H1 2006 performance of listed companies

Indonesian listed companies reported mix results in their first half 2006 performance with majority of companies reported lower net profit on poor margin.


Sampoerna, sales +29.4%, profit +20.8%
Gudang Garam, sales +2.8%, profit –49%
BAT Indonesia, sales –4%, loss Rp16bn against profit Rp22bn

Unilever, sales +13%, profit +8.9%
SMART, sales +13%, profit +2,550%
Cahaya Kalbar, sales +193%, loss –97%
PT Perkebunan Nusantara III, sales +16.7%, profit +8.3%

Tunas Baru Lampung, sales –19%, profit +1,172
Budi Acid Jaya, sales +8.4%, profit +73.9%
Suba Indah, sales –90%, loss –90%

Bimantara, sales +22%, profit +2,550%
RCTI, sales +4.9%, profit +4%

Adhi Karya, sales +40.5%, profit –87%
Tigaraksa Satria, sales +14.5%, profit +185%

Astra International, sales –13%, profit –38%
Astra Otoparts, sales –20.4%, profit –28.9%
Astra Graphia, sales +14%, profit +50%
Prima Alloy, sales +17.8%, profit –81%

Semen Gresik, sales +24.9%, profit +106%
Kalbe Farma, sales +3.1%, profit +27%
Enseval, sales +2.4%, profit –6%
Excelcomindo, sales +48.5%, profit Rp358bn (against loss of Rp52bn)
Samudera Indonesia, sales +4%, profit –80%

Medco Energi, sales +26.5%, profit +17%
Bukit Asam, sales +10%, profit –9%
United Tractors, sales +16%, profit –3.4%

Gajah Tunggal, sales +14%, profit -38%
Tri Polyta, sales +15%, profit Rp92bn (against loss of Rp367bn)
Berlian Laju Tanker, sales +22.5%, profit +49.4%
INCO, sales +1.4%, profit -16.9%
AQUA, sales +1.6%, profit +6%

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Telkom build up profit, when the tariff will go down?

It's kind of boring to put a note on PT Telkom Tbk's financial report. For years, the company has built up huge amount of profit at the expense of ordinary citizens who pay higher and higher telephone cost.

Today, Telkom published its first half financial result in which the state-owned company booked net profit of Rp5.8 trillion, jump 53% from first half 2005. This is a good news for investors. Good news for government to collect more taxes. But telephone users?
The company also reported impressive revenue growth of 23.8%. Cellular contributes the largest growth, followed by data and internet. But, interconnection increased significantly as well from Rp3.63 trillion to Rp4.116 trillion. Ah, that's why Telkom as the incumbent has no willingness to cut the interconnection tariff that would open up competition in the market.
Anyway, when Telkom will cut the cost for fix telephone service or boost teledensity in areas like my hometown in Flores?
Indonesia, according to many studies, already the most expensive nation in South East Asia when it comes to telephone costs, yet the lowest in terms of teledensity. These are also the reason why it's so difficult to lure in investment, including in the remote, yet beautiful areas, like Flores or other areas in Eastern part of the country.

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The cracks in Gudang Garam family

I got many letters last week regarding the rumor of a possible acquisition of PT Gudang Garam Tbk by BAT. Some believe it might be true, but more than half doubt that even though they acknowledged the fact about cracks in the family.

"Wonowidjojo sons have unique personalities. Son No.1 is in conflict with No.3 while both have strategic position in the company. People at Gudang Garam called it like New York's Twin Tower. No.4 is in control of marketing, but also not get along with the older brothers," people close to the family said.
But luckyly, Gudang Garam still has Djajusman as the CEO, who also acting as the main bridge for the Wonowidjoyo brothers.
Read my previous post:
Gudang Garam down to No.2

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Kalla Who's Who

You might have been familiar with Jusuf Kalla the vice president. But there are so many Kallas out there that you need to know, well at least in the next few years. Get the family tree (plus personal files), business interests/associates, political and social activities at Kalla Who's Who.

Content of the report:
- Enlarged Family Tree of JK (Grandparents to Grandchildren)
- Company profiles of Kalla-related, who's in charge of what
- Political/Social activities of Kalla members.

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Conflicting statements over Lapindo disaster

The newly appointed director general for oil and gas at the ministry of energy Mr Luluk Sumiarso said yesterday that Lapindo Brantas Inc could claim the cost incurred from hot mudflow disaster in its Banjar Panji-1 drilling to government. His statement is completely the opposite of Upstream Oil and Gas Regulatory Body (BP Migas) chairman Kardaya Warnika who rejected such claim. So, who's right?

Both officers quoted the contract as the rationale behind their statements. I would say it's just way too premature to make such statements as it's not clear yet whether there were miss of conducts during the drilling that caused the disaster.
Luluk also defended Lapindo saying its partners (Medco and Santos) should be held responsible for the disaster as well while Medco rejected to take that arguing Lapindo is the operator. On this issue, would be better if Lapindo, Medco & Santos disclosed their agreements on operatorship.

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Last chance for Bukaka

Jakarta Stock Exchange (JSX) warned PT Bukaka Teknik Utama Tbk, a company controlled by VP Jusuf Kalla family, to immediately submit an audited financial report with higher opinion to prevent delisting of its shares from the exchange. Bukaka has few days until last day of July trading to meet the requirement.

JSX sent the warning letter today to Bukaka management. VP's brother Achmad Kalla is the president of Bukaka. Bukaka's financial report had been with disclaimer opinion from auditor in the last six financial years since 2000 over debt restructuring uncertainty.

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First Half 2006: Fajar Surya Wisesa

Listed paper board manufacturer PT Fajar Surya Wisesa Tbk booked net profit of Rp77 billion in H1 2006 against net loss of Rp0.37 billion in H1 2005 despite lower margin.

Fajar Surya (Fajar Paper) booked net sales of Rp777 billion, a 10% growth from Rp700bn in H1 2005. But higher production & operation costs cut significantly Fajar's operating profit from Rp81.9bn to Rp70bn. Fajar gained Rp69bn from forex translation and this is why Fajar booked net profit.

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Bad loans cut Temasek banks profit

PT Bank Danamon Tbk and PT Bank Internasional Indonesia Tbk, both affiliated with Temasek Holdings, reported significant drop in net profit for first half 2006 mainly due to increasing operational costs and assets write-off.

Danamon booked Rp558 billion net profit, axed by 56% from Rp1.28 trillion in H1 2005. BII recorded Rp352 billion, reduced 11.3%.
Danamon actually reported 16% growth in net interest margin (NIM), but the company had to write-off Rp533bn assets while operating expenses increased significantly.
BII also reported better NIM, but it had to write off Rp196bn assets.
Both banks reported significant increase in loss category (V) and special mention loans (II). Danamon's V category loans at Rp733bn, doubled from Rp331bn in H1 2005 while BII's increased from Rp322bn to Rp487bn.
Danamon's special mention loans at Rp3.8 trillion (against Rp2.9 trillion in H1 05), BII at Rp2.37 trillion (Rp1.09 trillion).

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Lapindo suspects: To a higher level

Investigation on hot mudflow disaster from Lapindo Brantas Inc's drilling activities in Sidoarjo, East Java have entered a new level with the naming of three suspects from three related companies.

Media reported today that the three new suspects named by East Java police are vice president drilling of PT Energi Mega Persada Tbk (Nur Rohmat Sawolo), president director of PT Medici Citra Nusa (Yenny Nawawi), and general manager of Lapindo Brantas Inc (Imam Pria Agustino).
Energi Mega is the parent company of Lapindo Brantas, operator with 50% working interest in Brantas PSC. Medici is the sub-contractor assigned by Lapindo for drilling of Banjar Panji-1 well which ended up with unstoppable hot mudflow.
Lapindo's partner in Brantas PSC are PT Medco Energi International Tbk and Australia's Santos with 32% and 18% working interests respectively.
Previously East Java police named six suspects in the case consisted of two Lapindo staffs (drilling supervisor & drilling staff) and four Medici staffs (mainly those involved in drilling activities).
All these suspects are prosecuted for alegedly violating three laws, criminal code, environmental law, and water resources law.
These officials faced five to 15 years in prison if they were found guilty of negligence and 18 years in jail if they were found guilty of violating environment regulations.
Abi Tisnadisastra, the lawyer for PT Lapindo Brantas, told Reuters that
the massive flow of mud that inundated several villages was not a result of human error.
In a related development, companies hit by the mudflow are starting to claim compensation from Lapindo. Hundreds of small medium companies operating in the surrounding area have filed their claims to local authorities and then to Lapindo.
While government officers threatened to review Lapindo's operation in the area, no firm decision made so far. Brantas PSC contributes almost 40% of natural gas revenue for Energi Mega, a company in the merger pipeline with associated company PT Bumi Resources Tbk.
Both Energi and Bumi have postponed their respective extraordinary shareholders meeting to vote on the merger as Bumi has not completed the divestment of two coal mining companies, PT KPC and Arutmin, for US$3.25 billion to Borneo Lumbung Energi.
Both Borneo and Bumi are waiting consent letters from KPC and Arutmin contractor (Thiess) and equipment leasing company (Mitsui).

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Bentoel & Sampoerna boost cigarette output

Two listed cigarette producers, PT Bentoel & PT HM Sampoerna, are installing new machineries to boost output with Rp300 billion and Rp2.8 trillion investment respectively.

Bentoel, a company controlled by Rajawali Corporation, is allocating Rp300 billion to modernize its machineries in Malang, East Java. Meanwhile, HM Sampoerna, controlled by Philip Morris, secured expansion license from Investment Coordinating Board (BKPM) to build Rp2.8 trillion plant in Karawang, West Java province.
Prior to the acquisition of Sampoerna Family's shares in HM Sampoerna, Philip Morris was engaged in production cooperation with Bentoel. But both parties terminated the cooperation that cost Bentoel a massive layoff in 2005.
"But we're modernizing our plants with new machineries as our sales grew by 60% in the first half," Darjoto Setiawan, managing director of Rajawali Corporation said yesterday.
With the expansion, HM Sampoerna would widen its gap with PT Gudang Garam Tbk. HM Sampoerna for the first time took the number one spot as the largest cigarette producer this year from Gudang Garam.
These new expansions reflects increasing demand both in domestic and export market. This is clearly a bad news for anti-smoking movement, but good news for government and the state budget even though the anti-smoking movement argues that the cost for the state in the longer run actually higher from increasing healthcare costs.

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Benny Tjokro bought 75 m Cenko shares

Businessman Benny Tjokrosaputro bought 75 million shares of PT Central Korporindo (Cenko) Tbk at the time one of his companies, PT Suba Indah Tbk, defaulted the payments to creditors, especially Bank Mandiri. Cenko is controlled by Tjokrosaputro family.

It's strange that JSX had just published Benny Tjokrosaputro's letter today while he had sent the letter in June 7, 2006, few days after he bought the shares.

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Martabe Gold: Newmont sells to Newmont

Yesterday, Agincourt Resources told Australia Stock Exchange that up to A$50 million of payments to Newmont for Martabe gold mining acquisition will be shares in Agincourt. That would make Newmont as the single largest shareholder in Agincourt with 20% shares. So, it's about Newmont selling Martabe to itself. Wonder how Indonesian government would respond this.

Agincourt claimed it controls 100% working interest in Martabe with options up to 30% shares for Indonesian consortium called Dharmawangsa Group.
Martabe is one of the most attractive underdeveloped gold projects in the world with a resource of 5.3 million ounces of gold and 55 million ounces of silver.

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Bank Niaga asset grew 19.6%, profit up 15%

PT Bank Niaga Tbk, the listed subsidiary of Malaysia's Bumiputera-Commerce Holdings Berhad, booked net profit of Rp353 billion in first half 2006, an increase of 15% from the same period last year. Bad loans keeps increasing though.

According to the company's published financial statement today, Bank Niaga's total asset as of June 30, 2006 was Rp40.79 trillion (US$4.6 billion), 19.6% growth of Rp34.12 trillion in June 2005 mainly due to increasing time deposits. The bank, saved from bankruptcy with huge government bonds, disbursed more loans in H1 2006, especially rupiah denominated loans. But total loans in fifth category (loss) jumped from Rp100.85 billion in June 2005 to Rp728.8 billion in June 2006. In the special mention category, the amount also increased from Rp1.76 trillion to Rp2.66 trillion.
Bumiputera-Commerce owns 65.03% shares of Bank Niaga. Khazanah Nasional Berhad and Employee Provident Fund (EPV) have 20.95% and 17.04% shares respectively in Bumiputera-Commerce Holdings.

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No deal yet, Bumi postpone shareholders meeting

PT Bumi Resources Tbk told JSX Monday that extraordinary shareholders meeting which was initially scheduled this Friday (July 28) is postponed to September 19 for undisclosed reason.
The meeting is expected to decide the merger plan with PT Energi Mega Persada Tbk. But the uncertainty over the closing of US$3.2 billion acquisition of two Bumi subsidiaries (KPC & Arutmin Indonesia) by Borneo Lumbung Energi is believed to be the main reason behind the postponement.
Borneo-Bumi deal is pending on consent letters from Thiess as contractor & Mitsui as equipment leasing agent for KPC & Arutmin. Thiess is the main contractor of both coal companies which secured life-of-the mine contract (Aus$1.7 billion). So far, no letter of consent given from Thiess and Mitsui.
Borneo had secured financing for the acquisition, of which US$2.1 billion raised by Credit Suisse.
On the other hand, Energi Mega is facing its own problem on unstoppable hot mudflow disaster from Lapindo Brantas drilling activity in Porong, East Java. Lapindo has 50% working interest in Brantas PSC, one of EMP's key assets which contribute almost 40% of the company's revenue from natural gas operation. Investigations are underway, with civil & criminal charges, and these may lead to the termination of Lapindo's operation.

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Cemex-Rajawali deal signed

Rajawali Corporation and Indonesia government finally signed shareholders agreement this morning to mark the formal approval of Rajawali's acquisition of 24.9% shares of PT Semen Gresik Tbk previously owned by Cemex SA.

People close to the deal said crossing of shares would be conducted on Wednesday.
As the new shareholder, Rajawali is eligible to have three representatives in the management, in the position of deputy president commissioner, deputy president director, and director. It's interesting to see who will represent Rajawali in these positions.

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Two new coal ventures

Hong Kong-based company Chowlai Limited and BVI-based America Holdings Ltd to invest US$10 million in mining supporting services in Kutai, East Kalimantan. Both companies established a new JV called PT Sanga Coal Indonesia with US$20 million/year revenue target.

Meanwhile Singapore-based Sebuku Nusantara Holdings Pte Ltd and Mr Abdurrahman Jufrie will invest US$25 million through their JV called PT Sebuku Nusantara Indonesia Perkasa in Tanah Bumbu, South Kalimantan. The new JV is expected to get US$45 million/year contract.

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Borneo-Bumi deal pending on contractor's consent

The closing of US$3.25 billion deal between PT Borneo Lumbung Energi and PT Bumi Resources Tbk is pending on the consent letter from Thiess, main contractor of PT Kaltim Prima Coal & PT Arutmin Indonesia.

Thiess is the main contractor of both coal companies which secured life-of-the mine contract (Aus$1.7 billion). Why the contractor is so powerful in the deal between Borneo-Bumi?
Besides, Borneo needs consent from Mitsui as the main equipment leasing agent for both KPC and Arutmin. "So far, no letter of consent given from Thiess and Mitsui," he said.

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Former marine commander explore coal in Papua

PT Asoka Abadi is exploring coal mining in Horna, Bintuni Bay Regency, Papua. Who own the company?

ANTARA news agency quoted Markus Sraun, officer at Bintuni Bay Regency, saying ret Lt Gen (Mar) Suharto is the president director of Asoka. No information on who is the owner of Asoka. Suharto was the marine commander during Soeharto regime.

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The Lossers of The Earth Award 2006

Few months ago, United Nations Envinronmental Programme (UNEP) engaged with Singapore-based APRIL as Corporate Partner for UNEP's Champions of the Earth Awards in 2006. But last week, a WWF report said that APRIL and Asia Pulp & Paper (APP), the Indonesian paper producers, are accelerating the deforestation of Sumatra's jungles in spite of a bid to portray themselves as green.


"Partnering with UNEP for the Champion of The Earth Awards is a further confirmation of our commitment to conservation and and sustainability, as these are the principles we uphold in our business," AJ Devanesan, president director of APRIL said in a statement in April.
In March, Indonesian Ecolabel Institute (LEI) certified APRIL for its fiber plantation in Riau, Sumatra.
"Being the first to achieve LEI certification for plantation forest management affirms that APRIL is a leader in sustainable forest management in the region," Devanesan said in a press statement.
But last week, WWF researchers, as reported by Financial Times, say deforestation in the Sumatran province of Riau, where the groups have pulp mills, has accelerated in recent years, in spite of conservation pledges from APP and APRIL.
In fact, on July 11, WWF even published its press release on APP in its website (www.wwf.or.id). According to the report, APP has been responsible for about 80,000 hectares of natural forest loss every year, equivalent to roughly one-half of the Indonesia province of Riau's annual forest loss since 2002. As of 2005, the company controlled nearly one-fifth, or 520,000 hectares, of the natural forests left on Riau's mainland. All these forests are under threat, as are any additional forests that APP acquires in its quest to fill its wood supply gap and expand pulp production.
WWF didn't publish the same press release on APRIL. You may wonder why. But WWF Monitoring Brief June 2006 elaborated the organization's analysis on APRIL's activities.
Jikalahari (Riau NGO alliance) investigators have found evidence that APRIL's mills accepted wood from legally questionable third party source as late as May 2006. WWF admitted in the report that it calls APRIL to stop sourcing timber from this area until completion of the government legal verification process. You can read the complete monitoring brief at www.wwf.or.id.
TO BE CONTINUED...

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Manufacturing expansion projects

Global manufacturers keeps expanding their facilities in Indonesia amid criticism toward government's poor performance to improve the ailing sector's competitiveness.

Below is the list of some important expansion projects in the manufacturing sector:
1) Denso Indonesia, expand spar plug, compressor for car A/C, and radiator with additional investment of US$25.85 million and new jobs for 102 in two Denso sites (Jakarta & Bekasi).
2) Komatsu Undercarriage Indonesia, to produce idler assay with new investment of US$4.4 million in Bekasi, West Java.
3) Samsung Electronics Indonesia, distribution, Rp350 billion.
4) United Can Company Limited, can, US$8.12 million in Jakarta.
5) Yasunaga Indonesia, air pump & connecting rod, US$12.5 million in Serang, Banten province.
But we have to admit, government should work harder to lure in more manufacturing investment as not many new investors entering the sector. The only significant new investor is Akashi Kikai Seisakusho Co Ltd (JV with PT Wahana Eka Paramitra) to produce housing clutch & transmission assembly with US$8.8 million.

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Cemex-Rajawali deal

After almost three weeks of delay, Cemex SA and Rajawali Corporation (through Blue Valley, a SPV) would likely to close the US$335 million deal on PT Semen Gresik Tbk shares next Wednesday as the shareholders agreement is scheduled to be signed 3PM today.

"If we could sign the shareholders agreement as scheduled at 3PM at the Ministry of State Owned Enterprises office today, then we could close the deal next Wednesday," people close to the transaction said.
Under the shareholders agreement, Rajawali is reportedly agree to one share one vote and no rights issue after it control 25% shares of Semen Gresik.
Besides, Cemex also agree to drop the arbitrary suit against Indonesia government. Cemex and government will sign the settlement agreement tonight.

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Yani Alifen, new CEO of UIC

Listed chemical company PT Unggul Indah Cahaya (UIC) Tbk, the largest detergent raw material producer in South East Asia, promoted Yani Alifen as its new president director/CEO replacing Hartono Gunawan.

Mr Alifen was vice president director of UIC since 1995. Yani is also treasurer of Petra Christian University Foundation.
Meanwhile Mr Gunawan has been appointed chairman of commissioners of UIC replacing Andi Hartandi. Gunawan is also the chief of Salim Group's chemical division.
UIC is a JV between two conglomerates, Salim & Wings Group. The company produces alkyl benzene sulphonate (ABS), the raw material for detergents and other surfactants.
Wings is owned by two families, Katuari & Sutanto. Handoyo Sutanto is the new director at UIC, while Hanny Sutanto and Teddy Jeffrey Katuari as commissioners. Plus Jimmy Masrin from Lautan Luas (key partner of Wings), may be the war between Salim-Wings in noodle business as I posted many times in the past has been in Wings' favour. What do you think?

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Cargill-Temasek restructure PT Hindoli

CTP Holdings Pte, a plantation joint venture between US-based Cargill Inc and Singapore government control Temasek Holdings, restructured loans to PT Hindoli, a company previously controlled by Cargill.

CTP Holdings decided to convert the loans to equity of PT Hindoli. The company was started inthe early 1990's, and was acquired by Cargill in 1995. Found on the island of Sumatra, Cargill directly operates 10,000 hectare oil palm plantations.
Last year, CTP Holdings acquired CDC Group plc’s palm plantation interests in Indonesia and Papua New Guinea. These include a plantation in Kalimantan (Indonesia) and a majority shareholding in four other plantations in the region. One of these plantations is located in Sumatra (Indonesia), with the other three in Higaturu, Milne Bay and Poliamba (Papua New Guinea).
Cargill is the majority shareholder of CTP and will assume managerial and operational responsibilities. Cargill’s existing palm plantation in Sumatra then became part of CTP.

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Daniel Kuswandi resigned as Iglas CEO

Another state-owned enterprise CEO has decided to resign. He is Daniel Kuswandi, CEO at PT Iglas, glass/bottle manufacturer.

As reported by Kompas today, Mr Kuswandi said he resigned after the initiative to implement good corporate governance (GCG) failed to get enough positve supports both from internal and external actors. Iglas recorded net loss of Rp20 billion. "I tried to give my best for Iglas. But I got only accusations/defamations, so it's better for me to resign," he said.
Iglas operates two plants in Gresik & Surabaya, East Java with combined capacity of 128,500 t/y.
In the last two years, workers union and management have been at odds over various issues. Early last year, for example, chairman of Iglas workers union reported Mr Kuswandi to the police accusing him of bribing several institutions at Rp30 million (US$3,200) to stop investigation on a fire at Iglas Gresik's plant. But the police rejected the claim and declared Mr Kuswandi was not involved in any crime. East Java Police named three workers as suspects instead for stealing company's documents.
Early this week, I posted Ignatius Jonan who tendered his resignation as CEO at state-owned investment bank PT Bahana Pembinaan Usaha Indonesia (BPUI).
Not many people, especially at SOEs, dare to resign from important position in the country even though they have been named suspects in corruption cases or under public criticism for their poor performance.

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Tsunami rocked Indonesian politic

Tsunami has rocked Indonesian politic as legislators accused related ministers who got the alert after the 7.7-magnituted earthquake on July 17 of gross neglience.

Media reported on Wednesday that the tsunami warning centers in Indonesia, Australia, Malaysia, Sri Lanka and Thailand received alerts between 15 minutes and an hour after the 7.7-magnitude earthquake struck on July 17. At least 450 died on the coast of southern Java, where no warning was given.
Indonesian minister for research & technology Kusmayanto Kardiman was among key officers who received the alert from Japan and Pacific Tsunami Warning Center (PTWC), Indonesian media reported on Tuesday. But Mr Kardiman, as reported by Detik.com, didn’t pass on the information on unavailability of supporting facilities.
Politicians responded immediately saying if it’s true that Mr Kardiman received the alert and kept for himself, he should resign from the cabinet. Legislators from opposition party PDI-P, Permadi and Sidharto, said Mr Kardiman should have spread the information in the first place.
"How come we have such a minister," friends said.
The nation's state meteorology agency initially underplayed the strength of Monday's quake, rating it at a magnitude of 5.5, and said the tremor would not cause a serious tsunami. It revised that much later to a more dangerous 6.8, but by then the waves had already struck Java's south coast. The U.S.-based Pacific Tsunami Warning Center recorded the quake at magnitude 7.2 but said a tsunami would only affect areas 100 km (60 miles) from the epicenter.
Transportation Minister Hatta Radjasa who supervise the meteorology agency (BMG) admitted he received the information about the earthquake at a magnitude of 6.8 around four minutes later. He admitted that 18 minutes later Japan’s meteorology agency alerted Indonesian agency on tsunami potency. "But I didn't get the alert from Japan. May be research minister got that because he's the coordinator for early warning system," Hatta said.
So, that’s it, no action, denials, blame games! Hatta said most of the casualties were those who're sleeping or sailing.
Legislative will summon BMG over the issue for a possible further investigation. I'm just afraid it will end up like previous investigations.

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Indonesia Gas War Part II

The decision of Downstream Oil and Gas Regulatory Body (BPH Migas) to appoint Bakrie Brothers as the operator of 1,200 km long gas pipeline linking East Kalimantan and Java has sparked Gas War II in the country.


Upstream Oil and Gas Regulatory Body (BP Migas) Chairman Kardaya Warnika responded immediately the decision with his same-old statement that the gas reserves in East Kalimantan will not enough to support the pipeline.
We have two alliances at odds. First, BP Migas with gas producers in East Kalimantan such as Chevron (previously Unocal), Total Fina, and Arco/BP, PT LNG Badak (a joint venture of some companies) plus POG which plans to build new LNG plant in Bontang, and LNG customers in Japan, South Korea, & Taiwan (plus may be later on China). On top of this, several major gas customers in East Kalimantan such as PT Pupuk Kaltim (ammonia and urea producer), PT Kaltim Methanol Industry (methanol), PT Kaltim Pasifik Amoniak (ammonia), and PT Kaltim Parna Industry (ammonia).
Second, BPH Migas with domestic customers in Java and local pipe manufacturers which will take benefit out of the pipeline project.
The first group might say, sorry we have no more gas for you (Bakrie pipeline) because we have long-term contracts in hands at US$9/MMBTU. We could consider not to renew the contracts when they matured, but you have to pay the same export price. No way we will sell at US$3/MMBTU. Transporting gas to Java may help gas supply for power plants and manufacturing industries in Java, but at US$3/MMBTU, the country lost the foreign exhange earning of US$6/MMBTU. Without gas supply, no way that Bakrie could build the pipeline. Japanese LNG buyers are reportedly furious about the pipeline plan.
The second group, on the other end, 'may' push government to implement what we understand as Domestic Gas Obligation (DMO) wherein gas producers have the obligation to sell their output to domestic market first. But at what price, that's the question. This group argues gas pipeline would create more multiplier effects than exporting LNG.
What are the multiplier effects? Boost the pipe manufacturing industry, for sure, including Bakrie's pipe business. Power generation may be next in line because out of 10,000 MW new power plants to be built in the next five years, most will be coal-fired, not gas-fired. So this argument might be considered weak. Besides, if the country really want to develop multiplier effect of natural gas, why not build more gas-based chemical plants in East Kalimantan along with the power plants?
East Kalimantan already the largest ammonia producer in the world with more than 4 million tones per year capacity (through Pupuk Kaltim, KPA & KPI); the largest methanol (through KMI & Methanol Bunyu) with 1 million tones/year; and the largest urea producer in one site (3 million tones/year). We could build more of such plants, not to mention the mid-stream chemicals like acrylonitrile, caprolactam, nitric acid or ammonium nitrate (raw material for explossives, increasingly important with the growing mining industry in Indonesia/the world), all of which uses natural gas as feedstock.
The strategy to build more manufacturing facilities outside Java would deconcentrate both people and energy consumption in Java, right? And it's politically correct in the decentralization strategy.
The war is on and the winner might be decided by politics & power play instead of economic reasons.

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Petronas & Bakrie

Few months ago, Malaysia's Petronas signed the MoU to set up a consortium to bid for the development of gas pipeline from East Kalimantan to East Java. Yesterday, the consortium won the bid, beating listed state-owned gas transmission company PT Perusahaan Gas Negara (PGN) Tbk. How serious is Petronas?

While no details of share ownership in the Bakrie consortium, Petronas will likely play a key role in the pipeline and would only strengthen the Malaysian grip in Indonesian gas transmission business.
In 2002, PETRONAS International Corporation Ltd. (PICL) through Transasia Pipeline Company Pvt. Ltd. (Transasia), acquired 40 per cent stake in PT Transportasi Gas Indonesia (TGI). TGI is a subsidiary of PT Perusahaan Gas Negara (PGN), Indonesia's state-owned gas transmission company.
TGI currently owns and operates the 536-km Grissik-Duri transmission pipeline. The Grissik-Duri pipeline runs from the Corridor Block gas plant to the Duri Oil field. Its current throughput capacity is at 430 mmscfd.
Apart from the Grissik-Duri pipeline, TGI also own and operate the Grissik-Batam-Singapore pipeline. The 468-km pipeline transport gas from Sumatera to Singapore at a capacity of 350 mmscfd.
Transasia is a joint venture company incorporated in the Mauritius comprising a consortium involving PICL (35 per cent), CONOCO Indonesia Holdings Ltd (35 per cent), SPC Indo-Pipeline Co. Ltd. (15 per cent) and Talisman Transgasindo Ltd. (15 per cent). PICL is a wholly-owned international investment arm of PETRONAS.
The interest in TGI marks PETRONAS' entry into the gas transportation business in Indonesia and signifies an important move for PETRONAS in the diversification and expansion of its business portfolio in Indonesia, in line with its long-term investment commitment in that country.
PETRONAS' other activities in Indonesia include upstream business and oil trading. Its exploration and production arm PETRONAS Carigali Sdn Bhd currently has interests in the Jabung block onshore Sumatera and the Tanjung Aru block offshore Kalimantan, and operates the Ketapang and Karapan blocks offshore Java. Recently, PETRONAS started receiving natural gas from Indonesia, transported via pipeline from West Natuna in Indonesian waters to its facilities offshore Terengganu.
Petronas also owns North East Madura IV Ltd. a production-sharing contract for the North East Madura Offshore Block IV.
In 2004, Petronas Carigali Overseas Sdn. acquired Muriah Block PSC held by a unit of oil major BP PLC. Last month Petronas Carigali was awarded the Lampung 2 block in South Sumatra.
Bakrie, on the other side, involved in most of PGN's gas pipeline projects as pipe supplier. The East Kalimantan-East Java gas pipeline would ultimately boost Bakrie's pipe manufacturing business. So, Indonesia's pipeline projects are pretty much in the same hands.

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Lapindo disaster updates

Upstream Oil and Gas Regulatory Body (BP Migas) insisted that Lapindo Brantas Inc, a unit of listed company PT Energi Mega Persada Tbk, can't claim cost recovery for losses due its drilling failure which caused hot mudflow disaster in Porong district, East Java.

BP Migas chairman Kardaya Warnika said according to article 5 point 4.2. of the contractor agreement, the losses prior to production is the contractor's full responsibility.
"Disaster during planning and implementation of drilling is the responsibility of contractor, so there will not be cost recovery," he said.
The statement dismissed earlier claim made by Energi Mega that part of the losses would be claimed as cost recovery that will be deducted from government's revenue from the block.
In the field, Lapindo and BP Migas failed to stop the hot mudflow with snubbing unit. It's not clear for how long people should suffer for the air and water pollution.
RELATED ARTICLES
1) Hot mudflow to be offloaded to the sea
2) Lapindo Case: The scapegoats

3) Lapindo mudflow: The family affair

4) Lapindo mudflow & blame games

5) 6 Suspects in Lapindo case

6) Gov't would bear the cost, how generous
7)Lapindo disaster spillover to Bumi-Energy merger

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Years of living dangerously: Tsunami, quake, tsunami...

A powerful earthquake sent a 6-foot-high tsunami crashing into a beach resort on Indonesia's Java island Monday, killing at least 80 people and causing extensive damage to hotels, restaurants and homes, Detik.com reported.

According to Detik.com more than 38 found dead at the famous Pangandaran Beach, Ciamis, West Java.
Kompas.com meanwhile reported 15 found dead in Cilacap area (Detik.com claimed 34) with hundreds missing and tens of thousands people flee the city.
Miles away from Cilacap, in Kebumen regency, one dead found and hundreds missing.
A friend reported from Cilacap, southern coast of Central Java, panick drivers have cost some accidents in several main roads in the area.
The 2004 Indian Ocean tsunami killed at least 216,000 people, nearly half of them in Indonesia's Aceh province. On May 27, a magnitude-5.9 earthquake devastated a large swath of Java Island, killing more than 5,800 people.
On top of these, number of deaths of avian flu keeps increasing. Floods, including man-made hot mudflow like the one from Lapindo Brantas drilling activities in East Java, and then water scarcity in various areas. Oh...may be the following article I posted few months ago worth reading...
1) Cleaning up the President's bad aura...
2) Seismograph investment/donation please!...

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Medco set the platform in Gulf of Mexico

Medco Energi, the listed energy company controlled by Arifin Panigoro family, has set its first platform in the Gulf of Mexico.

Below is the statement from the company few minutes ago:

PT MedcoEnergi Internasional Tbk through its wholly owned subsidiary, MedcoEnergi US LLC, has successfully set its first new platform and facility in the Gulf of Mexico.
The new platform, located at East Cameron Block 318, approximately 105 miles SSW of Intracoastal City Louisiana, weighs over 1800 metric tons and sits in 229’ of water. The combination drilling and production facility carries 6 drilling slots; process facilities rated for 50 MMSCFD; 1400 HP of gas compression and quarters for 10 operators.
These quarters will serve as a hub headquarters to service other MedcoEnergi and third-party facilities in the area. MedcoEnergi US also anticipates improved run-time efficiency and more effective cost control at its nearby EC 317A facility as a result of this installation.
MedcoEnergi US is currently in the process of erecting a platform drilling rig, the Nabors Super Sundowner XIX, and anticipates beginning drilling operations in early August 2006.
MedcoEnergi US holds a 75% working interest and operates the East Cameron 318 development project. When fully developed, production from this project is expected to more than double the current MedcoEnergi US’s net gas production to over 30 MMSCFD.
Hilmi Panigoro, the CEO of MedcoEnergi, said “This measurable additional revenue-stream will make a noticeable contribution to MedcoEnergi’s continued operation and growth and produces a tangible, positive impact to our increasing role as an active mid-size energy company in the Gulf of Mexico.”
Dave Gibbs, MedcoEnergi US President, added “This project marks an important milestone for the new MedcoEnergi US team as we advance our strategy of mature field re-development in the shallow waters of the Gulf of Mexico.”
Lapindo mudflow
At home, Medco is in conflict with its partner Lapindo Brantas Inc over hot mudflow disaster from their Banjar Panji-1 drilling. Medco owns 32% working interest in the block, with Lapindo at 50% and Santos 18%. Lapindo is the operator of the block.
Lapindo argued the partners should bear the burden of the disaster, while Medco said it only share the burden if Lapindo could prove that it didn't violate the standard operating procedure (SOP) as the operator.

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Motorcycle sales drop 26.2%

Motorcycle sales in the first half 2006 dropped 26.2% from the same period last year, Tempointeraktif.com reported Sunday quoting data from industry association.

According to Indonesian Motorcycle Industry Association, motorcycle sales in H1 2006 reached 1.81 million units, dropped 26.2% from the same period last year at 2.45 million unit. The report is pretty much in line with earlier prediction that motorcycle sales this year would drop 25% on high interest rate and weaker purchasing power.
Ridwan Gunawan, chairman of the association, meanwhile praised the increasing monthly sales since April and expecting higher sales in second half. But he was pretty sure the year's total sales will not match last year's 5.1 million units. He predicted the total sales would only reach 4 million units.
Car sales also dropped significantly by 49% to 149,000 units in the first half. Central Bank's decision to cut it's benchmark rate by 25 points last week is seen as signal of further reduction that will eventually push banks to lower lending rates. But the recent oil price hike following the security concern in Middle East might potentially ruin the central bank's plan.
Positive side: Lower automotive sales give time to authorities to fix the country's crazy public transportation, especially the bad traffic in Jakarta.
Negative: Automotive-related stocks, including financing, and job market.

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Jonan resigned, Mukijat the new Bahana CEO

Ignatius Jonan had tendered his resignation as CEO of state-owned investment bank company PT Bahana Pembinaan Usaha Indonesia (BPUI) after five years in that position.

Jonan managed to save the company from bankruptcy of huge bad loans to big boys like Peter Sondakh (Rajawali), Prajogo Pangestu (Barito), Arifin Panigoro (Medco), Agus Anwar (fugitive), Mohamad S. Hidayat (Chairman of Indonesian Chamber of Commerce & Industry, owner of MSH Group), and Hashim Djoyohadikusumo (Tirtamas, currently Nations Energy) following the financial crisis in 1997.
"Shareholders accepted his resignation and appointed Boyke WE Mukijat as the new CEO," said an official at Bank Indonesia, the central bank, which owns 80% shares of BPUI. Government owns the remaining 20% shares.
But people close to Jonan said BI and MSOE are just about to decide whether to accept or not Jonan's resignation.
It is not clear why Jonan resigned. But some sources said he felt no more chemistry with officers at the ministry of state owned enterprises who represent government as the shareholder of BPUI.
Boyke was BPUI's managing director BPUI, a key ally of Jonan when the company restructured the massive debts of Rp9.1 trillion (US$1 billion) back in 2001.

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Gobel family, the new Bouraq Airlines pilot

Electronic manufacturer businessman Rachmat Gobel will make Bouraq Airlines fly again after he tookover the shares from Sumendap family.

As reported by Kompas today, transportation minister Hatta Radjasa disclosed that Gobel is about to revive the airline which has been grounded for six months. Gobel family is long time partner of Japan electronic giant Panasonic. Rachmat, the heir of Gobel family's business, is reportedly a close friend of president Susilo Bambang Yudhoyono and serves as vice chairman of Indonesian Chamber of Commerce and Industry (Kadin Indonesia). His name was mentioned several times as potential cabinet member.
No details available on how much Gobel would pay for the Sumendap family shares. Bouraq was developed by Jerry Albert Sumendap, a businessman from North Sulawesi which also the hometown of Gobel's father, the late businessman Thayeb Mohammad Gobel. Sumendap's family members who involved in the Bouraq management were Danny, Meiss, Laurina Saliot, Romeo MJ, Emmy, and Linda---all with Sumendap behind their names. Bouraq has another carrier called Bali Air.

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Deutsche refinance Mobile-8

Deutsche Bank is reportedly refinance debts of Bimantara Group's telecommunication subsidiary PT Mobile-8 Telecom.

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Regional corruption jumps

Internal Affairs minister M. Mar'uf claimed a significant jump of corruption in regional and local admnistrations level in line with increasing amount of funds under their management as the result of Regional Autonomy arrangements.

Tempointeraktif.com reported this morning that number of corruption cases committed by local and regional administrations increased in the last three years in particular.
Since the regional autonomy implemented in 2001, the flow of state budget to regional and local administrations level jumped significantly by 170% from Rp81.47 trillion to Rp220.07 trillion (US$25 billion) in the state budget 2006.
Well, this is what we called decentralization of corruption.
Read my previous posts about Decentralization of Corruption.

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Rabobank acquire 100% Hagabank Rp880 billion

Rabobank International had signed acquisition agreement of 100% shares at two banks previously owned by Djarum Group---PT Bank Haga and PT Bank Hagakita, with Rp880 billion price tag, reflecting a 3.5 to book value (PBV).

As I wrote earlier the shareholders of Hagabank (Djarum family) had divested all its shares to Rabobank. Both companies will announce the deal tommorow.
Read my previous post for the background (Rabobank acquires Indonesian bank).

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Kalimantan-Java pipeline: The Winner is...

The downstream oil and gas regulatory body (BPH Migas) is scheduled to announce the winner of the tender to build a 1,219 km gas pipeline transmission from East Kalimantan to Java Island by the end of this week. Could it be Bakrie Group, PGN or Barata?

Some newspapers reported earlier that BPH Migas has picked PT Perusahaan Gas Negara (PGN) Tbk, the listed state-owned gas transmission company, as the winner. But BPH Migas declined to confirm that.
PGN is teaming up with China's CNOOC and financial support from Asian Development Bank (ADB). It's not clear who support Bakrie's financing in the project.
Bakrie, meanwhile, is trying hard to convince public that its offer is better than PGN with cheaper cost. The pipeline is estimated to cost US$1.2 billion.
Bakrie offered gas transmission tariff of US$0.769/MMBTU with IRR 12.29%, Barata tariff at US$1.1/MMBTU with IRR 14.4%, and PGN at US$0.98/MMBTU with IRR 12%.
The bidding was a bit nasty when PGN claimed that its bidding document had been leaked to its competitors.
Read my previous posts on this topic:
1) East Kalimantan-Java gas pipeline
2) Clash of the Titans in Indonesian gas

3) Bakrie company bags US$84 million

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What's up with Borneo-Bumi deal?

It's almost two weeks after the scheduled closing of US$3.25 billion deal between PT Borneo Lumbung Energi and PT Bumi Resources Tbk. But it's not clear what's going on.

"The lawyers are fighting still. There are legal issues that need to be settled up-front to please investors. But we hope the deal could be closed this weekend," said one executive involved in the mega deal.
What legal issues?
"There are worrysome mining lifetime contracts with some parties, especially the contractors. Generally it is about assignment and notation of various contracts that Bumi Resources has with various contractors and suppliers," he further said.
Besides, creditors who finance most part of the deal want to secure their payments directly from two assets (PT Kaltim Prima Coal & PT Arutmin Indonesia), not from Borneo as the holding company.
"But we have time till September actually to close the deal," he said. Well, further delay of the deal, if any, would potentially delay another deal, PT Bumi Resources Tbk and PT Energi Mega Persada Tbk merger. Lawyers love the delays. They're the time-keepers great enemies.

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People on The Move

Brokerage and investment firm PT BNI Securities Tbk, a subsidiary of state-owned bank PT BNI Tbk, appointed Hindarmojo Hinuri as the new president director replacing Sudirman following a capital market investigation over the company's mutual fund operation.

Hindarmoyo is the former president director of Surabaya Stock Exchange (SSX), director at Jakarta Stock Exchange, and PDFCI Securities. He is 53 years old. Isn't he too old for the job?
Meanwhile, Danny Jozal retired from his position as CEO of chemical company PT BASF Indonesia, a subsidiary of Germany's BASF AG. Malaysian Henry Tan replaced Jozal.

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Biofuel dream could be a nightmare

A cabinet meeting chaired by president Susilo Bambang Yudhoyono decided to accelerate the development of biofuel with ambitious target at 10% of national consumption by 2010, five years ahead of the previous plan. Jatropha is apparently at the center of this plan. Without detail plans, the dream could be the nightmare for everybody. Why?

It's just over simplification if you say that our cars could use biodiesel/biofuel derived from jatropha curcas (castor oil) that could be produced by everybody. It's easy to say that all households could grow jatropha in their fences. It's also easy to claim that Indonesia has 50 million hectares of critical/infertile land that fit for jatropha. But when it comes to implementation, it could be a mess if government failed to establish a good logistic and trading system. It's workable like the way cigarette producers collect cloves from farmers through traders. But can we make sure that government will not repeat the 'monopoly' once implemented by Soeharto regime when his son and cooperatives controlled the clove collection?
It's perfectly OK for government to claim that 50 million people could get job out of jatropha curcas to biodiesel. But how many times government launched grandiose programs like the failed one-million-hectare-plantation?
Besides, there are lots of technical issues that deserved serious attention, especially to prevent government officers keep misleading public at large. One minister once claimed that building biodiesel plants is like soybean cake plants (pabrik tahu). Is it?
Well, it's nonsense. Technically, all oils contains what chemist called free fatty acid (FFA), a corrosive substance. Maximum FFA content allowed is 0.05%. Imagine that crude palm oil (CPO) has 5% FFA. So, there is no way that jatropha as B10 could be used as is. The B10 should be converted to methyl esters (B20-B80). The so-called-biodisel at pabrik tahu-scale could only act as crushing plants stationed in some areas. Their products should be processed further at high-technology-high-investment-scale plants to reduce the FFA to the allowed level. The same applies to biofuel derived from CPO.
Now. Even though many people could invest in methyl ester plants, they have to deal with two side products, dangerous ones, crude glycerine and methanol/water mix. Some of us may say...just leave the side products like what India does. But at the scale of 10% of national consumption, production of biodiesel could seriously harm our environment. We're talking about millions of tones of side products.
Let's say that we care about environment so we need to solve the side products. That would add investment cost by up to 20% and will eventually raise the biodiesel price at gas stations level.
And even so, investors are in difficult position to get the right technology. Not many biofuel technology could give the best standard on biofuel and the handling of two dangerous side products (crude glycerine and methanol).
"One of the technology supplier has overload projects in hands. That's why we can't expect many biodiesel projects in Indonesia could be materialized in two or three years time," one industry player said.
Another critical issue is pricing and the freedom to export. Most investors are entering the business because of high margin booked by existing biodiesel producers. The average price of biodiesel in industrialized countries are US$800/MT, equals to USD0.72/L or Rp6,500/L, almost the same with fossil fuel price. But the price is based on CPO price of USD420/ton. What if CPO price goes up to USD600? Can we afford to sell it in domestic market? Can we guarantee that these investors have the freedom to export their biodiesel and will not be banned like on-off-export ban on CPO?
And till all the above questions answered correctly, it's better for government officers to do their homework more seriously than trumpetting misleading statements!
READ MY PREVIOUS POSTS:
1) Biofuel politiconomics
2) Biodiesel projects mushroomed in Indonesia

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Govt to review Lapindo Brantas future

Energy minister Purnomo Yusgiantoro said his staffs are reviewing whether to let Lapindo Brantas Inc operate the oil and gas block after the humiliating disaster of mud flow from the company's drilling activity. Lapindo is a subsidiary of PT Energi Mega Persada Tbk where PT Medco Energi Internasional Tbk has 30% shares and Australia's Santos has 20% shares in the Brantas production sharing contract (PSC).

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Cemex to drop arbitrary

Cemex SA has agreed to drop the arbitrary suit against Indonesia government as part of the deal to sell its 25.5% shares in PT Semen Gresik Tbk to Rajawali Corporation.

People close to the deal said Cemex will submit the agreement letter to Indonesia government this week to pave the way for a closing of US$335 million deal with Rajawali.
"Almost 95% of legal process has been completed. Only one or two items left to be settled immediately. We hope by the end of this week we could close the deal," he said.
The deal has been dragged for few weeks on some critical issues, including the arbitrary suit filed by Cemex SA to ICSID in early 2004 on dispute over further divestment of PT Semen Gresik Tbk, the largest cement producer in Indonesia.

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Who's acquiring Adam Air?

Texas Pacific Group Ventures is reportedly acquiring minority shares of Adam Air.

Australian Qantas was previously reported to acquire 20% share of Adam Air from Suherman Family.
Read my previous post on Adam Air at: Qantas to aquire 20% of Adam Air.

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The coup d'etat against Iwan Pontjowinoto

President Director of PT Jamsostek (Persero) Iwan Pontjowinoto, a close aide to minister of state owned enterprises Sugiharto, is facing a coup d'etat from workers and fellow board members.

Jamsostek workers union threathened to stage nationwide protest if government as shareholder failed to meet their demand to replace Mr Pontjowinoto, a former chairman of Sharia Economy Society (MES) and managing director at state-owned investment bank PT Danareksa (Persero). Workers described Pontjowinoto as an authoritarian leader and always intimidating other officers of the company.
Four board of directors joined the workers demanding the replacement and supported the vote of no-confidence in Pontjowinoto, the first of a kind in the country.
Internal rifts have put Mr Pontjowinoto on the hot seat, especially when he tried to give away Rp6 trillion of funds for stock trading to two state-owned investment banks, Danareksa and PT Bahana Securities. Board of commissioners and BOD vetoed Pontjowinoto's proposal though.
Jamsostek managed social security funds from 25 million workers in the country. As of December 2005, Jamsostek managed Rp36.85 trillion (US$4 billion) of which around US$2 billion invested in bonds and Rp14.75 trillion in bank deposits.
There are some reports of fishy deals at Jamsostek that have been filed to Corruption Eradication Commission. The previous CEO and investment director have been sentenced few years behind the bars in corruption cases.
But Sugiharto came quickly to defend Pontjowinoto saying government will keep the man in the job arguing the company's first quarter performance has been on track.

Read my previous posts on Jamsostek:
1) Iwan Pontjowinoto & our money
2) Jamsostek Airways
3) Shariah Principle on Jamsostek: Ooops...
4) Adi Sasono-Sugiharto Connection
5) Ahmad Djunaedi, the fugitive

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Market Watch

Central Bank would likely soften its stance on single presence policy allowing owners of two banks to establish a holding company as the first option. This would be the preferred choice than reducing shareholding in one bank or merger.

In the meantime, as the Central Bank cut its benchmark rate by 0.25% to 12%, banks pledged to follow with lowering interest rates to boost lending.
Investor Daily reported today that plantation company PT PP London Sumatra Tbk is looking for US$150 million loan to finance its expansion projects. London Sumatra (Lonsum) has been rumored as acquisition target, but it's not clear which company made the offer. Various attempts to acquire the company have been failed as existing shareholders put sky-high price.

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ANTV acquires LaTV, TransTV buy TV7

In the latest move of broadcasting moguls, ANTV (partly owned by Ruppert Murdoch, controlled by Bakrie family) is reportedly acquiring majority stakes of debt-ridden LaTV (owned by Abdul Latief, former minister under Soeharto regime).

Meanwhile, Koran Tempo reported last week that TransTV (owned by Chairul Tanjung, Para Group) was in talk with TV7 owner Jacob Oetama (controlling shareholder of Kompas, the largest newspaper in Indonesia) for a possible acquisition.
If all these plans will materialize, Indonesia's TV industry will be more concentrated in several hands. Bimantara Citra (partly owned by Soeharto-linked families and groups) is currently own three TV stations (RCTI, TPI & Global TV).
Other TV stations are owned by Surya Paloh (Metro TV, Media Indonesia group), Mahaka (JakTV), some groups inc Soeharto family (SCTV) and Salim (Indosiar).

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PKS-PDIP coalition in Jakarta governor election

In the last few days, the Prosperous Justice Party (PKS) have made some interesting statements about its position regarding the Jakarta governor election next year. The most interesting is the plan to establish a coalition with PDI-P to support certain candidates.

While PDI-P have disclosed the potential candidates run for the election under its banner (Faisal Basri, Sarwono Kusumaatmadja, Hendropriyono, and Bibit Waluyo), PKS is yet to formally endorsed some names as candidates. The party tipped Lt Gen Syafri Syamsoedin (currently secretary to minister of defense) but Syafri prefers to maintain his current job. PKS also tipped National Police Chief Sutanto but most likely he will also reject that. It mentioned Adang Daradjatun, deputy police chief, but no clearance so far.
But the party's Jakarta chapter executive admitted PKS may endorse Bibit Waluyo who also secured support from PDI-P. Bibit's name might be the reason for PKS to informally say that it could work with PDI-P for the election.
But, wait a minute! Isn't the party's platform is very much different with PDI-P's?
PDI-P said they could work with PKS as long as the platform for the one who will lead Jakarta is the same i.e. he/she should guarantee the pluralism. PKS has been considered a party with strong flavor of secularism. But the party is trying hard to convince public that it promotes pluralism in various local/regional leaders across the nation in the last two years.
PKS, according to recent data, has been involved in coalition with various political parties on more than 40 local/regional leaders election. "Even we have coalition with Partai Damai Sejahtera (strong Christian ideology) in elections in eastern part of the country," the party said last year.
So, in that context, a coalition of PKS and PDI-P in the next year's Jakarta governor election will not be a big surprise. The question, who will be the candidate that could well represent the platform of both parties, who will be the senior and junior partner, what will be the consequence if they win etc. If 2004 election is the benchmark, I belief that PKS want to be the senior partner as the party with most seats in Jakarta house of representatives (DPRD), 18 seats to 9 seats (PDI-P).

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Panca Global may control 50% BNP

The rights issue of PT Bank Nusantara Parahyangan (BNP) Tbk may pave the way for PT Panca Global Securities Tbk to control up to 50% shares of the bank.

According to additional information to shareholders of BNP, the share ownership after the rights issue would reflect 50% dilution to existing shareholders (Tatang Hermawan family 63.2% and public 36.8%). Both BNP and Panca Global are listed companies. Under the rights issue agreement, Panca Global is the stand-by buyer.
It is not clear who will be the ultimate shareholders of the bank after the rights issue. Under the Central Bank regulations, ultimate shareholders should take responsibility of bank's liabilities.
Securities and brokerage firm Panca Global's main shareholder is Mr Hendra Hasan Kustarjo with 42%. Meanwhile Tatang Hermawan's family is involved in textile business under the Fujitex Group.

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Feni III shutdown, Antam missed target

PT Aneka Tambang (ANTAM) Tbk is forced to shutdown its newly built FeNi III smelter due to the leak from the metal tap hole late last week. That would cost Antam's ferronickel production target for 2006 a significant cut to 13,000 to 16,000 tonnes from the target of 19,000 tones.

ANTAM wrote to Australia Stock Exchange on Wednesday that it requires three months of FeNi III shutdown. Initially ANTAM planned the new plant's commercial operation by first quarter 2006 but delayed due to all conditions for conducting a final plant test had not been satisfied.
FeNi III is being built by a consortium of Mitsui & Co Ltd and Kawasaki Heavy Industries Ltd, Japan. Both companies are responsible for all work and testing prior to the commercial operation of the plant.
Antam's president director Dedy Aditya Sumanagara said, "We're extremely disappointed by this development as we had been operating FeNi III at capacity for one and a half months and were expecting to begin the final test and declare commercial operations at the beginning of July."
A full investigation is underway. No explanation from both Mitsui and Kawasaki on the accident.
The US$320 million FeNi III project involves the construction of a third smelter and new power plant in order to expand the Pomalaa ferronickel capacity from 11,000 tonnes of nickel contained in ferronickel to 26,000 tonnes. The FeNi III smelter will be built alongside FeNi I and FeNi II smelters in order to benefit from economies of scale.
The FeNi III plant will use nickel ore feed from Antam’s large nickel deposits in Buli, North Maluku and from a deposit adjacent to Pomalaa owned by PT Inco, known as East Pomalaa. The excavation of ore will be conducted by Antam or outsourced. Construction of the third power plant to power Antam’s entire ferronickel operation also began at the end of 2003 and will take 18 months to complete. The 102 megawatt plant includes the installation of six new diesel power generators and at the beginning of 2005 three of the generators will be operational, providing a more stable and efficient power load to the existing facility. Antam’s older plant with a capacity of 50MW, will be used for auxiliary and back up once the new power plant is operational. The new generators can run on fuel oil as well as natural gas. In June 2004, Antam signed an Operation and Maintenance (O&M) agreement with the builder of the new plant, Wärtsilä Corporation of Finland, for the operation and maintenance of Antam’s entire 152MW power facility.

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Feni III shutdown, Antam missed target

PT Aneka Tambang (ANTAM) Tbk is forced to shutdown its newly built FeNi III smelter due to the leak from the metal tap hole late last week. That would cost Antam's ferronickel production target for 2006 a significant cut to 13,000 to 16,000 tonnes from the target of 19,000 tones.

ANTAM wrote to Australia Stock Exchange on Wednesday that it requires three months of FeNi III shutdown. Initially ANTAM planned the new plant's commercial operation by first quarter 2006 but delayed due to all conditions for conducting a final plant test had not been satisfied.
FeNi III is being built by a consortium of Mitsui & Co Ltd and Kawasaki Heavy Industries Ltd, Japan. Both companies are responsible for all work and testing prior to the commercial operation of the plant.
Antam's president director Dedy Aditya Sumanagara said, "We're extremely disappointed by this development as we had been operating FeNi III at capacity for one and a half months and were expecting to begin the final test and declare commercial operations at the beginning of July."
A full investigation is underway. No explanation from both Mitsui and Kawasaki on the accident.

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Executive salaries & bonuses

This is an ongoing work on salaries and bonuses for Indonesian executives. Competitive enough to shopping frequently at the up-coming high-class Harrods store in Jakarta.



1) Arwin Rasjid, CEO of TELKOM: Net salary for 2006 = Rp108 million/month (USD12,000). Bonus for 2005 = Rp1.58 billion (US$176,000). Other members of BOD/BOC of Telkom get salary and bonus with the following formula: Deputy CEO = 95% of CEO, directors = 90%, president commissioner = 40%, other commissioners = 36%. You can calculate yourself of how much Mr Tanri Abeng (president commissioner) get or commissioners such as economist Arif Arryman.

2) Dwi Sutjipto, CEO of SEMEN GRESIK: Net salary : Rp95 million/mo (USD10,500) and bonus = Rp1.068 billion (USD118,000). Other members of BOD/BOC as follows: Deputy CEO = 100% of CEO, directors = 90%, president commissioner = 40%, deputy = 40%, and commissioners = 36%. Total management bonus = Rp14.31 billion (inc for subsidiaries).

3) Saiful Imam, CEO of ADHI KARYA: Net salary: Rp42 million/mo (USD4,600). Bonus = Rp220 million. Directors = 90% of CEO, president commissioner = 40%, commissioners = 36%. Total management bonus = Rp1.459 billion.

4) President commissioner INDOSAT : Rp1.7 billion (total package)/year; commissioners (average): Rp1.567 billion/year. Name of commissioners: Roes Aryawijaya (deputy minister of SOEs), Eva Riyanti Hutapea (former INDOFOOD CEO), Setyanto P. Santosa (former TELKOM CEO), and Soeprapto (former assistant to Army Chief of Staff).

5) Dedy Aditya Sumanagara: CEO of Aneka Tambang (ANTAM): Salary: Rp47 million/mo plus bonus (2005 FY) = Rp983 million (USD108,000). Formula of salary + bonus for BOD and BOC is similar to ADHI KARYA.

Remember that the actual amount of money these guys take home might well above that.
But the above list could answer my previous question of why Harrods eager to open its outlet in Jakarta while it failed in Singapore.

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People On the Move

Former president director of Jakarta Stock Exchange (JSX) Mas Ahmad Daniri has been appointed independent commissioner at PT Indah Kiat Pulp & Paper, a subsidiary of Asia Pulp & Paper Co Ltd.

Daniri is currently the chairman of Good Corporate Governance (GCG) Committee at Indonesian Chamber of Commerce and Industry (Kadin Indonesia).
Meanwhile, Adrian Rusmana, chief research of BNI Securities, is moving to PT Kresna Securities Tbk as research director.

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Small power plants mushroomed

Increasing energy prices have pushed some companies in Indonesia to build their own power plants, mainly coal-fired.

Below is the list of the projects:
Companies than planned to build power plant:
1) PT Great Giant Pineapple, capacity 14 MW, coal-fired, Lampung province, cost Rp120 billion.
2) PT Sumalindo Lestari Jaya Tbk, 24 MW, Kutai
3) PT Polychem Indonesia Tbk,
4) PT Tunas Baru Lampung Tbk, capacity 12 MW, coal-fired, Lampung province, cost US$11.45 million
5) PT Panasia Indosyntec, 30 MW, coal-fired, West Java, cost Rp230 billion
6) PT Humpuss Intermoda, 24 MW, coal-fired, Bangka Island, US$25 million
7) Kutai Regency: 14 MW, coal-fired, Kutai Regency, East Kalimantan
8) PT Cahaya Bintan Mulia, 50 MW, coal-fired, Bintan Island,
9) PT Berau Coal, coal-fired, Berau, US$12 million

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6 Suspects in Lapindo case

East Java police has named six workers as suspects in the Lapindo Brantas Inc environmental disaster that forced thousands of people living in tents due to unstoppable hot mudflow from Lapindo's Banjar Panji-1 drilling well in Sidoarjo, East Java.

Detik.com reported on Tuesday that two Lapindo staffs and four workers of PT Medici Citra Nusa---Lapindo's drilling contractor have been named suspects.
East Java Police Chief Herman Suryadi Sumawiredja said there is possibility that higher ranking officers of both companies will also be named suspects.
"It's impossible to have blue-collar workers only as suspects. Decision makers could be named suspects as well," he said.
So far so good. Let's hope that police could go farther than this.

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Jakarta Governor Candidates (4): Bibit Waluyo

Lt General (ret) Bibit Waluyo had registered his candidacy to run for Jakarta governor election under PDI-P banner, well before economist Faisal Basri. Bibit Waluyo is a former commander of army's strategic reserve command (Kostrad), retired in late 2004.

Bibit is competing with his senior, Lt Gen (ret) Agum Gumelar, who also run for Jakarta governor under PDI-P banner.
Who is Bibit?
Born in Klaten, Central Java, August 5, 1949, Bibit married to Sri Suharti. Father of three (Sari Lestari Kurniawati, Dian Handayani & Rini Tri Utami), Bibit is often considered the president's man (because his close relationship with president Susilo Bambang Yudhoyono). Military observer MT Arifin once called Bibit as SBY's man. His name once tipped as candidate for minister of transportation in SBY's first cabinet.
But Bibit was also reportedly close friend of former army chief of staff General Ryamizard Ryacudu. Some even says Bibit as General (ret) Wiranto's man.
Whatever. Bibit was one of top military figures who opposed peace agreement between Indonesia government and Free Aceh Movement (GAM) signed in August 2005. Why he run for Jakarta governor election?
Probably because he believe in his experience as commander of Jakarta military area in 2001-2002.

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Lapindo disaster, quo vadis?

Few days ago, energy minister Purnomo Yusgiantoro said government is considering stern sanction on Lapindo Brantas Inc for the environmental disaster in Sidoardjo, East Java. The maximum penalty will be revoking the company's license.

Lapindo's parent company, the listed PT Energi Mega Persada Tbk, responded quickly with a letter to Jakarta Stock Exchange (JSX) yesterday saying the revoking of such license should be based on production sharing contract (PSC) signed by the company and government.
It's interesting to see where the government will take the case. Revoking the license might seems perfect, but real politic is unlikely to support that. Worse, under the PSC terms, government should share the burden through cost recovery scheme. Lapindo reiterated in the letter to JSX yesterday that the drilled well which caused the unstoppable hot mudflow falls into production well category, so the cost incurred is recoverable.
But environmentalists or the victims of the disaster, who might be upset, could file a class action lawsuit in US court since Lapindo Brantas Inc is a US-registered company.

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Heard in the street: Suba Indah acquisition

Debt-ridden corn starch producer PT Suba Indah Tbk might have new controlling shareholder. Two groups, Gudang Garam and businessman Teddy P Rahmat (former CEO at Astra International) are reportedly in discussion with Suba Indah owners about a possible takeover.

People close to the groups said the discussion is still in early stage. "It's in the approach stage with Gudang Garam and Teddy Rahmat as potential investors," the businessman said and dismissed speculation of Cargill Inc might interested in acquiring Suba Indah.
But people close to Teddy Rahmat denied the report. "No, we're not looking Suba," he said.
State-owned PT Bank Mandiri Tbk as the biggest creditor at Suba mounts pressure to the company to service its Rp994 billion bad debt (more than US$100 million). Suba reported negative equity of Rp90 billion as of December 2005.
Two weeks ago Suba Indah reported to JSX that the shareholders were willing to pledge some property and mining assets as collateral to restructure Bank Mandiri loans after the bank soften its demand from cash payments.

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Borneo trying to get Marubeni on board

PT Borneo Lumbung Energi is apparently trying to get Marubeni Corporation on board of the US$3,25 billion acquisition of two coal mining assets from PT Bumi Resources Tbk.

"Senior officers of Renaissance Capital is in Tokyo to get Marubeni on board," said people close to the deal. Renaissance Capital's Samin Tan is the majority owner of Borneo Lumbung which supposedly close the deal last Friday.
No explanation on why Borneo failed to close the deal despite rumors of financing and legal issues.
"Lawyers are still fighting on each other," the executive said over the weekend.
It's not clear what subject they're fighting for. "But creditors and investors are worried about some life-time contracts with the mining subsidiaries. Besides they impose some conditions to make sure the cashflow management will secure the interest payments," he said.
Samin Tan dismissed speculation of financing difficulties last week saying Credit Suisse had raised the necessary US$2.1 billion loan and Singapore's UOB would provide US$700 million exchangeable bond.
It's the bond that Marubeni is being offered to. "It's not easy to sell bond at the moment," the executive said.
The loan being arranged by Credit Suisse will include US$1 billion over five years, $600 million over six years, and $500 million from an eight-year mezzanine loan, which usually includes warrants that can be converted into equity.

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Another cabinet reshuffle?

Rakyat Merdeka, as usual, run a provocative headline today quoting Tifatul Sembiring, chairman of Prosperous Justice Party (PKS), saying the party will pull out all its cadres from cabinet after the World Cup 2006.

Hundreds miles away from Jakarta, minister for agriculture Anton Apriyantono, one of PKS cadre was seemengly relax walking side-by-side with president Susilo Bambang Yudhoyono and other cabinet members prior to a meeting in Losari agri-resort, Malang, East Java.
Tifatul said the threat to pull out its support for the government is serious, amid criticism that the party is bargaining with Golkar Party for more seats in the cabinet.
Tifatul went short in details of the party's plan, including the exact timing as World Cup 2006 final is scheduled the end of this week and few months ahead of president SBY's routine annual examination of performance of his ministers (every November). But he disclosed the reason behind the pull-out decision, i.e. tired of being considered as the enemy within.
"This is our respond to Golkar Party's accusation that our party play two faces politics. It's better to serve people's interest than to support an undecisive government," Tifatul said.
PKS has three cadres in the cabinet in charge of agriculture, people's housing affairs, and sports. On top of this, minister for state-owned enterprises Sugiharto is reportedly closer to PKS recently.
So far, no words from the president or his close aides. But Partai Demokrat where SBY is the patron leader/founder, said government should seriously review its relationship (coalition) with PKS. Surprisingly PKS tipped National Police Chief General Sutanto, a close aide to SBY, as its potential candidate to run for Jakarta governor election next year.
So, watchout, whether this time PKS is not bark louder than its bite.

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Lapindo hot mud to be offloaded to the sea

Desperate on the ongoing hot mudflow from Lapindo Brantas Inc's Banjar-Panji well, the frustrated deputy regent of Sidoarjo Syaiful Illah said over the weekend that Madura Strait will likely be the final shelter of the hot mudflow chanelled through Porong River.

Tempointeraktif.com reported this morning that mudflow has been jumped from 5,000 cubic meter per day to 50,000 cubic meter per day. Lapindo build dams to absorb the mudflow, but with the current rate of mudflow, the existing dams would only be able to accommodate the flow until the end of July. What a mess!

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Biofuel politiconomics

Indonesia is in the mood of everything related to biofuel, biodiesel, or bioenergy. And it's not just a respond to sky-high fossil fuel price. It's about politics for 2009 election.

Energy Minister Purnomo Yusgiantoro told the press today that a limited cabinet meeting chaired by president Susilo Bambang Yudhoyono in Malang, East Java over the weekend set the target of 2010 for a mass consumption of biofuel in the country that has been struggling to keep up fossil oil production with increasing demand.
As reported by Detik.com in Sunday, Purnomo said by 2010 biofuel could save 10% the consumption of traditional diesel oil and gasoline, plus 50% of the country's electricity. Ambitious plan. Late last year, research ministry announced that by 2015, up to 10% of the nation's oil consumption could be met with biofuel.
Biofuel, according to the cabinet meeting, supports three basic policies: Pro-Growth, Pro-Poor, and Pro-Jobs. Pro-Growth means biofuel would support a higher economic growth, pro-poor means significant cut in fossil fuel subsidy, and pro-jobs means creating new jobs in the biofuel industry right from its upstream (plantation and the such) to downstreams (biodiesel plants and distribution).
President's spokesperson Andi Malarangeng claimed the program would create jobs for 3.5 million people.
Several raw materials were mentioned in the roadmap to biofuel. They're palm oil, molasses, casava, jatropha etc. Industry Minister Fahmi Idris came quickly with government's plan to build eight biofuel plants with jatropha as the raw materials.
In fact, companies have jumped into the business in a frenzy way in the last few months. Life science company DuPont, for example, announced its innitiative to produce biofuel based on corn in Indonesia in a cooperation with Beyond Petroleum (BP). Some state-owned and local private companies have also announced innitiatives to produce biodiesel based on palm oil. Big palm oil companies like Astra Agro, Bakrie Sumatra Plantations, for example, have announced their respective plans to build biodiesel plants. Wilmar Trading, the largest CPO trader in Asia, is reportedly drops a plan to build biodiesel plant in Singapore and relocate that to Indonesia. Others plans to build ethanol plants based on molasses in various parts of the country.
But the country, just like others, is facing the dilemma. Excessive land usage, for example, could raise the environmental problem in itself. Government claimed there are 50 million hectares of land in Indonesia that suitable for jatropha plantation.
To be continued........

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Honda buy out Indonesian partner

M&A: Honda Motor Co Ltd had acquired 51% shares of its partner PT Kodrat Adhimulia in PT Honda Lawadinata Power Products which sells Honda power products in Indonesia at undisclosed price.

Honda Motor Co., Ltd., established P.T. Honda Lawadinata Power Products, a joint venture between Honda (49% equity) and P.T. Kodrat Adhimulia (51%), with Rp73 billion capitl which began its operations in February 2001, selling Honda power products in Indonesia as well as to export markets.
The Indonesian power product market is rapidly recovering after the decline caused by the currency crisis of 1997. The new subsidiary will strengthen Honda's power products operations, which began local production in 1997. Honda plans to sell 150,000 units in 2002, a figure which would be four times the total for 1999.
Honda has been selling power products in Indonesia since 1972, and since 1991, its distributor, P.T. Wajamakumur Mandiri (WMM), has been responsible for sales activities.
In 1996, Honda and WMM jointly established a local production company, P.T. Sinar Honda Jaya, with headquarters in Tjikampek, West Java, and the following year began producing engines and water pumps. The new subsidiary will assume all distributorship rights from P.T. Wajamakumur Mandiri.

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No management reshuffle at Telkom

Despite earlier calls for a management shakeup, the shareholders meeting of PT Telkom Tbk, the largest company at Jakarta Stock Exchange (JSX) by market caps, on Friday decided not to do that.

MSOE Sugiharto, on behalf of the government as the biggest shareholder at the telecommunication giant, in his letter to the shareholders meeting argued against the shakeup and additional directors as proposed by the management.
Both president commissioner Tanri Abeng and CEO Arwin Rasyid maintaned in their position.
Representative from Telkom's workers union attending the meeting urged the management to be solid as they sensed disharmony between them. Competition between directors is reportedly behind the shakeup issue emerged late last week.

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Borneo also failed to close Bumi deal

PT Borneo Lumbung Energi failed to close the US$3.25 billion deal to acquire two coal mining assets of PT Bumi Resources Tbk on the deadline set for Friday afternoon.

"It's not closed yet as the lawyers failed to settle the terms," people close to the deal said.
Borneo was confident to close the deal this week amid concerns of difficulties to raise enough funding for the acquisition. Borneo dismissed fears that Credit Suisse had been difficult to raise US$2.1 billion loans and equity part of the deal. Borneo stated early this week that Singapore's UOB agreed to provide 70% of the equity part of the deal through exchangeable bond facility.
Some says lawyers were bussy to accommodate the demand from creditors to secure interest payments with escrow account of cash proceeds from the operation of two mining companies---Kaltim Prima Coal and Arutmin Indonesia.
"Besides, there are existing agreements with mining contractors which are considered not supportive enough for securing payments to creditors," people familiar with the coal deal said.

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