THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS
REPUBLIC OF INDONESIA
Main Building, Ministry of Finance,
Banteng Timur No.2-4 Jakarta Pusat
Tel: (021) 380-8384 Fax: (021)
Investment News, 4 June 2007
Senior US negotiator on North Korea, Christopher Hill, visits
Deal with US pharmaceutical Baxter on clinical trials for bird flu
Airline operators call for true ‘open sky’ policy
Government projects budget deficit at 1.8% of GDP
SOEs minister calls for lower dividends from state-owned sector
Year-on-year inflation expected to fall further
Budget projections maintain growth figure at 6.3%
Interest in plantation sector continues
Japan PM calls for early Economic Partnership Agreement
Tighter controls forecast on hypermarket expansion
Telkom may spend up to $2 billion to expand networks
Semen Gresik to commence new cement plant
Unilever Indonesia to spend Rp500 million on capacity boost
Astra International sees first-half vehicle sales at 180,000 units
Bank Mandiri to lend to major cellular operators
OCBC expands stake in Bank NISP
Japan keen to build first nuclear power plant
New geothermal, coal-fired plants for remote areas
Oil & gas
Indonesia considers revoking stalled licenses
Tax incentives considered for refinery construction
Tangguh project on track for 2008 start-up
Government to renegotiate Inco royalties
Aneka Tambang to build aluminium, nickel smelters
Hill Briefs Political Leaders
US negotiator Christopher Hill briefed Indonesian leaders about the
North Korean nuclear standoff on Tuesday (29/5/07), saying Indonesia
has an important role in global affairs as a new, non-permanent
member of the UN Security Council.
Hill, the US assistant secretary of state for East Asia and Pacific
affairs, also suggested ways in which Indonesia can help ease
spiralling tensions in the Middle East.
Indonesia and North Korea have historical ties, and Indonesian
President Susilo Bambang Yudhoyono has expressed interest in playing
a mediating role in the nuclear dispute.
discussed foreign policy issues because, as you know, Indonesia is
on the Security Council," Hill said after meeting with lawmakers and
government leaders. "I gave a little briefing on North Korea and
what we're trying to do," said Hill, who is also the chief US
negotiator at six-country talks aiming for nuclear disarmament on
the Korean peninsula.
On Sunday, US
Defense Secretary Robert Gates met with his Indonesian counterpart
Juwono Sudarsono in Singapore to discuss ways of deepening military
relations between the two countries with an emphasis on reform.
Gates and Sudarsono both "stressed the importance of encouraging
ongoing reforms undertaken by Indonesia's military, a crucial and
inseparable part of democratic reforms," they said in a joint
statement issued by the US Department of Defense.
Military relations between the two countries have been improving in
recent years after a long period in which they were suspended
because of the Indonesian military's human rights record.
Their meeting on the sidelines of an international conference on
Asian security saw agreement that "the two countries' security and
military-to-military ties need to be continuously monitored, managed
and nurtured within the framework of Indonesia's ongoing democratic
"They also discussed ways and means to deepen the strategic
partnership between Indonesia and the USA," it said. "They
underlined the importance of strengthening existing bilateral
cooperation to address various strategic challenges."
Jakarta Criticizes Myanmar
Indonesia expressed concern on Monday (28/5/07) over Myanmar's
decision to extend the house arrest of pro-democracy leader Aung San
Suu Kyi, saying it undermined claims the junta was serious about
human rights and democracy.
Myanmar also was tarnishing the reputation of the 10-member
Association of Southeast Asian Nations, foreign ministry spokesman
Kristiarto Legowo said in a statement.
Suu Kyi has been held continuously since May 30, 2003, when her
motorcade was attacked by a pro-junta mob during a political tour of
northern Myanmar, and the junta last week extended her house arrest
by another year.
Many nations have condemned her confinement, including Myanmar's
fellow members in ASEAN. Although bound by an edict not to interfere
in each other's affairs, some have become blunter in their criticism
of the junta.
Indonesia is "deeply concerned" by Myanmar's decision, Legowo said,
adding that it "ignored appeals made by ASEAN member countries as
well as the international community" to release the 1991 Nobel Peace
Bird Flu Vaccine Tests
Siti Fadilah Supari told the Associated Press on Tuesday (29/5/07)
that US drug manufacturer Baxter Healthcare Corp. will carry out
clinical trials of a bird flu vaccine in Indonesia in July and that
the country will initially stockpile 2 million doses.
"But when we are
getting closer to a pandemic, we will move to stockpile at least 20
million," said the minister, adding that she "hopes that will never
tentative deal reached in February, Indonesia agreed to provide
Baxter with samples of its H5N1 virus in exchange for the drug
manufacturer's expertise in vaccine production. Supari said Baxter's
"clinical trial involving hundreds of participants will start in
July" and should be concluded by October.
Baxter is now
able to produce 3 million doses of the vaccine per week, she said,
declining to say whether Indonesia has a ready stockpile at present.
has set aside 98 million doses of bird flu vaccine this year to
protect small-scale chicken raisers.
the director of animal health at the Ministry of Agriculture, said
the government had bought 60 million doses of vaccine and received a
grant of 33 million doses from China and another 5 million from the
Meanwhile a girl
from Central Java died of bird flu, a health ministry official said
on Friday (1/6/07), in a week which saw another confirmed death from
the disease at Solo in the same province.
Skies for All: Indonesian Airlines
operators have demanded that the House of Representatives press the
government to renegotiate with neighboring countries over the "open
sky" policy, The Jakarta Post reported.
carriers are concerned that foreign airlines will have an unfair
advantage when the policy comes into force in 2008 because of their
existing networks in Indonesia, and are seeking to ensure that
domestic airlines have reciprocal access to foreign airspace.
The open sky
policy was created to liberalize, or open up, airspace between the
countries involved in the agreement. The policy will take effect in
2008 for ASEAN countries and 2010 for
the rest of the world.
Asian nations -- Brunei, Indonesia, Malaysia and the Philippines --
have already agreed to permit unlimited flights between their
director of Lion Air, Rusdi Kirana, said airline operators grouped
in the Indonesian National Air Carriers Association (INACA) are
seeking reciprocal rights to foreign
airspace prior to the open sky policy kicking in.
"We want the
open sky policy to be reciprocal. If a foreign airline can fly into
Indonesia, then we want to be able to fly into their territory too,"
Rusdi said after a hearing on the aviation bill currently under
deliberation at the House of Representatives on Thursday (31/5/07).
chairs INACA, said foreign airlines should not be given a head start
in the race for airspace supremacy.
Deficit to Widen
deficit for this year will expand from original projections of 1.1%
of GDP to up to 1.8% on lower government revenues, according to new
budget projections presented to the House of Representatives by
Finance Minister Sri Mulyani Indrawati.
She told a
parliamentary hearing on Tuesday (29/5/07) that the government was
maintaining the growth target of 6.3% and lowering the projection
for end-year inflation from 6.5% to 6.7%.
said the government may substantially increase its bond sales to
finance the bigger budget shortfall, Reuters reported.
which have to be approved by the House, set budget revenues at Rp689
trillion, down 5% from the existing forecast, and expenditure at
Rp757 trillion, about 1% lower than in the original budget plan.
had said earlier that the deficit would be likely to be higher than
the 1.1% figure because of spending on a series of natural
the revisions reflected changes in key economic indicators in the
first quarter of 2007. An economist cited by Reuters said the lower
budget revenue forecast could in part reflect the impact of the
strong rupiah on royalties and other non-tax revenues from natural
resources, which account for about a fifth of total revenue. The
rupiah has gained more than 2% so far this year.
Minister for the Economy Boediono told an investor forum in Jakarta
that the government will soon issue a new economic policy package to
help accelerate economic growth. "The package will be primarily
aimed at boosting investment and invigorating the sluggish real
sector," he said.
would complement the packages on financial sector reform,
infrastructure development and investment, and small and medium
enterprises issued last year, he added
New minister for
state-owned enterprises Sofyan Djalil was continuing his campaign
for new independence for companies under his control, calling on the
government to reduce the level of dividends it demanded.
"We should not
take large dividends from profitable and fast-growing SOEs, as it
will hinder them from growing faster," he said Monday on the
sidelines of a hearing at the House of Representatives, The
Jakarta Post reported.
has set a target of Rp21 trillion ($2.3 billion) in dividends from
SOEs next year to help finance the 2008 state budget.
however, has proposed a target of Rp19 trillion, ministry secretary
Said Didu said.
For next year,
the government estimates state expenditure will reach Rp824 trillion
next year, with the deficit projected at between 1.6% and 1.8% of
GDP, Finance Minister Indrawati said.
In the last
three years, SOEs have exceeded the government's dividend target.
Last year, state firms paid out Rp21.4 trillion, while the
government targeted Rp20.8 trillion.
In the real
sector, Unilever, following an increase in net profit of 10% last
year to Rp1.72 trillion ($194.68 million), said it would invest a
further $500 million this year to boost production capacity.
There was strong
continuing interest in the plantations sector, with India’s Ruchi
Soya Industries and Malaysia’s Glenealy Plantations (Malaya) Bhd
looking to purchase land or an existing operation, and
Singapore-listed Indofood Agri Resources saying it would buy PT PP
In the resources
sector, the government said it was considering revoking oil and gas
licenses for blocks that had not been developed after 10 years,
although it said it would take into consideration difficulties that
contractors may have faced.
And in another
sign of a more demanding position in the sector, it said it was
negotiating with Inco to adjust the royalty payment system to better
reflect price movements.
Aneka Tambang (Antam) stated that it was planning to spend a total
of $2.9 billion on five alumina and nickel smelters. The company
plans to build an alumina smelter in Tayan, West Kalimantan, and one
in Bintan, with installed capacities of 300,000 tons per year and
600,000 tons a year, respectively.
Inflation Seen Lower in May – BI
inflation in May is expected to be lower than in April, Bank
Indonesia's (BI) senior deputy governor, Miranda Goeltom, said on
inflation in April was 6.29%.
"From January to
March, there was an increase in prices of basic commodities. In
April, we felt the impact of higher cooking oil prices although
overall prices of other commodities did not go up, so the inflation
number was good," Goeltom was quoted as saying by Reuters. "In May,
on a year-on year basis, we believe it will be lower."
in May should give the central bank more room to cut its benchmark
interest rate, known as the BI rate.
Bureau of Statistics is scheduled to announce official inflation
data on June 4, and the central bank will hold its monthly policy
meeting on June 7.
told a parliamentary hearing on Tuesday (29/5/07) that the central
bank expects the consumer inflation rate next year to come in at
6.4%, up slightly from the government forecast of 6%, as
inflationary pressure from the prices of food and price-controlled
goods is expected to remain high, Dow Jones Newswires reported.
Coordinating Minister for the Economy Boediono said Monday (28/5/07)
he expects the country's economy to expand faster than it did in the
first quarter while the inflation rate will be stable.
confident it (economic growth) will be better... because fiscal
spending will be speeded up," Boediono told reporters in Kuala
Lumpur on the sidelines of a meeting of the World Islamic Economic
Forum. The economy expanded 6% in the first quarter from a year
Plans Lower Rate Forecast in Budget Review
on Tuesday (29/5/07) lowered its interest rate expectations but
raised its inflation forecasts in proposed revisions to the current
year's budget, Dow Jones Newswires reported.
revised down spending and revenue targets, the government is
sticking to its economic growth forecast for the year at 6.3%,
reflecting the government's hope that the main source of growth will
come from the business sector.
improvement in the macroeconomic situation, the government has
decided to change its targets for the 2007 budget," Finance Minister
Sri Mulyani Indrawati told legislators in a hearing with the House
of Representative's economic committee.
the government altered its expectations for interest rates this
year, estimating the three-month Bank Indonesia (BI) Certificate
rate to fall to 8% by the end of 2007, compared with its previous
estimate of 8.5%. Some government bond coupons are tied to this
rate, which has been sliding in line with BI's move to cut the
one-month key rate since May 2006.
decline in interest rates comes despite an increase in the year-end
inflation target to 6.7% from 6.5% previously, bringing it closer to
most analysts' expectations.
changed the expected average rupiah exchange rate against the US
dollar over the year to Rp9,100 from Rp9,300, although the average
exchange rate forecast remains higher than the current dollar level
It changed its
estimate for oil prices to a $60 average for the year, compared with
$63 per barrel previously, and the budget deficit to 1.8% compared
with 1.1% previously.
also revised down its spending target to Rp756.9 trillion from the
original plan of Rp763 trillion, and revenues to Rp688.9 trillion
from Rp723 trillion. Indrawati did not provide reasons for the
estimate revisions still require parliamentary approval.
Finance Dept. Sells First T-Bills
Department sold Rp2 trillion ($227.5 million) worth of treasury
bills as targeted in an auction on Tuesday (29/5/07) at an average
yield of 8.496%, the department’s treasury director general Rahmat
expects to use the proceeds from its first T-bills issue, which
carry a maturity of 12 months, to help fund the budget deficit and
improve liquidity on the short-end of the yield curve.
bills issue will give a boost to the money market. It is also very
crucial to help maintain stability and liquidity in the bond
market," Waluyanto was quoted as saying by Reuters.
bills were originally planned to be issued in April but the
department delayed the issue twice due to technical reasons,
including tax. "All the issues regarding tax have already been
resolved," he said, without giving further details.
had initially planned to issue between Rp3 trillion and Rp4 trillion
of treasury bills, but scaled down the target size to Rp2 trillion.
India's Ruchi Eyes Palm Plantations
Industries Ltd, India's leading palm refiner and soymeal exporter,
is planning to either lease or buy palm plantations in Indonesia to
ensure stable supplies of the raw material, the firm's managing
With palm oil up
more than 75% since January 2006, Dinesh Shahra said it is important
to secure supplies of the commodity, which could increasingly be
diverted into biodiesel production, pushing prices up further.
"Palm oil is a
very important raw material for us and we need to have some
safeguard," he told Reuters on the sidelines of a traders' summit in
seriously looking at palm oil plantations in Indonesia. We will
take land on lease in Indonesia and plant oil palm. Also, we could
look at buying plantations there if they are offered at a good
firm refines about 800,000 tons of palm oil annually, said Ruchi is
also open to the idea of setting up a joint venture with an
Indonesian palm oil firm.
"We are looking
at any kind of partnership which can add value for them and for us,"
Glenealy Plantations (Malaya) Bhd is venturing into Indonesia with a
goal of tripling its land bank to 75,000 hectares by 2010, the
New Straits Times reported, citing managing director Yaw Chee
It is finalizing
applications for land in Kalimantan for some 50,000 hectares within
"Right now, our
25,000-hectare land bank is spread across Sabah and Sarawak and
we've already planted 80%. We need to build on size to stay
competitive," he said, adding that as of March, the oil palm company
had cash reserves of about RM100 million.
Foreign Investors Eye Low-Cost Apartments
investors have shown interest in investing in low-cost apartments
for rent, to be built in various regions in Indonesia, Housing
Minister Yusuf Asyari said, according to Antara.
investors have already come to Indonesia, including from Malaysia
and the Middle East, while others are still in the process," he said
at the completion of the "Elnusa" integrated village restoration
He hoped the
investors would cooperate with local companies who know much better
about the regulations governing such project.
He said several
apartment buildings have already been built in some cities for
students to rent, such as those in Medan, Batam, Padang and in
cities in Java.
He said the land
for the construction of apartments for rent may belong to local
administrations or state-owned companies.
Hopes EPA Signed Soon - VP
Minister Shinzo Abe, during a meeting with Indonesian Vice President
Jusuf Kalla in Tokyo on May 25, expressed hope that the two
countries would sign an Economic Partnership Agreement (EPA) as soon
According to a
Japanese embassy press release made available to Antara, Abe said
that President Susilo Bambang Yudhoyono’s visit to Japan in November
last year and that by Kalla have become a cohesive force in the
relations between Indonesia and Japan.
Kalla said the
EPA would strengthen economic relations between the two countries,
and should thus be signed in the near future.
Abe said that
last year, he and Yudhoyono discussed the stability of liquefied
natural gas (LNG) supply from Indonesia to Japan. During the
meeting with Kalla, the Japanese prime minister expressed hope that
Indonesia would continue to export gas to Japan. Kalla however made
it clear to the Japanese side that Indonesia also needs gas for
to Restrict Expansion of Hypermarkets
Mari Pangestu said the government will issue a regulation
restricting the expansion of hypermarkets to protect small retail
traders, Antara reported on Tuesday (29/5/07).
her department will issue the regulation. She added that
hypermarkets will need to secure approval from the Public Works
Department to be able to open new outlets.
The country has
three hypermarket operators -- Carrefour with 29 outlets, Hypermart
with 27 outlets and Giant with 17 outlets.
have urged the government to ban hypermarkets from operating in the
Reduce Dividend from SOEs
for State Enterprises Sofyan Djalil said he hopes that beginning
next year, the government would reduce the dividend target from
state-owned enterprises (SOEs), to help boost the companies'
performance and profitability.
"We should not
take large dividends from profitable and fast-growing SOEs, as it
will hinder them from growing faster," he said Monday (28/5/07) on
the sidelines of a hearing with the House of Representatives'
commission on SOEs.
has set a target of Rp21 trillion ($2.3 billion) in dividends from
SOEs next year to help finance the 2008 state budget, which is being
discussed by the House's budget committee. The Office of the State
Minister for State Enterprises however proposed a target of Rp19
trillion, said Said Didu, secretary at the office.
"Of course, we
need to talk about the proposal with the Finance Department, the
Office of the Coordinating Minister for the Economy and the budget
committee. This is basically a trade-off between the growth of the
SOEs and the need to finance the state budget," Djalil was quoted as
The Jakarta Post.
month, Didu said the government had set its privatization proceeds
target for next year at Rp1 trillion, well below this year's target
of Rp3.3 trillion.
In the last
three years, SOEs have exceeded the government's dividend target.
In 2005, they paid out Rp12.8 trillion in dividends to the
government, beating the target of Rp8.9 trillion. Last year, state
firms paid out Rp21.4 trillion, while the government targeted Rp20.8
To boost the
performance of SOEs, Djalil said he would also speed up the
privatization program. He said 10 SOEs could be privatized next
good ones will be privatized by way of an Initial Public Offering
(IPO)," he said, according to Antara.
May Spend $2b on Expansion
PT Telkom may
spend as much as $2 billion this year to expand its networks and
fend off competition, its president commissioner Tanri Abeng said.
company expects sales to rise more than 20% in 2007 with the
addition of millions of users to its mobile network, Abeng said
Monday (28/5/07) in an interview with Bloomberg on the sidelines of
an Islamic conference in Kuala Lumpur. The company is also focusing
on expanding its pay television, broadband and satellite businesses,
"We are not in a
hurry to expand regionally because of the tremendous opportunities
for domestic growth," Abeng said. "We have to make sure all the
domestic segments are captured by us. We are the leader and we have
to maintain the leadership position."
pushing their capital expenditures," said Chandra Pasaribu, an
analyst at PT Danareksa Sekuritas. "Competition is driving
Mobile-8 Telecom, a cellular phone operator partly owned by
Qualcomm, will start a low-cost service in the third quarter and
expects its subscribers to increase to 4 million this year from 1.8
million in 2006. Excelcomindo Pratama, the country's third biggest
mobile phone operator, plans to expand its cellular network.
first-quarter profit dropped 12% because of increased costs to
access rivals' networks and a foreign exchange loss, it said last
month. Net income at the state-owned telecommunications company
fell to Rp3.04 trillion ($347 million) in the three months that
ended on March 31, from Rp3.46 trillion a year earlier.
operator expects full-year earnings to increase by "double digits,"
even as profit gains may be limited by narrower margins, Abeng said,
declining to give specific projections.
Telkom’s mobile phone unit, PT Telkomsel, said on Wednesday
(30/5/07) its first-quarter net profit increased by 8% to Rp2.997
trillion ($340.2 million) from a year ago, Reuters reported.
Telkom also said
Thursday (31/5/07) that
it plans to
allocate up to Rp3.2 trillion ($362.2 million) to buy back a maximum
of 1.58% of its shares.
Gresik to Build New Plant
PT Semen Gresik
it plans to
start building a new cement plant costing up to $580 million next
year as it moves to raise capacity by about 40% by 2013.
director Dwi Soetjipto also confirmed plans for a stock split, but
declined to elaborate or give the share ratio.
"In 2008, we
will start the construction of a new plant with a total capacity of
4.4 million tons per year," he said, according to Reuters. He said
the investment would cost the company between $470 million and $580
firm has a long-term plan to boost capacity to 22.9 million tons by
2013 from about 16 million last year, by building new plants and
improving efficiency, director Rudiantara said.
"To strengthen our position we are evaluating plans to expand
capacity to meet domestic and export demand. The plants are targeted
to come on line by 2011," Rudiantara told an investor forum.
On the share split, a source familiar with the plan told Reuters on
that the firm was planning a 10-for-1 stock split to improve the
liquidity of its shares in the market.
Merpati to Use Chinese-Made Aircraft
Merpati Nusantara Airways said it will start operating two
Chinese-made MA-60 aircraft in August, Antara reported on Monday
president Hotasi Nababan said preparations for the operation of the
50-seater passenger aircraft are in the final stage. He said the
aircraft will be ready for operation in one or two months.
secretary Irvan Harijanto said the new aircraft will serve the Bali,
West Nusa Tenggara and East Java routes.
mainly domestic flights, especially to isolated areas in the eastern
part of the country.
to Boost Capacity
After a year in
which it put on 19% improved net profit, PT Unilever Indonesia will
spend around Rp500 million this year on increasing production
capacity, The Jakarta Post reported.
Indonesia booked a net profit of Rp1.72 trillion ($194.68 million)
in 2006, up from Rp1.44
trillion in 2005.
was attributed in part to a 13% growth in hygiene and personal care
products, with laundry detergents Rinso and Surf and Ponds skin
lotion the largest contributors. Foods and ice cream products grew
17%, with Bango sweet soy sauce and Taro Snacks leading the growth.
director Maurits Lalisang told a press conference after the annual
shareholder meeting Thursday (31/5/07) that the company as focusing
on strengthening production capacity to support growth in skin, soy
sauce and ice cream products.
Indonesia was open to the possibility of acquiring other companies
that could support Unilever’s core business of food and home and
Sees H1 Vehicle Sales at 180,000 Units
International sees total domestic vehicle sales at 180,000 units in
the first half of 2007, company director Johnny Darmawan said on
The company had
said that total domestic vehicle sales may top 400,000 units this
year, recovering from a slowdown in 2006 when the market was hit by
high interest rates and weak purchasing power.
"Sales in the
next few months are seen reaching 35,000 units a month. So in the
first half, I think it can reach 180,000 units," Darmawan was quoted
as saying by Reuters.
Vehicle sales in
the country plunged by about 40% last year after the government more
than doubled domestic fuel prices in October 2005.
Sales reached a
record-high 533,910 units in 2005 before dropping to 318,883 units
last year. Analysts and industry experts predict volumes may reach
350,000-400,000 units this year.
Mandiri Plans Telecom Loans
plans to lend up to Rp2 trillion ($228.8 million) each to the
country's top two mobile phone operators, president director Agus
Martowardojo said on Tuesday (29/5/07).
interested in the cellular communication sector, so we are planning
to lend between Rp1 trillion and Rp2 trillion each to PT Telkomsel
and PT Indosat," Martowardojo was quoted as saying by Reuters.
The state bank
has been providing loans to infrastructure sectors, such as toll
roads and mining firms, as the economy seeks to speed up such
projects to boost growth.
Telkomsel finance director Sudiro Asno said the company is seeking
to raise financing of between Rp4 trillion and Rp5 trillion this
year. "We would like to raise between 4-5 trillion rupiah from bank
loans and by issuing bonds," Asno said.
Singapore Ups Stake in Bank NISP
has increased its stake in Bank NISP to 72.4% from 72.35% after a
rights issue launched recently by the bank.
Bank NISP raised
Rp702.88 billion ($78.1 million) from the rights issue, Antara
reported on Tuesday (29/5/07).
management said the fund raised from the sale of new shares will be
used to strengthen its capital to meet the minimum condition set by
the central bank for the category of national bank in 2010.
The rights issue
did not change the position of the International Finance Corp (IFC)
as a shareholder of the bank, with 7.17%.
Repeats Nuclear Plant Offer
has repeated its offer to build Indonesia's first nuclear power
plant in compensation for continued supply of liquefied natural gas
(LNG), Antara reported on Monday (28/5/07).
Mari Pangestu, on a visit to Japan, said the nuclear power plant
will guarantee domestic energy requirement, and Japan claims to have
the best nuclear technology in the world.
has said it will reduce supply of LNG to Japan to meet its growing
domestic requirement. Vice President Jusuf Kalla has told Japan to
increase its investment in the oil and gas sector if it wants major
LNG supplies from Indonesia.
investors from Japan, France and South Korea offered to finance and
build the nuclear power plant estimated to cost $6 billion.
hopes to open tenders next year for the construction of a nuclear
power plant with a capacity of 4x1,000 MW to be built in the Muria
peninsula of Central Java. Construction is expected to start in 2010
and be completed in 2025.
2006 Loss Down 60.8%
electricity company PT PLN suffered a net loss of Rp1.928 trillion
in 2006, down 60.8% from a year earlier, Antara reported.
The decline in
net loss was the result of the company's efforts to adjust to the
market condition following the government's decision to double fuel
oil prices two years ago, PLN’s president director Edi Widiono said
on Monday (28/5/07).
PLN's financial report, the company booked Rp104.742 trillion in
operational income in 2006, up 36.8% from 2005.
customers rose 11.84% to Rp70.735 trillion in 2006 from Rp63.246
trillion a year earlier.
commercial and customer service director Sunggu Anwar Aritonang said
the 60.8% drop in net loss was due in part to windfall profit. "In
2006 we earned windfall profit totaling Rp1.7 trillion from
fluctuations in exchange rates," he said.
Geothermal Plants Planned
To help ease the
threats of power shortages in remote areas, state electricity firm
PT PLN plans to build 30 power plants which will be powered by coal
or geothermal. The plants are planned for outside Java with an
estimated total capacity to reach 1,852 MW by 2010.
generation director Ali Herman Ibrahim told The Jakarta Post
Monday (28/5/07) that the geothermal power plants would be built at
Ulubelu in Lampung, Ulumbu in Flores, East Nusa Tenggara, Lumutbalai
in South Sumatra and Lahendong in North Sulawesi.
and gas company Pertamina has set aside a budget of $24 million to
develop geothermal plants in Lahendong, Ulubelu and Lumutbalai and
PT Medco Energi Internasional recently announced a plan to build a
geothermal plant in North Sumatra.
Herman said the
capacity of each plant would range between 20 MW to 110 MW, with an
estimated total capacity of around 1,000 MW.
believed to have nearly one-third of the world's geothermal
resources so the government is stepping up efforts to develop its
estimated 27,000 MW of potential geothermal power capacity. These
efforts are expected to help reduce the country's dependence on oil
however are hard to come by -- and their issues with the projects
include a lack of necessary regulations or incentives. Pertamina and
Chevron both have geothermal operations in Indonesia.
has a total installed capacity of 807 MW of geothermal-created
energy, which is around 3% of its potential. The government expects
to complete a new regulation on tender procedures and licenses to
explore and develop geothermal plants by the end of this year, said
Energy and Mineral Resources Minister Purnomo Yusgiantoro,
Herman said PLN
also plans to build coal-fired plants outside Java and Bali.
are not part of the 10,000 MW program initiated by the government to
deliver an additional power supply of 10,000 MW by 2009.
OIL & GAS
Considers Revoking Exploration Licenses
considering revoking licenses of oil companies that fail to start
developing oil and gas fields within 10 years, a senior government
official said on Monday (28/5/07).
OPEC's second-smallest producer, has been offering new exploration
rights and financial incentives for oilfields in a bid to stem a
steady decline in production as the country has failed to tap new
oilfields fast enough to meet domestic demand.
"We will see the
contracts. If the companies do not meet their commitments on
exploration after the 10-year period, we will revoke their
licenses," Oil and Gas Director General Luluk Sumiarso told Reuters.
He said the
government would consider problems facing oil firms before taking a
decision. "We understand that there are some problems faced by
companies such as land clearing and difficulties to find rigs for
exploration. For these reasons, we may extend their licenses," he
"If they have
the contracts but are doing nothing then we will terminate them."
gives oil companies a 10-year period for exploration and drilling
for oil and gas, but mines and energy ministry documents show that
several oil firms are still exploring after the 10-year deadline.
watchdog BP Migas said the companies should develop the fields
within 10 years if they find oil. "Some companies have already
drilled the wells and found oil. But some of them need more time to
develop," Achmad Luthfi, BP Migas deputy chief, said.
Incentives for New Refineries
will provide tax incentives for new oil refinery projects in an
effort to boost the country's oil product output, the head of the
investment coordination board told reporters on Wednesday (30/5/07).
oil and gas company PT Pertamina has nine refineries scattered
around the archipelago with a combined capacity of around 1 million
barrels per day (bpd). But it only supplies 70% of domestic oil
product consumption and 30% comes from imports.
told reporters the country needs around $4 billion worth of
investment to develop 300,000 bpd of processing capacity. His
remarks came after the plan to develop a number of refineries in the
country was stalled as construction costs doubled.
projects are a capital-intensive investment. To make it economical,
we have to provide tax incentives or tax breaks," Reuters quoted
Lutfi as saying.
are in talks with a Kuwaiti investor to develop a refinery in
Lutfi had said
the government has been trying to develop a 220,000-barrels-per day
refinery in Selayar island, south of Sulawesi.
Tangguh LNG Plant on Track
liquefied natural gas (LNG) plant, located in a Papua gas field with
proven reserves of more than 14 trillion cubic feet of LNG, is
entering the final phase of construction and remains on track for
its operations to commence in late 2008, The Jakarta Post
reported on Monday (28/5/07).
At the end of
the first quarter of this year, the construction of the plant, to be
operated by a consortium led by BP Indonesia, was over 70% complete
and all major equipment to build the train one and train two LNG
processing facilities had been delivered, a statement said.
It also said
drilling operations were scheduled to commence in late May.
president director John C. Minge said the company would start
drilling the first of 15 planned wells to be completed within the
next 18 months in early June.
He also said the
company was in discussions with a group of investors to build the
third and final train in the complex. However, he refused to give
further details, including the names of the investors.
month, the world's largest LNG importer, Korea Gas (Kogas), told the
Post it was interested in taking part in the development of a
third train at the LNG plant.
BP is currently
in the process of setting up a new consortium made up of global and
domestic lenders to provide an additional $880 million to complete
the construction of the plant.
state-owned banks, Bank Mandiri and Bank Negara Indonesia (BNI), may
join the loan syndicate to finance the construction of the plant.
The extra money
will come on top of the $2.6 billion disbursed in August for the
project by an international consortium of foreign banks.
BP is the
largest single investor in the Tangguh plant, and holds a 37.16%
stake. CNOOC, China's largest offshore oil producer, is the second
biggest investor with 16.96%.
include Mitsubishi Ltd. and Inpex Corp., which hold a combined 16.3%
interest in Tangguh. A Nippon Oil Corporation-led grouping has a
12.23% stake and LNG Japan, owned by Sumitomo Corp. and Sojitz
Holdings Corp., holds 7.2%.
Japan Oil, Gas &
Metals National Corp., Kanematsu Corp. and Mitsui & Co.'s Overseas
Petroleum Corp. hold a combined 10% stake.
Aabar Completes Appraisal Well
Investments Co., a UAE-based oil and gas investment firm, said
Monday it completed drilling and testing at an appraisal well at the
Sebuku gas prospect in Indonesia, Dow Jones reported on Monday
Strait-3 well located offshore east Kalimantan was drilled to a
depth of 5,000 feet and flowed at a rate of 39.2 million cubic feet
a day of gas, Aabar said in an emailed statement.
The well was
drilled under Aabar's Sebuku production sharing contract, which
covers a 5,920 sq km area onshore Sumatra, the company said in the
"We will spend
the next few weeks analyzing the results of the two latest appraisal
wells along with the two earlier wells with a view to submitting a
plan of development to the Indonesian authorities during the third
quarter," Chris Gibson-Robinson, Aabar's vice president for
operations and new business development in Southeast Asia, said in
its subsidiary PearlOil (Sebuku) Ltd., is the operator of the Sebuku
concession and presently holds a 50% participating interest in it,
the company said.
acquired the remaining 50% in the concession but is still awaiting
approval of the transaction from the Indonesian government and the
oil and gas regulator, according to the statement.
Optimistic on Pangkah Block Tender
International Co. said it will be ready with $411 million in its bid
to acquire and develop the Pangkah Block in East Java, Antara
reported on Tuesday (29/5/07).
Minadi Pujaya said his company will acquire a 25% stake in the oil
and gas block owned by ConocoPhillips at a price of $211 million.
acquisition, Ina will need to spend around $200 million to develop
the oil and gas field, Minadi said.
Renegotiate Inco Deal
intends to renegotiate the royalties payable by PT International
Nickel Indonesia (Inco) for the term of its extended contract of
work (CoW) from 2008 to 2025, a senior official told The Jakarta
Director General of Geology and Mineral Resources at the Energy and
Mineral Resources Ministry, said Tuesday (29/5/07) that the
royalties payable by Inco were based on a fixed sum of $78 per ton.
With the sharp
increase in nickel prices since the extended contract was signed in
1978, the royalty formula was no longer appropriate, he said.
$78 per ton under the contract were based on the nickel price at
that time, which stood at $2 per pound (about $4,000 per ton). Now
the price of the metal has reached $20 per pound, or the equivalent
of $40,000 per ton," Simon said.
He said that the
state could suffer losses of between $4 million and $5 million a
year if no revision was made to the royalty formula. Sembiring said
the government would propose a floating rate in line with nickel
prices on the global market.
director Arif S. Siregar said the company had not received any
formal request from the government regarding a renegotiation of the
He said Inco
had, in fact, proposed that the government employ a floating rate to
calculate royalties during the negotiations prior to the signing of
the 30-year extended contract. However, the proposal was turned down
by the government as it did not expect the nickel price to reach the
"As soon as we
get a notification, we will discuss the issue with the shareholders
to determine our stance," Siregar said.
largest nickel producer said it expected to produce between 155 and
165 million pounds of nickel in matte this year and to boost its
annual production to 200 million pounds by 2010.
Build Five Smelters
miner PT Aneka Tambang (Antam) on Tuesday (29/5/07) revealed that it
will build five alumina and nickel smelters at a total cost of $2.9
billion in a bid to add value to its mining operations.
director Dedi Aditya Sumanagara said that the company planned to
build an alumina smelter in Tayan, West Kalimantan, and one in
Bintan, with installed capacities of 300,000 tons a year and 600,000
tons a year, respectively.
He said that a
consortium involving Japanese company Marubeni and Singaporean
company Swadenco had been formed in February to provide financial
support for the $220-million Tayan project, while the company was in
talks with a number of Chinese companies on financing of the
$500-million Bintan project. The two projects are expected come
onstream by 2010.
The company also
plans to build a nickel smelter worth $50 million, a ferronickel
plant worth $650 million and $1.5-billion nickel refinery producing
nickel and cobalt. The projects will be built at the company's mines
the projects would increase the company's nickel production to more
than 50,000 tons per year from the current 20,000 tons.
Output Seen Down 28%
the world's second-largest tin producer after China, expects to
produce 90,000 tons of the metal this year with fewer small smelters
operating, a senior energy and mines official told Reuters on
allowed 12 smelters in the tin-producing Bangka-Belitung islands to
resume exports after a crackdown in October forced dozens of small
smelters to close, sending the tin price on the London Metal
Exchange to contract highs.
consumption of around 1,440 tons this year, the country will export
around 88,560 tons of tin, said Simon Sembiring, Director General of
Mineral Resources and Geothermal Energy. The government's figure is
in line with market expectations.
association ITRI in March forecast Indonesia would produce 90,000
tons of tin this year, down 28% from 125,000 tons in 2006.
been closely watching Indonesia, where smuggling of tin from Bangka
had been blamed for causing a glut on global markets and sending
prices tumbling in 2002.
issued tough rules for exports after the crackdown. Smelters must
now produce refined tin with a minimum purity of 99.85%, own mining
sites to source raw materials and provide proof of royalty payments.
improving supplies from Indonesia have helped pull down tin prices
on the LME from a contract high of $15,100 a tone on April 18.
Tractors Pursues Coal Licenses
which owns Indonesia's biggest mining contractor, has said it is in
talks to buy four coal concessions in the country after clients set
up competing businesses, Bloomber reported on Friday (1/6/07).
The company may
spend as much as $100 million on each acquisition, Gidion Hasan,
finance director at United Tractors, said Wednesday. The
Jakarta-based company's mining unit, Pamapersada Nusantara, this
year spent $85 million to buy several coal licenses in one area with
a total capacity of 3 million metric tons a year.
which earns half its revenue from extracting coal for companies, is
seeking to buy coal mines after some of the company's 10 clients,
including Bumi Resources, set up their own contracting businesses.
contractor expects its new strategy and rising commodity prices to
help it double sales to $3 billion in three years. "Many small coal
concessions have been looking for mining
contractors, as they lack the expertise" to extract the fuel,” Ferry
Wong, head of Indonesian research at BNP Paribas Securities
Indonesia, said. "United Tractors will be a suitable partner for
formed in 1972, is more than half-owned by Astra International,
Indonesia's biggest car retailer, and had $117 million of cash at
the end of the first quarter, according to data compiled by
Tin Approves Bangka Project
The board of
Yunnan Tin Co (YTC) has approved a plan to set up a 10,000 tons per
year (tpy) crude tin smelter and a mining company in Indonesia,
Metal Bulletin reported.
The $17 million
smelter on Bangka island will be 51% owned by YTC, China's biggest
tin producer. It will be constructed by Singapore's KJP Investments
(KJPI) and PT Bangka Global Mandiri International (BGM), an
affiliate of refiner Singapore Tin Industries (STI).
KJPI will own
48.4% of the smelter with BGM holding the remaining 0.6%.
YTC's board also
approved a plan to set up a mining company to explore and mine tin,
copper, lead, nickel and other metals in Indonesia. The company
requires an initial investment of $2 million and will be 51% owned
by YTC, 24% by KJPI, 20% by PT Karya Abadi Selars and 5% by PT
Bangun Prima International.
KJPI is owned by
Ku Siew Kuan and Petrus Tjandra, both investors in STI via KJP
International. The projects still require the approval of relevant
authorities in China, YTC said.
company Yunnan Tin Group and STI announced plans to build a 36,000
tpy integrated tin plant in Bangka island in April.
venture, PT Indo Yunnan Mineral Utama, will invest in mining,
dressing, smelting, refining and production of tin ingots,
chemicals, powders and solders, with the ingots expected to be sent
to STI's Tuas works in Singapore as raw material for its production
of 99.99% purity tin.