Pertamina set to own 15% in TPPI: Official

JAKARTA (JP): State-owned oil and gas company Pertamina may gain up to a 15 percent stake in PT Trans Pacific Petrochemical Indotama (TPPI), after lending its approval to resuming the long- delayed construction of the petrochemical center.

Secretary of the Financial Sector Policy Committee (FSPC), Syafruddin Temenggung, said on Friday that the Committee and Pertamina had agreed on a preliminary deal for a scheme to finalize TPPI's construction, a crucial ingredient in the company's debt restructuring program.

About 65 percent of the TPPI aromatics plant has already been completed, and some $400 million is needed to bring it on stream.

Syafruddin said that to jump start TPPI's aromatics' production, Pertamina would join in a product swap scheme.

"We will use Pertamina's products to raise the funds, which will finance the project's completion," Syafruddin told reporters after a meeting at his office with Japanese creditors of TPPI.

The FSPC handles high profile debt workouts of the Indonesian Bank Restructuring Agency (IBRA), which took over TPPI loans from local banks hit by the 1997 economic crisis.

Syafruddin fell short of explaining which Pertamina products TPPI would use to raise the capital.

In addition to the expected production of aromatics, TPPI will also produce refined products requiring oil and gas supplies from Pertamina.

Once full production begins, Pertamina will continue to supply TPPI with raw materials in exchange for the latter's aromatics, he said.

For that, Pertamina would gain a stake in TPPI ranging between 10 percent and 15 percent, he added.

TPPI was 70 percent owned by the Tirtamas Group and 20 percent by a unit of Thailand's Siam Cement PLC, Tuban Petrochemical Pte. Ltd. The remaining 10 percent is evenly split between Itochu and Nissho Iwai.

Tirtamas has reportedly transferred its entire 70 percent stake to IBRA after the group's debts to local banks were taken over by the agency.

Construction at TPPI came to an halt in early 1998, after $900 million had been spent -- about $200 million out of the equity and $700 million out of contractors' funds.

Foreign investors had been reluctant to resume the project citing Indonesia's unfavorable investment climate.

Pertamina became involved upon urging from the government following lobbying by TPPI's Japanese contractors.

Syafruddin estimated that TPPT would be completed by 2003, with production beginning in 2004.

"We'll treat Pertamina as the senior creditor, the first cash received (by TPPI) will go to Pertamina," he explained.

The remainder, he said, would be evenly divided among TPPI's contractors and its shareholders.

He also dismissed talk that the government was set to sell its loans in PT Chandra Asri Petrochemical Center to foreign parties.

The government, he said, still prioritized a restructuring deal with Chandra Asri's creditors before considering a sale.

"A strategic partner would be an option if we can't come to a restructuring deal," he said.

Earlier, Syafruddin said that one strategic investor and an investment bank had expressed interest in a Chandra Asri stake.

Offers had ranged from between $800 million and $1 billion for buying out Chandra Asri, according to Syafruddin.

Chandra Asri owes some $730 million to a foreign consortium led by Japan's Marubeni Corp., which also controls a 20 percent stake in the company.

Chandra Asri owes another $464 million to IBRA after the latter took over the loans from local banks hit by the 1997 economic crisis.

IBRA and the Japanese creditors have been deadlocked over a restructuring scheme for Chandra Asri.

Previous deals had been scrapped following charges they were overly advantageous to the Japanese side and disadvantageous to IBRA.

But after more than two years without any deal being reached, pressure from the Japanese government to speed up the talks has built up.

Syafruddin said the prolonged negotiations had hurt the value of Chandra Asri's assets, with skilled workers leaving the company.

The FSPC now planned only to improve the makeup of the latest restructuring deal reached last April, he said.(bkm)