Two Asian tycoons to set up seven sugar projects
JAKARTA (JP): Two of Asia's wealthiest and most powerful businessmen are forming an alliance that will create one of the largest sugar empires in the world.
Indonesia's Liem Sioe Liong and Malaysia's Robert Kuok plan to merge their sugar interests in Indonesia under a new holding company and spend more than US$1 billion on seven projects which will cover a total area of more than twice the size of Singapore in south Sumatra.
According to the Singapore-based Business Times daily, each of the projects, costing about $130 million, will cover about 25,000 hectares, has a planted area of 20,000 hectares, a factory capable of crushing 10,000 tons of cane a day and producing about 120,000 tons of sugar a year.
Two of the projects have been completely developed and are in full operation, while the other five will be developed over the next 10 years.
The company has obtained loans for one of the five projects and is now sourcing funding for the remaining four projects.
Nearly half the money or about $70 million for each project will be for factory machinery and construction, with $20 million for farm equipment, $10 million for infrastructure development and $30 million for plantation development.
The shareholders hope to inject $20 million in equity contributions for each of the projects and generate another $20 million from internal funds.
They expect to raise the remaining $90 million for each project or $360 million in total for the four unfunded projects from financial institutions.
As the two partners are among the biggest names in Asian business and with sugar prices currently on the rise, financing is not expected to be a problem. According to the International Sugar Organization, there will be a global sugar deficit of 2.4 million tons this year --- just over two percent of world consumption.
Liem is Indonesia's wealthiest Chinese businessman. He has interests in cement, property, finance and food in Indonesia and abroad, including Singapore, where he is the biggest shareholder of listed United Industrial Corp. His companies generate a total turnover of more than $10 billion, with his PT Indocement Tunggal Prakarsa being Indonesia's largest listed company.
Hong Kong-based Kuok, known as the "sugar king", is already one of the biggest sugar players in the world and has extensive interests in property, shipping and vegetable oils. He is also the largest shareholder of the up-market Shangri-La group of hotels.
Investment
Kuok's investment in the Indonesian projects, sources said, will be through Perlis Plantations Bhd., which is listed on the Kuala Lumpur Stock Exchange and is one of the largest sugar producers in Malaysia. A Perlis Plantations spokesman in Kuala Lumpur declined comment on the grounds that the projects were in a "preliminary and delicate stage".
According to the 1992 annual report of Perlis Plantations, the latest available, it currently has no other projects in Indonesia except for 95 percent owned PT Healthcare Glovindo, which manufactures rubber gloves. The new investment will be one of its largest.
The sources said external financing for the Indonesian projects could be raised in one of two ways. One would be through direct loans using the plantation land and fixed assets as collateral. The other would be for the two share-holders to establish a leasing company that will purchase all the agricultural and factory machinery and then enter into lease contracts with the projects.
The leasing company, if established, will be a subsidiary of the new holding company of Kuok and Liem, and will only service the requirements of the sugar projects. Funding will largely be from financial institutions, which will secure their loans with the machinery and equipment leased to the factories.