Muara Enim power project: Chicken-and-egg situation

Reporters from major newspapers covering president Susilo Bambang Yudhoyono's visit to Shanghai, China wrote that China Huadian has eventually entered into a JV agreement with Indonesian partners to build the US$2.1 billion coal-fired power plant in Muara Enim, South Sumatra. A significant step forward, but the project is still in a chicken-and-egg situation.

Why? Because the 2,400 MW power plant would only sensible to be built if state-owned electricity PT Perusahaan Listrik Negara (PLN) also start to install Sumatra-Java power grid. So far, we never heard of PLN's plan.
Actually, early this month, director general for electricity, J Purwono, rejected US investor's plan to build 1,200 MW coal-fired power plant in Musi Rawas, South Sumatra arguing it's too big-too dangerous. The investor, AES Asia & Middle East would work with Japan's Sojitz and local partner, to build the power plant.
Mr Purwono was quoted by Detik.com saying Sumatra is not suitable for power plants with generating capacity of more than 600 MW. "Sumatra only good for 100-200 MW capacity, " he said. (Strange if we consider the regular blackouts in the island)
I would say the real reason behind the rejection is not the size of the power plants, but the availability of reliable power grid linking Sumatra and Java. By law, only PLN is allowed to operate electricity transmission & distribution in the country.

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BP Migas chairmanship price tag: Rp15 billion

I got information from a friend legislator that candidates for Upstream Oil & Gas Regulatory Body (BP Migas) chairman could win the upcoming selection (to replace Kardaya Warnika) with at least Rp15 billion investment (read as bribery) to buy the votes.

"You don't have to have Rp15 billion in hands. We could help you to get sponsorship with certain concessions," he said. The House of Representative (DPR) will conduct fit and proper test to select the new BP Migas chairman, one of the most powerful position in the country's oil & gas business.
I wonder whether Kardaya spent that much when he competes with Iin Arifin Takhyan (currently vice president director of Pertamina) and Triyana Kartoatmodjo (currently deputy chairman of BP Migas) for the post early last year.
Iin was initially the strongest candidate endorsed by government, but Kardaya won majority support from DPR, Tempointeraktif.com reported last year.

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Off to China again, balancing act

President Susilo Bambang Yudhoyono (SBY) starts a five-day visit to China today, mainly to strengthen economic ties between the two countries, just weeks ahead of US president George Bush's visit to Jakarta and days after VP Jusuf Kalla visit US.

Last year, both the president and VP visited China. SBY also visited US last year. SBY will meet Chinese PM Hu Jintao, the fourth meeting between the two leaders. SBY will score the same amount of meetings with Bush next month. Balancing act, to take benefit from the competition between the superpowers, hopefully.
As reported today, the president is scheduled to witness the signing of cooperation agreements worth US$4.5 billion between Indonesia and Chinese companies in energy sector. No details available so far.
One thing, China energy giants such as CNOOC and Petrochina, have been agressively invested in Indonesia's oil and gas sector even though the scale of their operations are still insignificant compared to US giants such as Chevron or ExxonMobil.
I'm pretty sure, Bush will take with him these giants to Jakarta next month. Whatever, such competition, especially between US and China energy giants, should be good for the country.

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Another team, too many too slow!

President Susilo Bambang Yudhoyono has established a new team called Reform Acceleration Team led by Marsilam Simanjuntak (former minister under Abdurrahman Wahid administration). Members are, among others, Lt General (ret) Agus Widjojo and Edwin Gerungan (former IBRA chairman). We're on our way to set The Guiness Book of World Records for number of teams in the administration.

The new team, Marsilam explained, has five tasks; improve investment climate, improve bureaucracy (administration), improve small & medium enterprises, boost state-owned enterprises performance, and improvement in law enforcement.
It was coordinating minister for the economy Dr Boediono who disclosed the plan to establish the team six months ago. Last month, the president finally establish a team to solve the mudflow disaster in Sidoarjo, East Java, four months after the first eruption in May.
I'm just afraid we have too many of such 'teams' but way too slow in implementation. I understand that the main concern is improving investment climate to lure in more investments and boost the economic growth. The key issue is not that we can't identify the problems, but rather on slow-pace of decision making process.

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Chevron in Indonesia: A Wakeup Call (2)

I'm so glad to read an article written by Orin Basuki, reporter of Kompas, the largest newspaper in Indonesia, under the title...chasing the truth to San Ramon. The article is basically based on an audit report completed by Supreme Audit Agency (BPK) on PT Chevron Pacific Indonesia, a subsidiary of Chevron Corp, USA.

The article is centered on cost recovery, a term in oil and gas business in which contractors such as Chevron claim the costs to government/state.
BPK found the following irregularities at Chevron:
1) Caltex polytechnic Riau: Cost recovery claimed US$6.56 million. (So the education & training facility is not a donation of Chevron, it's a state-funded institution)
2) School cost: Cost recovery claimed US$6.29 million for 2004 & 2005. (Again, this is no corporate social responsibility/CSR, it's a state-sponsored)
3) Donation to international school: Cost recovery claimed US$5.94 million. (This isn't a CSR for God sake)
4) Community development & community relationship: Cost recovery claimed US$1.5 million and US$1.47 million respectively. (Not CSR, state-funded activity)
5) Interest recovery: US$4.97 million (this should not be charged as cost recovery item)
6) Modification of collecting stations US$33.98 million: No benefits for the operation.
7) Materials worth US$18.92 million, no gain, charged as cost recovery.
8) Electricity and steam supplied by PT Mandau Cipta Tenaga Nusantara have been doubted the fairness and would cost the government US$210 million and loss to the state at US$1.23 billion.
BPK auditors admit there should be a long list of items that deserved cost recovery, but government's position in most contracts is so weak that contractors tend to mark up cost recovery and charge everything in the mechanism. "Even they charged the cost to pay foreign teachers for expatriate's children or scholarship for children of local staffs. In the end, cost recovery is about the same with all the company's operational costs," Arief Handoko, BPK auditor told Kompas.
Worse, as explained by J Widodo Mumpuni, chief auditor on Chevron, government's position in the contracts is so weak that it coudn't blame contractors for the markups even though they put the country at huge financial losses.
This is what I mentioned in my previous article Chevron in Indonesia: A Wakeup Call.
I hope Kompas would continue the publication of other audit results over oil contractors such as ExxonMobil, ConocoPhillips, Petrochina, CNOOC, Medco Energi, Energi Mega Persada, Pacific Oil & Gas, Santos, Star Energy, Pertamina, Petronas, etc.
Not just that we're aware of how these contractors made lots of money from the country's resources, but we know how careless our government officers (including BP Migas) in performing their role as regulator and supervisor. With that, we know what we should fix right now.

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Sidoarjo mudflow, the favourite sightseeing spot

Unstoppable mudflow that forced almost 10,000 people to leave their homes in Sidoarjo turns out to be one of the most favourite sightseeing spots for those who celebrate Lebaran, Antara reported.

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Huntsman expand Indonesian dyestuffs

PT Huntsman Indonesia, a wholly owned subsidiary of US-based Huntsman Corp, is expanding its disperse dyestuff production facility with additional investment of US$6.9 million. The new facility will have installed capacity of 7,300 t/y of disperse, vat, and reactive dyestuff for textile.

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Going Home

No crying no sighing I'm going home, I'm leaving no grieving I'm going home, and there's no one here, and there's nothing here gonna turn me around...I'm going home.

The above is Leo Sayer's Going Home lyric I dedicate to millions of Indonesian going home (mudik) for the festive of the season, Lebaran.
Mudik is the largest movement of people from urban centers to villages to celebrate Idul Fitri, which sometimes accompanied by diversified crimes committed to take benefit out of crowds in bus terminals, train stations, or those who ride motorcycles.
Crazy traffic jams all around in Nagreg, West Java (two hours drive, against the normal time of 10 minutes), or Pantura.
Lousy and frustrated drivers have sent many more people to their eternal home. But that would never turn them around...

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Mergers & Acquisitions

Malaysia's Tridomain Acres Sdn Bhd acquires 95.4% shares of PT Mitsui Eterindo Chemicals from Mitsui Chemicals Inc (86.9%) and Baylite Company Limited (8.5%) at undisclosed price. Meanwhile PT Schlumberger Geophysics Nusantara (SGN) and PT Reda Pump Indonesia (RPI) will merge with SGN as the surviving company.

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Telkom accomplish Bukaka SingTel acquisition for US$256 million

Giant telecommunication operator PT Telkom Tbk has accomplished the acquisition of assets and operation of PT Bukaka SingTel Indonesia (BSI) through reverse agreement mechanism at around US$256 million.

Arwin Rasyid, Telkom CEO, said yesterday that the acquisition has been completed. He didn't disclose the acquisition price. But Telkom finance director Rinaldy Firmansyah said BSI deserved to get fix investor revenue (FIR) of Rp55.6 billion per month from October 2006 to June 2007 plus Rp44.25 billion/month from July 2007 to December 2010 as compensation. It means Rp2.358 trillion or somewhere around US$256 million.
BSI was established in October 17, 1995 to build telecommunication infrastructure in eastern part of the country under a cooperation agreement with Telkom as the monopolist for the span of 15 years. Shareholder composition was PT Bukaka Telekomindo International/BTI (51.5%), SingTel (40%), and Transpac Capital Pte Ltd (8.5%). BTI is a wholly-owned subsidiary of Bukaka, a group of business controlled by VP Jusuf Kalla's family. Muhammad Abduh, VP's special staff, was once the chairman of BSI with Kalla brothers (Achmad & Suhaeli) as commissioners.
But in July 5, 2002, Green View Finance Offshore Ltd bought all shares Bukaka in BSI at undisclosed price. No information available about Green View Finance Offshore. Whoever, BSI clearly got the deal, with income of Rp44.25 per month in 51 months while Telkom will take care operation, maintenance, and development of the contract. BSI is reportedly invested US$300 million in the project. High return, right?

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Wynford in soda ash venture

Wynford Finance Ltd, a BVI company, has entered into a JV with PT Bengalon Limestone to establish a soda ash plant in East Kutai, East Kalimantan province with US$85 million investment. Both companies establish PT Bengalon Chemical Industry for that purpose. Previously Wynford established a JV with Kobexindo, one of the largest heavy equipment distributor in Indonesia, to build cement plant in Kutai.

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Jui Shin Indonesia, new cement player

Indonesia's cement industry would have new player. PT Jui Shin Indonesia, a subsidiary of Taiwan-based Long Shun International Co Ltd, plans to build cement plant in Karawang, West Java.

The plant will have installed capacity of 2 million tones/year. Long Shun and its partners would invest US$165 million and will create 2,030 new jobs. Jui Shin Indonesia is involved in tile manufacturing in Medan Industrial Estate, North Sumatra, with Garuda brand. The product has entered export market as well.

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Voucher & WSF scandals

Imagine few weeks ago when property tycoon Ciputra introduced Hasan Saputro, inventor of water stimulating feed (WSF), to president Susilo Bambang Yudhoyono? The president praised the man and immediately promise to ask all governors to listen Saputro's presentation. Today we read in papers: Minister of Agriculture, Anton Apriantono, declared WSF, currently 'produced' by listed debt-ridden company PT Suba Indah Tbk, as illegal product.

But if that's not enough, read all the stories about hundreds of million rupiah 'gift' vouchers provided by Education Minister Bambang Sudibyo (finance minister under Wahid Administration) and distributed by the speaker of The House of Representative Agung Laksono to schools owned-operated by Kosgoro (organization under Golkar Party). Laksono is not alone. Total amount of such vouchers could be around Rp350 billion (US$40 million). Laksnono disclosed his colleagues at House Commission IX & VIII also received the same vouchers. He defended the vouchers calling himself only as postman for Education Ministry's donation program.
Sudibyo admitted the issuance of the vouchers, but failed to answer the question,
why he need these legislators as postmen? What kind of deal between the minister and these postmen? How much is the stamp cost?

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Capital market surpass bank loans

The amount of fund raised by Indonesian companies through capital market (equity & debt) has reached Rp44 trillion, surpassing total bank loans of Rp40 trillion in the first nine months of 2006. Why?

Bank Indonesia deputy governor Hartadi Sarwono admitted bank loans growth for 2006 would be well below target at 20% as the first nine months has only grown by 7% despite improvement in the last two months following significant interest rate cut.
The central bank reported Rp21.4 trillion fund raised from Indonesian capital market and US$2.3 billion from international bond issuance in Jan-Sept.
Bankers blamed investigations on state-owned bank loan disbursements have reduced Indonesian companies' appetite amid low interest rate. Recent bond & debt issuance in global market of Indonesian companies shown high interest rate charged such as Bumi Resources around 11% loan facilities.

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Credit Suisse provides US$300 million loan to Bumi subsidiary

Credit Suisse has agreed to provide up to US$300 million loan to Enercoal Resources Pte Ltd, a subsidiary of PT Bumi Resources Tbk. The one-year facility will then be loaned further to Bumi Resources to finance working capital with Bumi's rupiah and USD bank accounts plus Enercoal accounts as collaterals.

No details available on the interest rate charged. Bumi is currently busy to buyback up to 1.9 billion shares with maximum purhasing price of Rp1,200/share. Bumi reported buyback of 16 million shares early this week at Rp760/share.

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Meadowstream acquired Berlian Laju Tanker

Meadowstream Limited, a BVI company, has purchased 714 million shares of PT Berlian Laju Tanker (BLTA) Tbk in Singapore Stock Exchange at Rp2,075/share. Meadowstream bought the shares of BLTA, Indonesian company listed at Jakarta & Singapore stock exchanges, from PT Tunggaladhi Baskara, founding shareholder of BLTA.

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Bumi buyback & Lapindo divestment

PT Bumi Resources Tbk has started shares buyback late last week with initial purchase of around 9 million shares at Rp760-770/share. Bakrie-linked brokerage firm PT Danatama Makmur was the agent for the buyback. Plenty more to follow, 1.9 billion shares with total value around US$250 million.

Meanwhile, PT Energi Mega Persada Tbk told JSX yesterday that it's looking for financing of Lapindo Brantas Inc loans related to US$120 million notes issued by Malacca Brantas Finance BV.
Under the divestment plan, Energi needs to settle third party loans chanelled to Lapindo Brantas. Energi has signed sales & purchase agreement (SPA) with Bakrie Oil and Gas Limited, in which Bakrie would pay US$2 for Energi shares in Lapindo.
Lapindo Brantas Inc has six development wells and five exploration wells. In the first half 2006, Lapindo contributed 15% of Energi's total revenue.
According to Energi, total losses calculated at Lapindo's well blast that turned into a disaster could reach US$106 million. Based on Section VI of PSC agreement, Lapindo claimed it deserved cost recovery from government. Insurance coverage is reported at US$27.5 million.
So far, Lapindo got Rp109.2 billion funding from Energi's IPO and another Rp19.7 billion from a rights issue. On top of these, Lapindo also got loan from the US$120 million notes arranged by Merrill Lynch. It's not clear how much loan chanelled to Lapindo.
Malacca Brantas Finance BV issued the 3-year LIBOR plus 8%-8.5% loan to refinance US$50 million loan to PMA Investment Advisors Ltd and Bank Mandiri, while the remaining US$70 million to finance Malacca PSC and Brantas PSC.
"According to SPA, one of the requirements is to settle all third party debts. For that purpose, we're in the process to get financial resources," Energi told JSX.
So, it's clear, Energi could safely walk away from Lapindo disaster, leave it to government to recover all the cost incurred, and the environment for the unstoppable mudflow.

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Flip Flop on Natuna D-Alpha

In less than one month, government officers made flip-flop and conflicting statements on the status of ExxonMobil & Pertamina's contract to develop the massive gas reserves called Natuna D-Alpha project.

Today, both energy minister Purnomo Yusgiantoro and BPMigas chairman Kardaya Warnika stated that the Natuna PSC had been automatically terminated in January 2005. Few weeks ago, both officers stated that give time to Exxon & Pertamina until January 2007. In between, both guys also stated that Exxon may still operate the gas block but with brand new contract.
On the other hand, ExxonMobil which controls 76% shares in Natuna D-Alpha (Pertamina 24%) insisted that the contract is valid until 2009. (FYI, Pertamina initially owned 50% shares in Natuna D-Alpha. But somehow Pertamina divested 26% few years ago, and nobody raised the question, why? I could understand if the divestment is considered a big mistake, especially with the sky-high energy price in recent years)
Anyway, back to the Natuna legal battle, it's clear that both parties have different interpretation of the contract itself. Article II.2.2 of Natuna PSC amended in 1995 stated that if contractors (Exxon & Natuna) failed to come up with clear commitment before January 2005, the contract shall automatically terminated. Exxon claimed that it's letter dated December 2004 to BPMigas confirming the commitment to develop Natuna has been enough to secure the first two year extension, which means until January 2007. Article II.2.3 also stated that if one of the parties (BPMigas or contractor) asking for extension after the first two year of extension to further confirm the project, it's deemed obliged to approve additional second two-year extension (until 2009).
Government claimed that the contract has not been terminated unilaterally, but automatically. It means, government should provide proofs that contractor (Exxon & Pertamina) failed to meet the requirements in the contract. So far, no such proofs available that legally convincing. But Kardaya seems to believe that government is in strong position even if Exxon challenge that in international arbitrary. People that familiar to oil & gas business doubt though. "It's gonna be the next Karaha Bodas," he said.
What if government think that Indonesia managed to postpone hundreds of million dollar fine of Karaha Bodas case? Well, let's read brand new flip-flop statements in the newspaper in the coming weeks or so.
But the first statements, maturity of contract in 2007, has completely different legal consequences, i.e. government acknowledging Exxon's commitment made in December 2004 and the 2-year extension accordingly. Meanwhile if government claim the contract had been terminated automatically in Jan 2005, it has to come up with proofs to support that and probably a stupid question: Why government said before that the contract would mature in Jan 07? Or another stupid question: What's happened in the last two years? Where are all these guys?
I try to take positive leasons out of this. Suppose that gas price stays the same like 5 years ago, nobody would care about Natuna D-Alpha, because it's just too costly to develop. Now that government want to renegotiate for better terms, that's good. But we have to do it right. Some people try to blame Soeharto or BJ Habibie for the contract given to Exxon. Partly true because we always forget to protect ourselves from future ups-and-downs in contracts with smarter guys. Meaning, we have to learn to be smart in negotiations, articles by articles, paragraph by paragraph, and word by word.

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No Nobel Peace Prize for SBY

It's Muhammad Yunus, not president Susilo Bambang Yudhoyono, who won the Nobel Peace Prize. As reported by AP, the Bangladeshi economist and his Grameen Bank won the Nobel for their pioneering use of tiny, seemingly insignificant loans — microcredit — to lift millions out of poverty.

Through Yunus's efforts and those of the bank he founded, poor people around the world, especially women, have been able to buy cows, a few chickens or the cell phone they desperately needed to get ahead. I initially thought Yunus deserved Nobel in economy. But fighting poverty through microcredit is considered an act to promote peace than an economic breakthrough. This is what some observers called major shift in the definition of peace.
I think SBY and many around the world praise Yunus's effort amid such criticism. It also a boost to Indonesia's effort to improve microcredit facility to the country's poor people.
The rationale could be like this. Peace in Aceh prevent more deaths from bloody war between Indonesian military & Free Aceh Movement (GAM). But history told us that lot more people died every day of famine & absolute poverty than wars. I'm not sure about the statistics in Indonesia. But I'm pretty sure of the rationale of poverty & peace, though most wars triggered by those who pursue for more wealths.
Finnish ex-President Martti Ahtisaari, who mediated a peace accord in Indonesia's Aceh province, and veteran peace broker Gareth Evans of Australia were among those tipped to win the Nobel Peace Prize on Friday.
Ethnic Uighur activist Rebiya Kadeer, who accuses Beijing of persecuting Uighur people in northwestern Xinjiang, and Indonesian President SBY were also among possible winners of what many see as the world's top accolade.
VP Jusuf Kalla expressed his prayers yesterday for SBY to win the prize. "None had nominated me," Kalla said lightly when asked his chance to win the Nobel considering his active role in Aceh peace deal.

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Bumi buyback: JSX' silentium magnum

I was wrong to indirectly predict the fall of PT Bumi Resources Tbk shares price following the collapse of US$3.2 billion divestment of KPC and Arutmin to Borneo Lumbung. In fact, Bumi price never droped to below Rp600 even though some said that time of black market price of Rp580. Why?

Because there were people defending the price. They 'collect' lot of shares. When Bumi secured US$1.2 billion funding, the management confirmed no fraction of the loan would be taken to buyback shares. I was also wrong to indirectly predict that, forget about the buyback Bumi promised. Creditors wouldn't allow that.
But this week, Bumi management announced the massive 1.9 billion shares buyback program, in a relatively short period of time, with maximum share price at Rp1,200 (vs the current price Rp760) which means Rp2.3 trillion (approx.US$250 million) using internally generated cash.
A reader sent the following email:
As you know, recent events surrounding Lapindo (and the previous intended merger between BUMI and ENRG) have led to significant selling pressure in Bakrie group stocks, including BUMI.)
Given that it is said that some of the company's loans are collateralized against the family's personal shares in BUMI, it is assumed that the Bakrie has been heavily supporting the share price at the Rp700-730 price level (to
the tune of hundreds of millions of shares).
BUMI's share buyback would perhaps be an opportune way of on-selling any of these recently purchased shares to the company... at a hefty profit? Is anybody looking into this possibility? Potential short term trading gains (especially if the stock rises significantly from here) could be enormous. Who was/were the big buyer(s) when the share price was under heavy selling pressure?
Unfortunately I have no Bloomberg terminal in front of me. (Poor Me, I took two semester to learn Bloomberg but no terminal back home????) But I think people know the answer. Readers who kind enough to do a little research with Bloomberg are free to contribute here!
PS: Don't expect JSX or Bapepam do that! They're in 'silentium magnum' period, always!

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BTPN divestment

PT Perusahaan Pengelola Aset (PPA), a company established to manage remaining assets
of IBRA, starts to divest 18% shares in PT Bank Tabungan Pensiunan Nasional (BTPN) Tbk. PT Bahana Securities & PT Deutsche Securities Indonesia are financial advisors for the deal. BTPN has total asset of Rp4.31 trillion.


PPA, acting on behalf of GOI, controls 28.39% shares, followed by PT Recapital Advisors (22.61%), Fuad Hasan Masyhur (20%), Danatama Makmur (19%), and Bakrie Capital Indonesia (10%).
Previous owner of BTPN who surrenders BTPN shares to government/IBRA and the affiliate party are not allowed to participate in the deal. (Except nobody knows!)
The source of funds used to acquire BTPN shares shall not have orriginated from borrowing or other financing facilities in whatsoever form from banks or other parties in Indonesia. (You're encouraged to borrow from overseas banks or through fancy local-overseas-local channelling!!!!)

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Lee & SBY exchange warning letters

The Jakarta Post wrote: Fight the haze or choke investors, Lee warns RI. I would write: Return the fugitives-corruptors or choke on the haze, SBY warns Singapore.

Well, Singapore PM Lee Hsien Loong has written to president Susilo Bambang Yudhoyono (SBY) to express his dissapointment over smog from land-clearing fires in Indonesia that have blanketed parts of South East Asia.
"Indonesia needed to deal with the problem in a timely and effective manner, so that investor confidence in Indonesia, ...., would not be affected."
SBY is a sensitive personality, so he replies with apologies, not just to Singapore but Malaysia as well. But I never heard of such gratitude when Indonesia desperately wanted Singapore return fugitives-corruptors long hided safely there and sign the extradition treaty.
Haze is absolutely not good for our health, so are corruptors-fugitives. As a country, Indonesia have no intention to export smokes. But as country, Singapore has every intention to keep the fugitives safe?
So, SBY will write to Lee as follows: "Singapore need to deal with the problem (the fugitives) in a timely and effective manner, so that investor confidence on Singapore's 'air quality', ...., would not be affected."

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Reader's suggestion to prevent another Lapindo catastrophe

A generous reader dropped an email, offering help to prevent Lapindo mudflow disaster into major catastrophe by pumping the mud directly to the sea. Please note that the following article does not blame any one for the problem but sugests a method of tackling the problem.

Here's the letter from a reader named RR (no, this is not the one who recently appointed as chairman of state-owned enterprise):
Having watched with interest the continuing struggle Lapindo have endured since their gas exploration well blew out causing the devastating effects we have all seen on the television and the fact that it would seem that they have attempted to solve the problem with all the considerable resources available to them.
It is in this light of extensive effort on their part that they seem to have given up and decided to pump their problem somewhere else. The problem for everyone being that they intend to pump the mud to local rivers which will then carry the mud to the marine environment destroying the local marine ecosystem for ever.
Being an Engineer myself, my understanding of the problems they have faced is and are facing is a little better than most although my understanding of the Indonesian language is not as good as it should be.
I see the immediate problem being one of reducing the solids content of any material which must be pumped hopefully to that of water only. The only way I can see that this can be achieved, at least in the short term is to utilize as much of the materials to hand as possible. In this case it is the mud itself.
They seem to have forgotten that compacted clay is to all purposes waterproof. If the compacted mud available is loaded into (one ton polly bags), often used for carrying fertilizer or sand, the bags can then be used as either barricades or building channels to divert the flow.
A series of dams could then be constructed in such a way that the speed of flow can be reduced allowing the suspended solids to settle out of suspension, eventually leaving just dirty water which can be further cleaned with a series of gravel beds before being discharged into an existing waterway.
To ensure that the proposed arrangement would continue to work efficiently each of the settling tanks would need to be dredged almost continuously with the material being bagged and stacked, later to be used as either further barricades or the raw material for the massive reconstruction required when Lapindo and their associates are finally able to stem the flow of the hot mud.
The size of the existing and continuing problem is a vast one and would only be exasperated by moving the problem to the marine environment where the effect on flora and fauna would be devastating.
For Lapindo and their associates should be looking to a different mineral industry and their techniques for the answer to their immediate problems rather than just moving the problem somewhere else.
Well, this is at least better than simply saying mea culpa to president SBY for not quick enough to dump the mud into Porong river.

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Texas Pacific drops plan to acquire Adam Air

US-based Texas Pacific Group has cancelled the plan to acquire Indonesian airline Adam Air because Suherman Family, the controlling shareholder, rejected to sell majority shares.

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Single Presence Policy & Bank Consolidation Sweeteners

Indonesia Central Bank had issued two important decrees that would accelerate consolidation in the banking industry. The first, Bank Indonesia Regulation No.8/16 on single presence policy and the second, BI Reg No.8/17 on incentive packages for bank consolidation. Which banks should merge under the new policy? What's happen to state-owned banks? How about foreign-owned banks? Small banks? What are the sweeteners?

Exerpts from SPP according to BI Reg No.8/16 are as follows:
1) Parties could only be controlling shareholder in one bank, except
(a) Controlling shareholders of two banks with different banking principles, ie, conventional and sharia. Banks fall into the category are Bank Mega with Bank Syariah Mega or Bank Mandiri with Bank Syariah Mandiri, etc
(b) Controlling shareholder in two banks in which one of them is a joint venture bank. Like in the case of Standard Chartered and Bank Permata (JV between Stanchart and Astra Group), or branches of foreign banks
(c) bank holding company established by controlling shareholder to control and manage directly the shareholdings in more than one bank,

2) There are options for those who controls more than one bank:
(a) Divest shares partly or in full,
(b) merger
(c) establish a bank holding company by establishing new company as the holding company or appoint one of the banks as holding company.
3) The bank holding company should be a company registered under Indonesian law.

What are the sweeteners for those who want to consolidate their banking business?
WRITING IN PROGRESS

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Farallon enters Kalbe Farma

US-based investment company Farallon is buying shares of PT Kable Farma Tbk, a pharmaceutical company with Rp13.4 trillion market capitalization. It's not clear how much shares being acquired. "It's a passive investment," one banker said.

As of last month, 52.87% shares of Kalbe is controlled by six controlling companies. They're PT Bina Artha Charisma (8.59%), PT Gira Sole Prima (9.41%), PT Ladang Ira Panen (8.58%), PT Lucasta Murni Cemerlang (8.74%), PT Diptanala Bahana (8.64%), and PT Santa Seha Sanadi (8.92%).

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Banten gubernatorial race: The promises

Banten gubernatorial race has entered crucial moments after four pairs have been confirmed to contest.

The candidates are as follows:
1. Zulkieflimansyah-Marissa Haque
Supporter: -Partai Keadilan Sejahtera (11 seats in Banten legislative council)
-Partai Sarikat Indonesia (1 seat)
Key campaign message: Fight corruption, friendly investment climate, improve quality of life to prevent Islamic radicalism
2. Tubagus Tryana Sjam’un-Benyamin Davnie
Supporter: -Partai Amanat Nasional (4 seats)
-Partai Persatuan Pembangunan (8 seats)
Key campaign message: Red carpet for investors.
3. Ratu Atut Chosiyah-M Masduki
Supporter: -Partai Golkar (13 seats)
-Partai Demokrasi Indonesia Perjuangan (10 seats)
-Partai Bintang Reformasi (5 seats)
-Partai Bulang Bintang (3 seats)
-Partai Damai Sejahtera (2 seats)
Key campaign message: Continuance of existing development program, improve education quality, especially Islamic boarding schools.
4. Irsjad Djuwaeli-Mas Achmad Daniri
Supporter: -Partai Demokrat (8 seats)
-Partai Kebangkitan Bangsa (5 seats)
Key campaign message: Fight poverty, improve education, friendly investment climate.
Looks all good programs and about the same. Many times, it's not about the quality of programs, but who will get people's trust to implement them.

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Sick Man of IMF no more, but...

Central Bank governor Burhanuddin Abdullah said: "With an accelerated payment of US$3.2 billion to IMF today, we're no longer the sick member, we're a normal member now, at the same level of playing field with other normal members," Detik.com quoted Abdullah today.

Bank Indonesia, the central bank, also revised up its predictions on several macro economy indicators. Inflation, for example, is projected at 6.7% and economic growth at 5.5%. What's next?
We need to convince investors (domestic & foreign) that Indonesia is a profitable place to invest in. Without inflow of investments to create more jobs, these macro economic indicators are just numbers and we're still the sick man of Asia compared to China and India.

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Bumi operating profit drops 13%

PT Bumi Resources Tbk's first half audited financial report has confirmed earlier speculation of declining profit margin with 13% drop in its H1 operating profit to US$156.23 million.

According to its financial statement published this morning, Bumi reported net sales of US$865 million, a healthy 25% growth from US$692 million in H1 2005.
But the company's cost of goods sold jumped 41% in the period, resulting in 4% decrease in gross profit at US$235 million.
Bumi's operating expenses grew significantly by 21.5%, resulting in significant cut of operating profit to US$156 million against US$180 million in H1 2005.
But the company booked net profit of US$90.4 million in H1 2006 or a 13% growth from US$79.9 million in the same period last year, mainly due to gain from foreign exchange translation and lower tax liabilities (?).

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Bumi gets US$1.2bn financing, oversubscribed?

PT Bumi Resources Tbk announced yesterday the closing of US$1.2 billion facility arranged by Credit Suisse, claiming the oversubscription on US$300 million three-year loan.

Bumi closed the sles of US$900 million floating rate notes due 2011 and 2012 by Indocoal Exports (Cayman) Limited to refinance the US$800 million fixed rate notes due 2006 and other corporate expenses. The notes were issued in two tranches, Class A-1 in US$600 million which matures Sept 2011 and carries interest rate of one-month LIBOR plus 3.25% and Class A-2 in US$300 million which matures 2012 carries LIBOR + 5% interest.
Bumi also announced that it has closed an oversubscribed syndication on a US$300 million loan facility with a three-year term at undisclosed interest rate.

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Quotes of The Day

Sharp and harsh, as usual, that's how Anwar Nasution, chairman of Supreme Audit Agency (Badan pemeriksa Keuangan/BPK) explain what state banks should do when they have to restructure bad debts. Anwar said, state banks should uphold good governance principle. But when it comes to tycoon Sukanto Tanoto, he said..."Don't give haircut to businessman who keep investing abroad, the richest. Sukanto Tanoto is a big thief (garong in Indonesian language)," Detik.com reported.

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Public Offerings: Mobile-8 & CP Prima

Cellular operator PT Mobile-8, a subsidiary of PT Bimantara Citra Tbk, launched the initial public offering (IPO) of 3.9 billion shares (19.9% of outstanding) at Jakarta Stock Exchange (JSX) to finance expansions and working capital.

According to the company's prospectus published today, Mobile-8 booked net loss of Rp26.5 billion in the first half. Two weeks ago, Lehman Brothers signed US$70 million loan (Libor + 6%) to Mobile-8.
Funds from Lehman + IPO would finance the company's ambitious plan to boost cellular subscribers from 2.2 million to 7 million by the year 2008.
Meanwhile, CP Prima has decided to resume the IPO. In second quarter, CP Prima announced its plan to offer 6.5 billion ordinary shares, among others, to pay debt at Barclays Bank and business expansion. But according to its new prospectus today, CP Prima offers only 3 billion ordinary shares (equals to 16.8% outstanding shares). But CP Prima also offers 6 billion warrants that would potentially make public control 45% shares after exercises of the warrants.

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Astra Agro sales increased 18.1%

PT Astra Agro Lestari (AALI) Tbk, a plantation subsidiary of PT Astra International Tbk, reported 18.1% increase in crude palm oil (CPO) sales volume in January-August 2006 to 617,712 tons, thanks to 39% export growth (reached 206,530 tons or 33.4% of total sales). As the world price of CPO increased 8.4% to US$451/ton, AALI's average CPO price slightly improved by 2.9% in the period.

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Bakrie sold 180 million Bumi shares

Willow Finance Ltd and Long Haul Holdings Ltd, two companies related to Bakrie family, have sold around 180 million shares of PT Bumi Resources Tbk with total proceeds around Rp126 billion. With the sales, Willow's shares slightly reduced to 22.14% and Long Haul to 11.4%.

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Santos delivers Maleo gas to PGN

Santos (Madura Offshore) Pty Ltd, a subsidiary of Australia-listed Santos, has started gas supply of 100 MMSCFD from its Maleo gas field in Madura offshore to PT Perusahaan Gas Negara (PGN) Tbk on Sunday, PGN reported to JSX on Monday.

Under the gas contract signed in May 2005, Santos would supply 243 billion cubic feet (BCF) of gas to PGN in 12 years worth US$550 million. PGN then distributes the gas through its transmission pipeline (East Java Gas Pipeline). The gas supply would reduce diesel oil consumption in East Java by 6.75 million kilo liter (KL). As for PGN, the gas supply would boost its distribution volume by 400 MMSCFD or 29% by the end of 2006.
Santos is the holder of 18% participating interest in Brantas PSC operated by Lapindo Brantas Inc. Brantas PSC is in limbo on unstoppable mudflow at Banjar Panji-1 drilling since May 2006.

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SCB-Mizuho-ABN Amro arrange U$150 million loan for BNI

State-owned bank PT Bank Negara Indonesia (BNI) Tbk has appointed Standard Chartered Bank, Mizuho, and ABN Amro as arrangers to raise US$150 million loan to refinance its debts and support expansion programs, Antara reported.

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Do we need another reshuffle?

Tempointeraktif.com quoted Agung Laksono (deputy chairman of Golkar Party) and Sutrisno Bachir (chairman of National Mandate Party/PAN) on Sunday about the possible cabinet reshuffle before the end of the year. Do we really need that?

Mr Laksono said Golkar has prepared candidates should president SBY reshuffle the cabinet. But he doubted if the president could downsize political parties representation in the cabinet because the coalition has been there, based on political acommodation.
Meanwhile, Mr Bachir predicted the reshuffle will not downsizing the cabinet. It's just replacing low-quality ministers, he said. "It seems the president will not replace ministers from PAN," he claimed.
Mr Bachir, a close ally and confidant of president SBY, believes the cabinet reshuffle would not be done next month, but most likely in November or December.
Well, when it comes to the frequent reshuffle, some believe it could only lead to administration chaos, flip-flopping policies, and wasting time. But others believe the necessity of another reshuffle to bring in new ideas from better & qualified people.
Looking back at what we have achieved in the last two years, reshuffle alone is not the right answer on sluggish performance of some ministries. Overall, we have lost the direction and poor leadership. Another reshuffle may give impression of the leader's willingness to improve the situation. But without clear direction and strong leadership, I'm afraid we would only fooling people around with brand new promises.
Let say the slow-pace of projects implementation at state agencies and state-owned enterprises to fuel the economy. Is it because poor performance of ministers or the absence of leadership that pave the ways in enforcing implementations?

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