PT Kiani Kertas to begin pulp production soon

JAKARTA (JP): The new pulp firm PT Kiani Kertas, a subsidiary of the Kalimanis Group owned by Indonesia's timber baron Mohammad 'Bob' Hasan, expects to start making pulp in April.

Company president Machnan R. Kamaluddin said yesterday that the new plant would initially produce about 500,000 tons of pulp a year.

"Construction of the company's pulp plant is expected to be completed by March this year," he told The Jakarta Post. "Construction started in September 1993."

Machnan said his company was spending US$1.1 billion (Rp 2.3 trillion) on the plant in Berau regency, East Kalimantan: $400 million of this was derived from equity and $700 million from bank loans.

Kiani Kertas' pulp plant will occupy a 3,400-hectare site.

He said the company planned to export its pulp products to Japan, the United States, South Korea, Australia, European countries and other countries. "Most of the products will be destined for export markets," he told the Post.

He said the firm was prepared to sell about 10 percent of its output on the domestic market. "It will depend on the demand of paper producers in Indonesia," he said.

The production cost, he said, would be around $200 a ton, much cheaper than foreign producers'. "We expect the pulp price will be between $650 and $700 a ton when the company starts selling its pulp," he said.

Machnan said pulp prices on the world market now averaged $390 a ton.

He said that raw materials for the plant would be supplied by a timber estate owned PT Tanjung Redeb Hutani, a joint venture between Bob Hasan and PT Inhutani I.

Tanjung plans to spend about $216 million opening up the timber estate, which is expected to occupy 180,000 hectares.

He said the estate would be 35 percent financed by Tanjung and the 65 percent by reforestation funds from the government.

"The firm will need around $1,200 for each hectare of timber estate," Machan said.

Since Tanjung will not be able to feed the pulp plant until 2001, the pulp plant plans to use mixed local hardwood as a raw material.

Kiani Kertas is projected to earn between $350 million and $400 million in foreign exchange a year.

PT Kiani Kertas plans to float its shares on the U.S. Nasdaq stock exchange in 1998.

Machnan firm said his company chose Nasdaq because the stock exchange allowed new companies with strong potential to float shares without requirements on profitability for three consecutive years. (09)