make an intensive assessment, involving the country's mining professionals, before executing the merger to empower the state mining companies.

Tanri earlier said his office was considering two strategies regarding the divestment of government shares in publicly listed tin miner PT Tambang Timah, publicly listed general mining firm PT Aneka Tambang (Antam) and coal miner PT Bukit Asam.

The first strategy is to merge the three with Tambang Timah as the holding company prior to their privatization.

Another strategy is to privatize the three individually.

No decision has been made, Tanri said.

The three mining companies are among the 12 state firms the government plans to partially privatize this year to provide US$1.2 billion to state coffers as part of the agreement with the International Monetary Fund (IMF).

Herman said Timah, Antam and Bukit Asam had different mining characteristics and applications of technology.

As such, a merger among them would hardly create a synergy. Instead, it could unfavorably affect the productivity and profitability of each company.

Herman suggested that Bukit Asam be merged with its main consumer, the giant coal-fired power plant in Suralaya, West Java, to establish an integrated power company.

The Suralaya power plant is owned by the Pembangkitan Listrik Jawa Bali I (PJB I), a subsidiary of state electricity company PLN.

Bukit Asam currently sells 70 percent of its annual 12 million tons of coal to the Suralaya power plant at discounted prices.

Herman also attacked the assumption in Tanri's proposal that Timah would be the best choice for the holding company, indicating that Antam would be more suitable.

He said Antam was bigger than Timah in terms of assets, with the former currently booking total assets of Rp 1.6 trillion ($114 million) against Timah's assets of Rp 1.15 trillion.

Antam had a better future than Timah since the former was active in various minerals which still had prospects on the international market, while tin, Timah's main commodity, had a declining demand.

"Multicommodity is a new thing for Timah, while Antam has a long multicommodity corporate culture," Herman said.

Antam produces ferronickel, gold, bauxite, iron sand and silver.

Herman said if Tanri Abeng insisted on merging the three companies to establish the Indonesian Mining Company (IMC), it should be done while maintaining the independence of the three companies as strategic business units.

"The merger should be limited to the aspect of share-holding. The strategic business units -- the three state mining companies -- should remain autonomous in implementing their managerial strategy in line with their technological skills and core competence," Herman said.

The holding company should focus on marketing, promotion and loan procurement, as applied by the Malaysian Mining Corporation, Herman said.

Perhapi also called on the government to delay the privatization of state mining companies until the prices of all minerals strengthened on the international market.

"The state mining companies' shares will not sell for a maximum price at present when the prices of minerals are down," Herman said. (jsk)