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.