Pertamina gets US$1b loan commitments from banks

Pertamina gets US$1b loan commitments from banks

Moch. N. Kurniawan, The Jakarta Post, Jakarta

State oil and gas firm Pertamina said on Thursday that it had
received initial commitments from three U.S. and Japanese
financial institutions to provide US$1 billion in commercial
loans to finance its expansion and exploration projects.

Pertamina president Baihaki Hakim said the loans were needed
after the House of Representatives decided earlier to force the
company to pay over 50 percent of its earnings to the treasury,
up from the current 10 percent, starting next year.

"We hope we will reach a deal with them soon," he told
reporters prior to a meeting with the House of Representatives'
Commission VIII for science, technology and the environment.

He added that the government had agreed with the company's
plan to take out commercial loans.

But he declined to provide the names of the lending
institutions or the timetable for reaching final agreements.

The government officially agreed on Wednesday with the House's
decision to raise the government's dividend from Pertamina.

Pertamina has been banned by the government from seeking
commercial loans for nearly thirty years following a scandal in
the mid 1970s when it was headed by founding president Ibnu
Sutowo.

Pertamina borrowed some US$10.5 billion to finance a fleet of
oil tankers, but was unable to repay the loans. The scandal
pushed the company to the brink of bankruptcy.

Baihaki said that the loans would be used to finance various
projects, particularly those in the upstream sector, such as the
acquisition of Spanish-Argentinean firm Repsol-YPF for $270
million.

Pertamina would also seek loans from other financial
institutions although this wouldn't be easy, he added.

Baihaki further said that Pertamina might have to shelve other
expansion projects requiring billions of dollars in upstream and
downstream sectors between 2002 and 2006 if it was unable to come
up with enough funding.

According to Baihaki, among the projects that may be delayed
are the $90-million acquisition of a geothermal power plant in
Dieng, Central Java, and the $73-million takeover of the Wayang
Windu power plant in West Java.

The company would also change the procurement of 38 fuel
tankers worth $805 million into a leasing mechanism, he said.

Pertamina would evaluate other projects over the next two
weeks, he added.

"But we remain committed to continuing the expansion of three
projects: investing in ExxonMobil Cepu in Central Java, taking
over the Coastal Plain Pekanbaru block in Riau and expanding the
Langit Biru projects in West Java," Baihaki said.

Pertamina will invest $92 million in the Cepu block owned by
American firm ExxonMobil, $115 million taking over the CPP block
operated by Caltex Pacific Indonesia, and $245 million for the
Cilacap and Balongan Langit Biru projects.

Separately, energy analyst Kurtibi hailed the government's
decision to allow Pertamina to seek commercial loans, saying that
such a move should have been made a long time ago.

"The move will help Pertamina expand," he said.

He added that the government should also revoke other
regulations which limited Pertamina's expansion programs, but he
failed to provide details.

Elsewhere, Baihaki said that Pertamina also planned to hedge
oil prices at $22 per barrel in order to minimize the risk of a
possible fall in oil prices next year.

The firm had sought funds from two U.S-based institutions,
Bank of America and Merryl Linch, and Germany-based Deutsche Bank
to finance crude oil hedging, he said.

"It's still a pilot project. We must be careful with this
plan, otherwise we might suffer unexpected losses," he said.

He added that Pertamina would start implementing the hedging
plan in January 2002.