Semen Gresik to set up finance firm

Semen Gresik to set up finance firm

JAKARTA (JP): The publicly-listed cement producer, PT Semen Gresik, received approval from its shareholders yesterday to set up a finance firm in the Netherlands called Gresik Cement Finance BV, with an authorized capital of 400,000 guilders (US$241,509).

Semen Gresik's president, Urip Timuryono, told journalists after an extraordinary shareholders meeting that the new company expects to issue US$100 million in Eurobonds on the Luxembourg stock exchange in May.

"We prefer to do it this way because we can control the planned company, which will be 100 percent owned by Semen Gresik, and minimize the risk of the debt issue," he said.

Moreover, according to Urip, Semen Gresik will act as guarantor of the issue, not the subsidiary.

He said the total proceeds from the bonds will be used to finance the construction of Semen Gresik's Tuban III plant in Tuban, East Java.

"We need a total investment of Rp 700 billion for the Tuban III plant. We will raise both onshore and offshore loans in addition to our own equity. But equity financing will not exceed five percent of the total," he said.

Skeptics

Urip countered skeptics who said that Semen Gresik should have retained enough funds from its Rp 1.7 trillion rights issue last year to build Tuban III.

He said that for the acquisition of PT Semen Tonasa and PT Semen Padang alone, Semen Gresik spent Rp 1.06 trillion, or 74 percent of its total proceeds.

Another five percent was used to repay debts and to strengthen Semen Tonasa's capital structure.

The remaining 20 percent went to construction of the Indarung plants in West Sumatra, Tuban II and Tuban III.

"The fund for Tuban III was not more than five percent of the total," he added.

Urip said that construction of the Tuban III plant began in the fourth quarter of last year. It will commence commercial production in June 1998 with a production capacity of 2.3 million tons of cement per annum.

He said that with the acquisition of the two other state-owned cement firms -- Semen Tonasa and Semen Padang -- Semen Gresik has a combined production capacity of 10.8 million tons of cement per annum.

"Semen Tonasa will complete the construction of its new production unit with an annual capacity of 1.3 million tons this year," he said.

Urip declined to discuss Semen Gresik's performance last year or projections for this year.

"We will try to maximize the utilization of the production capacity," he said.

Semen Gresik's consolidated assets, according to Urip, stand at Rp 4.2 trillion. (08)