Soeharto launches Kiani Kertas pulp mill

Soeharto launches Kiani Kertas pulp mill

JAKARTA (JP): President Soeharto yesterday inaugurated PT
Kiani Kertas' US$1.3 billion pulp plant in Berau regency, East
Kalimantan, praising it as an environmentally sustainable
industry.

Soeharto said Kiani Kertas' pulp mill would strengthen the
country's domestic paper industry and non-oil exports as most of
its production would be destined for export markets.

The President said demand for pulp and paper was increasing
from year to year while the existing pulp and paper producing
countries could no longer expand their production capacity.

"Therefore, Indonesia has a great chance to meet world
demand," Soeharto said.

The plant, dubbed the largest single-line pulp mill in
Southeast Asia, will start commercial production next week and
reach its full capacity of 500,000 tons of air-dried pulp per
annum within three months.

The President said Indonesia had comparative advantages in the
pulp business as it had a large acreage of tropical industrial
forests.

In tropical forests, Soeharto noted, trees grow more rapidly
than those in other kinds of forests (in the temperate zone).

"Investors chose Kalimantan as the site of their pulp and
paper business because this island is one of the largest timber
producers," Soeharto said.

East Kalimantan is set to have the world's largest
concentration of pulp and paper production in the next five years
with the establishment of three more pulp and paper plants in the
province, excluding that owned by Kiani Kertas.

The three pulp plants were being developed separately by PT
Adindo, PT Sumalindo and PT ITCI Hutan Manunggal, a senior
provincial forestry official said.

Kiani Kertas' pulp plant occupies 3,400 hectares.

Kiani president Machnan R. Kamaluddin said recently that raw
materials for the plant would be supplied by a timber estate
owned by PT Tanjung Redeb Hutani, a joint venture between Bob
Hasan and state-owned PT Inhutani I.

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

Kiani Kertas is almost completely owned by timber baron
Muhammad "Bob" Hasan through his Kalimanis group which owns
almost 500,000 hectares of forest concessions in East Kalimantan.

Hasan, a close associate of Soeharto, said that some of the
equity in Kiani Kertas was held by two charitable foundations
headed by the President.

Kiani Kertas drew public criticism earlier this year when it
secured a Rp 250 billion (US$98 million) loan from the
government-administered reforestation funds. The loan to Kiani
Kertas was based on a Presidential instruction.

But Hasan said $700 million of financing for the project was
derived from equity and $600 million from bank loans.

He said the company would consider floating part of its equity
after production was up and running.

Machnan said earlier that Kiani Kertas planned to float its
shares on the U.S. Nasdaq stock exchange in 1998.

Machnan said his company chose Nasdaq because the stock
exchange allowed new companies with strong potential to float
shares without tough requirements such as those on profitability
for at least two consecutive years, as imposed by the Jakarta
Stock Exchange. (rid)