Thu, 30 Aug 2001

Spin-off plans remain an option: Semen Gresik

JAKARTA (JP): State-owned cement producer PT Semen Gresik said on Wednesday that plans to spin off its two cement subsidiaries remain intact, despite the government's consideration of a put option deal to sell the company for US$520 million.

Semen Gresik president Urip Timuryono said the government may still divest Semen Gresik's two units, PT Semen Padang and PT Semen Tonasa, even though the move would annul the put option deal with the Mexican-based PT Cemex Indonesia.

He said reviews of the implementation of spin-off plans and the put option agreement were being conducted simultaneously.

"The government and our company are investigating the most effective solution," Urip said during a public presentation.

State Minister for State Enterprises Laksamana Sukardi said on Monday that the government would exercise its option rights to sell Semen Gresik to Cemex.

The government is under pressure to raise Rp 6.5 trillion (US$730 million) in privatization proceeds this year as part of reform targets agreed with the International Monetary Fund (IMF).

Thus far, no funds have been raised through privatization and, with only four month left before the deadline, Laksamana has expressed concern over meeting the target on time.

Exercising Cemex's put option deal, however, would earn the government US$520 million.

That price would exchange to about Rp 4.63 trillion at current rates, or over 70 percent of the government's privatization target.

The government secured the put option deal with Cemex in 1998, when the latter entered Semen Gresik with a 14 percent stake.

Under the deal, which expires on Oct. 26 this year, the government has the right to sell its remaining 51.01 percent stake in Semen Gresik at a value of $1.72 a share. Cemex must accept the sale offer at the agreed price.

At present, the Mexican company owns 25.53 percent in Semen Gresik, 11 percent of which was acquired through the stock market.

Cemex's three-year campaign to become Semen Gresik's majority shareholder has faced protests from local people in West Sumatra, especially those in the capital city of Padang.

According to the locals, Semen Padang was built on their ancestors' land and should therefore remain under Indonesian ownership.

Similar demands have been aired by people in South Sulawesi, who also want Semen Tonasa removed from the Semen Gresik group.

Urip said the government must take such demands into account, even though conceding to them could jeopardize the put option deal.

The put option agreement is only valid if Semen Padang and Semen Tonasa remain subsidiaries of Semen Gresik.

Removing the two units would also require the government to compensate Cemex for the loss of value in Semen Gresik.

Urip refused to speculate as to whether the government would consider a spin-off after exercising its put option right.

Cemex said it was prepared to hold talks with the government regarding the put option agreement.

"The transaction would have a positive impact on the overall economic environment of Indonesia, fueling the optimism of the financial and investor community," PT Cemex Indonesia president Francisco Noriega said in a statement on Wednesday.

Meanwhile, Semen Gresik finance director Satriyo said he believed that the rupiah would remain strong which would in turn ease the company's debt burden.

Semen Gresik must repay some Rp 215 billion and another $162 million in U.S dollars by January next year, he said.

Earlier this year, Semen Gresik issued bonds to secure funds for the debt payment, but then halved the issue due to sluggish market conditions at the time.

Satriyo said Semen Gresik would make up the shortfall with loans of up to Rp 700 billion from Bank Mandiri.

Semen Gresik said foreign exchange losses had led the company to suffer a net loss of Rp 41.4 billion in the first semester of this year. (bkm).