Three nations to sell shares in AAF

Zakki P. Hakim, The Jakarta Post, Jakarta

Malaysia, Thailand and Singapore plan to sell all 27 percent of their shares in the ailing fertilizer producer PT ASEAN Aceh Fertilizer (AAF) in Nanggroe Aceh Darussalam to any interested investors, a senior executive says.

AAF president director Rauf Purnama said on Tuesday that the three members of the Association of Southeast Asian Nations (ASEAN) announced their plan in a shareholder's meeting last month.

"Right now we are using a consultant to evaluate the value of the shares owned by the three ASEAN members," he said.

Indonesia, through PT Pupuk Sriwijaya (Pusri), holds 60 percent of AAF shares, while Malaysia, the Philippines and Thailand each has 13 percent, and Singapore owns only 1 percent of the equity through Temasek Holdings Pte.

The decision by the three countries to sell their shares reflects frustration over the sustainability of the firm, which has been in the red for the past two years.

Established in 1979, AAF reached its peak capacity in 1997 to produce 695,826 tons of urea fertilizer. The joint venture company prioritized as its market ASEAN countries, with the remainder going to China, India, Japan and Taiwan, among other places. However, AAF's financial condition has been deteriorating since its operations were disturbed two years ago due to a lack of natural gas supply, Rauf said, "The firm suffers at least a US$3 million loss per month".

The firm may not be able to pay the salaries of its remaining 800 employees, who are mostly maintenance staff, next month.

Late last year, Megawati's administration announced that it wanted to shut down AAF, which ceased much of its operations in August 2003, as natural gas (a key raw production material) supply in the province was considered insufficient to cover export commitments and the needs of other manufacturers there.

However, the proposal to shut down AAF must take into consideration other shareholder countries.

Fertilizer firms in Aceh have been struggling to survive due to natural gas supply problems as reserves from its main gas field, Arun, are dropping, while at the same time, the remaining reserves are being converted into liquefied natural gas (LNG) to meet Arun's LNG export commitments to Japan and South Korea.

In the meantime however, Rauf continued, the new administration, through the Office of the State Minister of State Enterprises and ExxonMobil Oil Indonesia (EMOI), had promised to provide AAF with a supply of natural gas sufficient for six months' production by July.

"If we have no natural gas supply by July, we would have to hand AAF over to the government. By which time the government could do whatever they like to the firm," he said.

At the moment, EMOI is the sole natural gas producer in Aceh and its output has largely been dedicated to Arun for LNG production.

EMOI has also seen its gas reserves declining over the past few years. This has affected Arun's operations as it now operates only four trains out of six trains in Lhokseumawe.

At present, there are two other fertilizer firms in Aceh: PT Pupuk Iskandar Muda (PIM)-I and II.