Friday, September 29, 2006

Bumi new loan downsized to US$900 million

PT Bumi Resources Tbk is pushed to downsize the amount of loan raised by Credit Suisse to US$900 million, but looking for mezzanine facility of US$300 million to make it US$1.2 billion.

Source at Bumi Resources said the US$900 million facility would be consisted of US$600 million 5-year and US$300 million y-year loans. Then to meet the demand (US$1.2 billion, of which US$805 million refinancing and the remaining for working capital), Bumi is looking for Mezzanine facility of US$300 million.
Bumi is expected to announce the fund raising result this afternoon. Interest rates are believed to be higher.

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Bumi new loan downsized to US$900 million

PT Bumi Resources Tbk is pushed to downsize the amount of loan raised by Credit Suisse to US$900 million, but looking for mezzanine facility of US$300 million to make it US$1.2 billion.

Source at Bumi said the US$900 million facility would be consisted of US$600 million 5-year and US$300 million y-year loans. Then to meet the demand (US$1.2 billion, of which US$805 million refinancing and the remaining for working capital), Bumi is looking for Mezzanine facility of US$300 million.
Bumi is expected to announce the fund raising result this afternoon. Interest rates are believed to be higher.

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Indonesia Think Tanks = Corporations' Quiet Weapon

Do you know how many think tanks in town? Well, this is a very lucrative business, at least in the last few years, thanks to reform movement. How they generate businesses? How business groups quitely deploy think tanks as weapons whenever their interests ruined? Which group owns what think tank? Which ones are stinky tanks?

The think tanks normally provide analyses, TV advertising, frame the debates, polling and academic studies that add an air of authority to corporate arguments. They organize events such as press conference, seminars, book review etc at luxury hotels. Nobody knows how these groups collect the tax-deductible contributions from major corporations, yet people quoted them as 'independent analyst'.

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Thursday, September 28, 2006

BRI rides on biofuel frenzy, Rp13 trillion loan

State-owned bank PT Bank Rakyat Indonesia (BRI) Tbk claimed it has disbursed Rp6 trillion of new loans to support government's ambitious biofuel plan, Antara reported.

BRI director Sulaiman Arief Arianto said the bank has allocated up to Rp13 trillion loan to support the program this year, most of which goes to plantation activities.
No details available, especially in relation with government's earlier plan to give interest rate subsidy for biofuel-related investments. Some companies have launched various initiatives to develop biofuel. But only few have bold plans.
"A major palm oil plantation company, for example, decides to enter the business with bioethanol which may take 10 years to harvest while it could produce biodiesel using crude palm oil as raw material," a businessman involved in the biofuel said.

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Wednesday, September 27, 2006

Mud therapy USD150/hr, Merrill & Greenpeace

No kidding. A geologist from European country confirmed earlier skepticism that Lapindo Brantas Inc would ever stop the mudflow in Sidoarjo, East Java. He suggested the alternative future of the area, just like what initially believed as mere joke, for mud therapy. The difference, this time at a price, say the Ayuverda's Lepana (herbalized mud treatment) could cost US$150/hour.
A cabinet meeting tonight will make decision on whether to dump the mud to the sea, open new business opportunity like SPAs, or make it national park like Yellowstone.

Public Utilities minister Djoko said, "it's better to save people's lives than fish," a sign that most likely president SBY would let Lapindo offload the mud to Madura sea.
Greenpeace had poured some liters of the mud in front of Aburizal Bakrie's office (as minister) today. But this NGO needs several tankers/vessels to ship the mud from Sidoarjo to Bakrie & Lapindo offices.
Stock Market authorities stunned with US$2 price tag on Lapindo Brantas Inc's asset to be sold to Bakrie Group. Not to mention Merrill Lynch's US$120 million loan arranged to finance Brantas production sharing contract (PSC) operated by Lapindo. It's a hell of pain for creditors to think of Lapindo's new owner financial liabilities amid growing victim's claims.
Still, creditors believe in this group. An investment banker said it almost certain Bumi Resources would get US$1.2 billion, the amount exactly it needed. Well, the new owner of Lapindo would make more money out of the Ayuverda thing.

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Introducing, Chemical News Indonesia

A friend journalist has developed a blog, Chemical News Indonesia. Mainly about recent developments or particular projects in the sector. Could be a good alternative source of information. Take a tour to the site, http://chemicalnews.blogspot.com.

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Monday, September 25, 2006

Mega Projects from Menara Batavia 17th Floor

I got information from Investment Coordinating Board (BKPM) about mega projects awarded to four companies with the same address: Menara Batavia 17th Floor, Jakarta. Total investment cost would be US$3.5 billion, mainly in pulp, paper, and wood processing industries. Who are the people behind these projects?

The projects are as follows:
1) PT Kutai Pulp & Paper: Pulp project, 1.2 million tones/year, investment Rp15.8 trillion, location: Samarinda, East Kalimantan.
2) PT Kaltim Prima Pulp & Paper: Pulp project, 1.2 million tones/year, investment Rp15.8 trillion, location: Bulungan, East Kalimantan.
3) PT Kutai Chip Mill: Chip wood 700,000 t/y, Rp277 billion, Samarinda, East Kalimantan.
4) PT Tarakan Chip Mill: Chip wood 700,000 t/y, Rp277 billion, Tarakan, East Kalimantan.
Are these projects real?

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Bumi Resources: Buyback, who said so?

Here we go. Last week, Bisnis Indonesia quoted Nalin Rathod, commissioner of PT Bumi Resources Tbk, saying the company secured US$1.2 billion funding. But today, Bumi Resources management told JSX that the statement is not formal statement from the company.
In the letter to JSX today, Bumi Resources management also denied the newspaper report that part of the funds, currently being raised, would be used to buy back some shares. The company stated US$395 million of the US$1.2 billion would be used as working capital and general purpose. So, forget about the buyback for a while.
Bumi said the final amount of funds raised would be announced on September 29. As far as I remember, the company stated few weeks ago that it would pursue the shares buyback. But the implementation of the plan would be pending the result of divestment of up to 20% shares in the subsidiaries.
So far, no clear progress on the divestment after the collapse of US$3.2 billion divestment of subsidiaries (KPC, Arutmin & Indocoal) to Borneo Lumbung Energi late last month.

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Lehman's US$70 million loan to Mobile-8

Lehman Brothers agree to disburse US$70 million loan (LIBOR +6) to PT Mobile-8 Telecom, a subsidiary of PT Bimantara Citra Tbk. Mobile-8 would use most of the funds to expand cellular telecommunication facilities, Antara reported.

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Petrochina feel the heat in Bojonegoro

Traumatized with unstoppable mudflow in Lapindo Brantas Inc's drilling activity in Sidoarjo, Bojonegoro administration, also in East Java hold off the license for Petrochina's new drilling wells in the area, because they're just too close to the housing complex, Tempointeraktif.com reported. But no information yet on what would happen to ExxonMobil's giant US$2.3 billion oil and gas operation in Cepu, Bojonegoro.

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Lapindo disaster spin-off: Accountability!

Shareholders of PT Energi Mega Persada (EMP) Tbk will assemble next month to vote for spin-off of Lapindo Brantas Inc. Stock market authorities, surprisingly, had given their blessings arguing of no public (shareholders & the victims) losses from the spin-off. Bakrie Oil & Gas, the would-be name of Lyte Ltd which takeover Lapindo Brantas with US$2 only, will assume the accountability of the mudflow disaster in Sidoarjo, East Java. What's going on? Why US$2 only?

Under the plan, EMP would sell its shares in Kalila Energy Ltd and Pan Asia Enterprises Ltd, both control 100% shares of Lapindo Brantas Inc, to Lyte Ltd at US$2. Kalila and Pan have combined sales revenue of Rp221 billion (US$25 million) last year. Given so, EMP has the option to buyback Kalila and EMP. Nice Hah!
Lyte is a company established in January 2006 in Jersey Island. The owners? Fiduciary Management Ltd & Fiduciary Ltd, both controlled by Bakrie Group.
Unfortunately, no risk factors mentioned in EMP's announcement. Is that simple? Well, with US$2, it looks so easy. EMP shareholders may also have been relaxed. But can we really believe that the so-called Bakrie Oil & Gas will be accountable on Lapindo disaster that may cost up to hundreds of million USD? Can EMP shareholders and management simply walk away from the disaster, financially & legally?

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Friday, September 22, 2006

The End

Justice prevails! Without justice the weak are defenseless. Without mercy justice is a robot that knows not what it does. Justice diminishes evil by diminishing fear. Love diminishes evil by diminishing pain and lust.
....and I sing this song for you...
Now the sun's gone to hell
And the moon's riding high
let me bid you farewell
every man has to die
but it's written in the starlight
(Thanks to Mark Knopfler)

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Habibie's Memoir: Questions

Suppose that president Habibie didn't call miliary commander Wiranto to ask the general to stay in his position, would Wiranto tell Habibie about the 'existence' of Kostrad troops around State Palace and Habibie's residence? Why Wiranto didn't file a report before Habibie's call? Is there any convincing proofs about Prabowo's move? Why Habibie prefer to believe in Wiranto than Prabowo? Those are questions that remain unanswered in BJ Habibie's recently published book, Decisive Seconds.

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Wednesday, September 20, 2006

Habibie's Decisive Seconds: Book Excerpts

Former president BJ Habibie's memoir, titled Decisive Seconds, tells us some interesting events about the transition of power from Soeharto, how he kick out general Prabowo---that time Kostrad Commander and still Soeharto's son-in-law, and how Soeharto rejected his appeals to meet, Kompas reported.

"This is an abasement. You fired me as Kostrad Commander?" Lt Gen Prabowo asked. "Not fired, replaced," Habibie replied.
"Why? I want to protect the President."
"That's the task of President's Security Forces with direct responsibility to Military Commander, not your job..."
"What kind of President are you? On behalf of my father's and my father-in-law's name, please give me three more months as Kostrad commander."
"No. Before the sun goes down, all Kostrad forces should be under the new commander."
That was the tense dialog between Prabowo & Habibie on May 22, 1998, less than 24 hours after Habibie sworn in as president.
The dialog was stopped when ret lt general Sintong Panjaitan cut the dialog and said...General, The President has no more time, leave the room...
Earlier that day, 06.10, Habibie called Gen Wiranto and asked him to stay in his position as TNI Commander. Wiranto reported to Habibie the movement of Kostrad forces around the State Palace and Habibie's residence at Patra Kuningan, South Jakarta.
At 07.30, commander general of Special Forces (Kopassus) Maj Gen Muchdi met Habibie with the letter from Gen (Ret) AH Nasution asking Habibie to promote Gen Subagyo HS as TNI Commander and Prabowo as Army's Chief of Staff (KSAD).

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Saturday, September 16, 2006

Soeharto: I don't need wheelchair!

Former Indonesian president Suharto, who escaped trial for corruption on health grounds, appeared healthy as he attended the wedding of one of his grandsons. The 85-year-old former president arrived at the At-Tien mosque shortly before the wedding of Danny Bimo Hendra Utomo, the son of his eldest daughter Siti "Tutut" Hardiayanti Rukmana, to actress Lulu Tobing, AFP reported on Saturday.

Meanwhile, Detik.com reported that a wheelchair had been prepared for Soeharto, but he chose to walk instead. This is completely in contrast with the photo published by AFP in 2005.
Well, he needs wheelchair for certain circumstances only!
RELATED ARTICLES:
1) Soeharto & friends: Mea Maxima Culpa

2)Soeharto: I'm alive, hold your obits!

3) Soeharto Inc: Eight Years Later (I)

4) Soeharto Inc: Eight Years Later (II)
5) The End of Soeharto's trial

6) Internet poll: Go ahead with Soeharto's trial

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Habibie's Decisive Seconds

Former president BJ Habibie is about to launch his memoir titled Decisive Seconds: Indonesia's Long Journey to Democracy. The 549-page book is based on Habibie's diary especially during the transition from Soeharto regime in what he called decisive moments that changed the course of the nation.

"Policies that I made have been very important and couldn't be influenced by anybody. If I followed the noises that try to influence the decisions, may be we have a different nation now, could be a socialist Indonesia or Islamic country, not the united Indonesia republic," Habibie explained part of the book.
He promised the book contains facts and significant events he wrote in details about the early days of reform movement in the country.
Habibie raised to power as Indonesia's third president following Soeharto's decision to step down after months of mass and violent protests. Habibie failed to keep his power after lost the first democratic election in 1999 after decades of authoritarian rules of Soekarno & Soeharto.
Wish Habibie, a tecno-minded personality, publish his full diary in a blog. His book would be a good reading though.
Full of energy, I remember Habibie always said (when I cover technology beat in my early years as journalist) that he admired both Soekarno & Soeharto even though that time no minister would openly stated admiration on Soekarno (Soeharto hate that!).
It was Soekarno, the first president and father of former president Megawati Soekarnoputri, who encouraged him to study in Germany (aerospace) and Soeharto brought him home to be one of his 'golden boy'.
He gained stronger influence on Soeharto's economic policies in early 1990s and credited him for Habibienomics to make a contrast to Widjojonomics (school of liberal economic thoughts) brought in by Prof Widjojo Nitisastro (and his Berkeley Mafia) that ruled the country for many decades.
A colorful personality, a small group of journalist (three of us) used to interview him at his office with desk full of aircraft models. It's difficult to stop him explaining things. He could explain hard-to-digest issues to legislators till 3AM and all of us still love to listen.
But his projects failed to take-off as what he dreamed of. The aircraft industry (IPTN) has been crashed since 1997. We used to make our own version of IPTN as the abbreviation of Industri Penerima Tamu Negara (Industry to Host State Guests) because almost all state guests were arranged to visit the aircraft assembling plant in Bandung, West Java. The shipping industry (PT PAL) also sinked.
But, I think these are not part of the book. And would be more interesting to read the decisive seconds in early days of reform, including how he prevented military coup d'etat.

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Sri Mulyani, The Best Finance Minister in Asia?

Talking about awards, it's about preference. So, when Emerging Markets, a newspaper, named Indonesia Finance Minister Sri Mulyani Indrawati as The Best Finance Minister in Asia, we have to see in that perspective. It's a challenge for Sri Mulyani herself as many might have different view on her performance.

As reported by Tempointeraktif.com, quoting Taimur Ahmad, chief editor of the newspaper, Sri Mulyani is considered as the best finance minister in Asia based on some aspects such as economic growth, investor's confidence, rating, and foreign investors views. Emerging Markets newspaper give the award regularly every IMF-World Bank meeting.
Read: Sri Mulyani: How Cool?

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Industrial Estates controversy

Government's plan to force manufacturers relocate plants to industrial estates has created a controversy. Those who oppose the plan accuse government of giving too much power to the industrial estate developers, while the supporters said the plan would be for the best of manufacturers themselves. What's up?

Government is drafting a regulation on industrial estates scheduled for implementation by 2010. In the next few years, plants should be relocated to industrial estates. If by 2020 these plants still outside the industrial estate, government will impose administrative sanctions such as freezing the extension license, means they can't grow further. Not all plants should abide the regulation. Exceptions applies to petrochemicals, cement, and mining.
Industry minister Fahmi Idris argued industrial estates with good infrastructure would accelerate production as things would be made easier for them to get raw materials and necessary licenses. Government also argued better environmental impact management inside the industrial estates.
As reported by Kompas today, there are 83 industrial estates developed in 24 cities across the country with occupancy rate of 40%. The new regulation would definetely increase the occupancy rate.
Industry players responded the draft regulation with criticism. No way that government could force them to relocate. Should be market driven, they said. Any forced relocation would make the cost at industrial estates jump significantly as people have no choice.

Major industrial estates that might get benefit out of government's plan:
1) Jababeka (listed)
2) Kawasan Industri Gresik (state-owned)
3) Kawasan Industri Sentul (private)
4) Kujang Industrial Estate (state-owned)
5) Krakatau Industrial Estate Cilegon (state-owned)
6) Kota Bukit Indah Industrial City (private)
7) Lippo Cikarang (listed)
8) MM2100 Industrial Estate (private)
9) Surya Cipta Industrial Estate (private)
10) Surabaya Industrial Estate Rungkut (state-owned)
11) Wijaya Kusuma (state-owned)
12) Batamindo Industrial Park (private)
13) Kabil Industrial Estate
14) Cilegon Industrial Estate (Jababeka subsidiary)
15) Medan Industrial Estate (state-owned)
16) Makassar Industrial Estate (state-owned)
17) Kawasan Industri Bontang (state-owned, subsidiary of PT Pupuk Kaltim)
18) East Jakarta Industrial Park (private)

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Friday, September 15, 2006

Conglomerates, New Publishers

I got the info today that a conglomerate engaged in oil & gas business is preparing the publication of newspaper to be named The Point. It's going to be the first English business paper in the country. The new publisher is currently under spotlight for an environmental disaster that forced more than 10,000 people left their home.

Few months ago, Jurnal Nasional started its publication. This newspaper is reportedly owned by a group of businessmen considered as the loyal supporters of president Susilo Bambang Yudhoyono's administration.
Earlier than Jurnal Nasional, a newspaper named The President has also been published by a group with industrial estate as its main business.
PT Media Nusantara Citra, a subsidiary of PT Bimantara Citra Tbk led by tycoon Harry Tanoesoedibjo, started the publication of Seputar Indonesia (Sindo) more than a year ago.

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Lapindo mudflow protesters run amok

Desperate with unstoppable mudflow from Lapindo Brantas Inc's drilling well, residents of Besuki, Sidoarjo, East Java waged protest. These protesters run amok at Gempol-Surabaya turnpike, crushing cars & the toll road facilities, Detik.com reported.

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Pertamina & Statoil to explore oil in Makassar Strait

State-owned Pertamina and Statoil would cooperate in exploration activities in Makassar Strait, Antara reported.

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Thursday, September 14, 2006

Chevron in Indonesia: A Wakeup Call

The largest oil and gas operator in Indonesia (boosted further with the global acquisition of Unocal assets last year), Chevron (CVX) operations have increasingly raised eyebrows of those familiar with the business & the company's ethics of conducting business with honesty and integrity. The company managed, in many ways, to put Indonesian government at 'fait-a-compli' situations. What's up?

Indonesia's oil production has been steadily declined in the last few years. Oil majors, including Chevron, blamed on poor investment in exploration activities, old & depleted fields, uncertainty of contracts etc. But rarely we check whether these guys are honest enough in their commitment to boost the country's oil output.
Chevron's operations deserved huge attention since the company is the largest oil producer in Indonesia, producing 478,000 barrels per day, roughly half of the country's total oil output, from its wells across Riau province. It operates three blocks (Duri-Minas, Siak, and MFK) in Riau and Kisaran block in North Sumatra.
Chevron Indonesia's oil operation contributes net earning of US$392 million in the first half 2006, according to the company's report to NYSE. Gas operations gave net earning of US$596 million in the same period to make total Indonesian contribution of US$988 million to Chevron's net income (US$8.35 billion). For the whole year, Chevron Indonesia's operations would contribute up to US$2 billion net earnings for Chevron.
It's HUGE! It's just too huge to say that Indonesia's investment climate is not competitive compared to other countries. Where else Chevron could make such a big chunk of profit? Mind you, the above earnings are net because all Chevron's investments would be repaid by government under what popularly known as cost recovery!
So, even if Chevron invests US$500 million a year only to be repaid later by government, the company's US$2 billion profit from Indonesian operation is still too big to raise the question: Has Chevron been honest enough to Indonesian people even to answer the question on why its production declined and let the country in oil deficit that cost so much for poor and ordinary Indonesian for sky-high oil price?
As reported by Tempointeraktif.com in April 2005, Chevron demanded more incentives to boost oil production, called the profit sharing of 10% (90% for government) is not profitable. Chevron argues that it needs better incentives to revive the old wells (300 in Chevron's operating area). It also blamed the declining of production from 750,000 barrel/day to 550,000 bpd on poor incentives. (I think, Chevron enjoys lot more profits at lower production now than in the past!) It's a kind of blessing in disguise. The company's contract at Siak block would be until 2013, while Duri-Minas on 2021. Indonesia has been generous (under pressure, cornered, or fooled around) enough to extend the contracts five years before their maturity.
Writing in progress...

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Wednesday, September 13, 2006

30 Pro bono paranormals failed to stop the mudflow!

100 Days passed since the first mudflow at Banjar Panji-1 well, Sidoarjo, East Java. President Susilo Bambang Yudhoyono just issued the decree to establish a team to tackle the environmental disaster. In a related development, a team of 30-plus paranormals have performed rituals to stop the mudflow but failed. They perform the superstitious rituals on pro bono basis, separated from 40-plus paranormals who competes for a US$9,000 grand prize provided by local village chief.


"The team has a duty to take integrated operational steps to overcome the blowout, including to shut the blowout, to handle mud flow and to handle social issues," the decree said as reported by Reuters on Tuesday.
Energy Minister Purnomo Yusgiantoro will head the team that will include the public work, maritime and environment ministers, as well as top local government officials in the province.
I though the cabinet is a team so there is no need to establish a new team like that after 100 days people living dangerously. All we need is decision, to do something!
"Maybe the new team would manage the competition of paranormals as well. The team would likely provide more attractive prizes to assemble the best paranormals in the country," a friend commenting the too-late-team. (Have you notied that Indonesian ambullance cars have the sirene sounds like too-late, too-late, too-late?)
As reported by Antara today, apart from 40-plus paranormals who came from various ethnic groups in the country to perform supranatural mights to stop the mudflow for a US$9,000 grand prize, there were 30 paranormals who came to Sidoarjo and performed their supranatural gifts on pro-bono basis, but formally announced their failures today.
At competition arena, about 25 paranormals failed to pass qualification stage leaving another 20 yet to perform. Registration for the first phase had been closed on Sunday. If none of them managed to stop the mudflow, the organizer would open the second phase registration after the fasting month.

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Tuesday, September 12, 2006

Workers union urge SBY to kick out Sugiharto

State-Ownes Enterprise Workers Union Federation (FSP-BUMN)urge president SBY to kick out Minister Sugiharto for poor performance, Detik.com reported. This would heat-up the internal conflict at the ministry, already divided with competing political groups/motives.

FSP-BUMN said the conclusion was made based on a survey with 10,000 SOE workers as respondents. Go to detik.com story for a complete report.
FSP-BUMN is in legal battle with Sugiharto's camp after Lendo Novo, one of his right-hand men, filed lawsuit against the organization which claimed to have 8 million supporters for defamation. Lendo filed the lawsuit on FSP-BUMN's statement that Lendo's ad hoc team to investigate corruption at SOEs have squeezed BODs and have been selective in eradicating corruption at SOEs.
At the same time, some groups reported MSOE's secretary M. Said Didu for alleged corruption. Didu's supporters consider this move as part of Sugiharto's camp campaign to kick Didu out of the ministry.
In another not-so-unrelated development, yesterday, members of Geram (Anti-Corruption Student Activists Movement) three rotten eggs to Hendarman Supandji, deputy attorney general for special crime. Geram mad at Supandji because he was believed to be the one who set free Eddie Widiono, state-owned electricity company PLN CEO. Widiono, detained for few months, was in a meeting with VP Jusuf Kalla at PLN's headquarter discussing 'crash program' on development of 10,000 MW power plants when Geram throwing the rotten eggs to Supandji.
Supandji himself is under the spotlight following the accusation of Rusdi Tahir, former Jakarta Attorney Chief, that the former regularly intervene the prosecution of corruption cases.

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Monday, September 11, 2006

BNI look for US$150 million funding

State-owned bank PT BNI Tbk is reportedly preparing US$150 million fund raising to refinance its debts. The bank, with total asset of Rp146 trillion as of June, is about to send out request for proposal (RFP) to prospective underwriters/arrangers.

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Saturday, September 09, 2006

ASTRO invest another US$140 million in Indonesia

PT Direct Vision, a JV between Malaysia's Astro and Lippo Group, has invested US$140 million since last month to boost its presence in Indonesia's direct-to-home broadcasting market, Antara news agency reported.

In its first six months of operation, Astro managed to get 30,000 customers with target of 150,000 customers by the year end. In the next five years, Astro plans to boost its investment by US$1 billion with ambitious target of up to 2 million customers.

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The President turns 57, no party!

President Susilo Bambang Yudhoyono is 57 today. The birthday party might have been organized by air crew as he is in the flight to Finland. As reported by Detik.com, State Palace reporters presented him the red roses. "Keep criticize, but constructive," SBY said when he received the birthday present at Halim Perdanakusuma airport before the take-off.

The President is scheduled to visit three countries, Finland, Norway, and Cuba. Accompanying the president are chief economic minister Boediono, coordinating minister for politic/security affairs Widodo AS, energy minister Purnomo Yusgiantoro, trade minister Mari Elka Pangestu, cabinet secretary Sudi Silalahi, and justice/human rights affairs minister Hamid Awaluddin.
In Norway, the president would attend the signing ceremony of cooperation agreement between state-owned oil company PT Pertamina and Norway's Statoil.

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Bumi deal screwed you up?

JSX asked PT Bumi Resources Tbk of whether the announced US$3.25 billion acquisition price of its assets by PT Borneo Lumbung Energi-Renaissance Capital was the final price? JSX raised the question, investors as well, because Bumi called the collapse of the deal mainly due to disagreement on the final acquisition price.
No clear-cut explanation from both Bumi and Renaissance. But let me give you the likely answer.

The purchase consideration of coal companies (KPC, Arutmin & Indocoal) was US$3.25 billion on debt-free basis, subject to further adjustments, which were expected in May (when Credit Suisse launch the US$2.1 billion fund raising) to amount to approximately US$250 million.
So, in many documents, the expected final price was US$3 billion (excluding US$100 million for working capital & transaction costs). That was early May. Financing plan was then based on the US$3.1 billion cost. The source of funds: US$1 billion of equity from Borneo (consisted of US$300 million plus US$700 million of Borneo Notes issued to UOB) and US$2.1 billion debt to be raised by Credit Suisse (consisted of US$1.1 billion senior notes and US$500 million junior notes).
So, some people (mainly advisors & lenders/investors in Credit Suisse deal) have been aware of the US$3 billion price (max) to be paid to Bumi shareholders. Borneo was reportedly deposited nonrefundable US$120 million down-payment (even though recently Bumi announced the fund would be returned to Borneo).
Under the SPA between Bumi & Borneo, Bumi was also obliged to repay all outstanding indebtedness owed by the coal companies and part of purchase consideration will be used by Bumi to discharge loans owed by Bumi to each of Mitsubishi, Glencore, and PAMA.
And for the transferred rights and obligations, novation was needed of marketing advisory contracts with Mitsubishi & Glencore and consulting deed with PAMA. Condition precedents were: (1) shareholders' approval (obtained in May 17), (2) consents required under the CCOWs or from relevant Indonesian government bodies, and (3) no events of defaults under existing financing documents.
But later of the month, investors got information that buyer was expecting final price of US$2.7 billion to US$2.8 billion which equals to US$400 million to US$500 million adjustment from the purchase consideration. Why? The buyer seems realized the real value of coal assets were not as high as expected combined with difficulties to raise enough funds in the equity capital side.
The expected closing period of the deal failed to materialize in late June as a result. In that month, director general of coal of the energy ministry sent a letter of default on royalties payment at KPC. Tax office is also reportedly sent two warning letters to KPC on unpaid taxes amount to US$40 million. The stories on Bumi's EBITDA for first half below analyst expectations also put more pressure on buyer, lender, and investors. In May, Credit Suisse told investors (when it launch US$2.1 billion financing) that estimated EBITDA for coal companies in 2006 at US$583 million. But in July, investors got the information of well-below epectations EBITDA of only US$118 million at KPC and Arutmin.
Confronting all the problems, the buyer (under pressure from potential lenders) cut further the price offered to unknown exact figure even though some says at US$2.5 billion as the final price (after the adjustments). Some even says at US$2.2 billion to US$2.3 billion.
Apart of the deal, Bumi announced various initiatives including its claim to work with South Africa's SASOL to develop a multi-years-multi-billion dollar coal-to-liquid (CTL) business only to face SASOL's denial.

To be followed...

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Friday, September 08, 2006

The Richest 'Refugees'

Do you know where the richest Indonesians live? Most of them live in Singapore, Hong Kong or Shanghai. They are active residents in these countries. They come to Indonesia only on VIP invitations, to meet the president, vice president, ministers or governors. Why? Is it because they're not comfortable with the living condition here, the country that gave them most of the fortunes?

Wait a minute! Some of the richests in Forbes list have left the country as fugitives even though overseas travel ban were installed and became permanent residents in other countries. Government made announcements when imposing travel ban on these guys, but silently lifted the ban. Last year, a conglomerate sent 10 men to my office asking the newspaper to make correction on a story that the guy was still in the fugitive list. The reporter knew the conglomerate was on the list when he wrote the story, but somehow the police had wiped his name from the list.
Some managed to pass the travel ban on prosecutor's permit for medical treatment and never came back, enjoy shopping spree at the country next door.
Some left the country to be senior citizens (because they're really old) in the new country and self-proclaimed global citizens.

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Thursday, September 07, 2006

Bumi suspension in all market lifted, where to go?

JSX has lifted the trading suspension on PT Bumi Resources Tbk shares in all markets starting Friday, Sept 8. Bumi shares trading has been resumed on negotiation market today with price range of Rp700-720 on thin trading volume, reduced 7% from the price before suspension imposed late last month (Rp750) following the collapse of US$3.2 billion divestment of its coal mine assets. Where Bumi shares price would go at regular market trading?

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Wednesday, September 06, 2006

Inco & Phelps Dodge cancel the merger

Nickel giant Inco Ltd and Phelps Dodge agree to terminate the
Combination Agreement the parties entered into on June 25, 2006. Inco also
announced that it has cancelled the special meeting of Inco shareholders
called for September 7, 2006.


PT Inco Tbk, a subsidiary of Inco Ltd, with shares floating at Jakarta Stock Exchange (JSX). Inco shares price closed higher 4% on Wednesday trading at Rp23,050 or market capitalization of US$2.5 billion. Inco Ltd is the largest shareholder with 60.8%, followed by Sumitomo Metal Mining 20.09%.
According to Inco's statement to Toronto Stock Exchange on Wednesday, Sept 5, Inco will pay Phelps Dodge a termination fee of US$125 million today and a further US$350 million if Inco consummates an alternative take-over bid or similar transaction on or prior to September 7, 2007. Inco would have paid
these same amounts had the agreement been terminated after Inco shareholders
failed to approve the Phelps Dodge transaction at the special meeting.
Scott Hand, Chairman and Chief Executive Officer of Inco, stated: “It was
very clear from the proxies we received that Inco shareholders were not
going to support the Phelps Dodge transaction, so the two companies agreed
that it was in our respective best interests to move on.”
Following the termination of the Combination Agreement, Inco is no longer
restricted in its ability to solicit acquisition proposals from, provide
confidential information to or enter into negotiations or agreements with
interested parties concerning potential value enhancing alternatives. The
Board has authorized Inco’s senior management and its advisors to explore
these alternatives consistent with the company’s commitment to maximize
value to Inco shareholders. Inco also continues to be open to entering into
discussions or negotiations with Companhia do Vale Rio Doce (CVRD) with
regard to its offer of August 14, 2006.
Brazil's CVRD US$17.5 billion in cash for Inco while the merger value was predicted at US$17.7 billion.

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Rio Tinto's Lasamphala nickel project facing delay

Rio Tinto's US$1 billion nickel project in Lasamphala, Central Sulawesi is facing another delay as government agencies failed to settle the concession area and tax issue.

Simon Felix Sembiring, director general of Mineral, Coal & Geothermal at Energy Ministry confirmed the possible delay of working contract scheduled for signing this month.
"Rio Tinto is asking for guarantee that the concession area would not be converted into conservation forest. They want the guarantee is inserted in the contract but forestry ministry rejected that," he is quoted by Detik.com on Wednesday.
The government will charge a royalty of 3% of sales. Rio Tinto is planning to invest $1 billion in the nickel mine. With the new investment, the world's third largest mining company is expected to produce 46,000 metric tons of nickel and employ about 5,000 workers.
The Lasamphala mine is located on the border between Central and Southeast Sulawesi provinces.
Rio Tinto applied for the contract in 1999, but the application process slowed down when Indonesia's central government started to transfer various decision-making powers to regional authorities.
French-based company Eramet had also announced its plan to invest US$1.5 billion in developing nickel project in Moluccas Island.
The world demand for nickel is growing, driven by the market for stainless steel, which accounts for 54% of nickel consumption in the USA and more than 60% in other countries.
Nickel prices have increased tremendously in the last few years and that has led to many new exploration projects around the world. Nickel price increased from around US$7,000/ton in early 2004 to US$12,000/ton recently. Prices peaked at a 14-year high of $17,700 a ton in January 2006.
PT Inco Tbk is the largest nickel producer in the country.

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40 Soothsayers compete to stop Lapindo mudflow

At least 40 soothsayers, witches, magicians, and sorcerers from various ethnics in the country have registered to compete in stopping the mudflow at Lapindo Brantas Inc's Sidoarjo, East Java operation with grand prize of 36-square meters home worth around US$9,000, Detik.com reported.

Hasan, Kedungbendo Village Chief, said the participants came from Bandung in West Java and as far as Flores Island, East Nusa Tenggara. Since too many participants registered, Hasan as the coordinator of the competition (stop the mudflow in one month operation instead of almost a year technology approach implemented by Lapindo) said all of them should pass qualification round first. In that stage, participants should proof that they could turn-off waterflow from far away without touching the shut-off valves.

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Watchout Bumi repo market!

Suppose that Bumi Resources share price would drop after JSX lifted the trading suspension tomorrow. What will happen to Bumi repo market? There are probably trillions of rupiah worth of repo on Bumi shares in the hands of local investors.

By definition, the repo market is one in which two participants agree that one will sell securities to another and make a commitment to repurchase equivalent securities on a future specified date, or on call, at a specified price. In effect, it is a way of borrowing or lending stock for cash, with the stock serving as collateral.
"There are lots of local investors holding repo on Bumi shares. I think the worth could be trillions of rupiah," said one executive at local brokerage firm.
Risk in repo market arises mainly from volatility in the value of the collateral, in this case Bumi shares volatility.
The fall of Bumi shares would make repo holders not safe anymore and need more shares as collateral.

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Suspension lifted, Bumi trading on negotiable market only

JSX finally lifted the trading suspension on PT Bumi Resources Tbk shares imposed on August 24 following the collapse of US$3.2 billion deal with PT Borneo Lumbung Energi. But the trading to be resumed on Thursday, September 7, would be limited on negotiable market, a move that could prevent the free fall of Bumi shares.

Sources at local investment banks said there are investors who offered to buy Bumi shares at Rp680, 10% lower than the price before the suspension imposed at Rp750.
JSX stated today that the lifting of trading suspension at regular and cash market would be announced later on.

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Tuesday, September 05, 2006

Energi spin-off Lapindo to Bakrie Group

As reported earlier, PT Energi Mega Persada Tbk confirmed the plan to spin-off Lapindo Brantas Inc which is currently at the center of an unstoppable hot mudflow in Porong, East Java, to Bakrie Group.

Finance director of Energi Yuli Soedargo stated in a press release to Detik.com that the divestment "would hopefully help Energi maintain its healthy operation and financial performance."
Energi share price had dropped almost 24% since the first eruption of mud at Lapindo's Banjar Panji-1 drilling well in May 29 and no sign of immediate end to the disaster that forced thousands of people left their homes vacant (covered by mud), thousands lost their jobs, and cost the company millions of US dollar. Several of the company's executives, contractors, and sub-contractors involved in the drilling activity have been named suspects by East Java police for environmental pollution case. Gov't had asked Bakrie family to take full responsibility in handling the disaster despite calls to have government share the burdens.
Under the spin-off plan, Energi would divest Kalila Energy Ltd and Pan Asia Enterprise (both registered in Hong Kong) which co-own 99% shares at Lapindo Brantas Inc. Lapindo Brantas is the operator of Brantas PSC (50% participating interest) with Medco Energi and Santos held 32% and 18% respectively.
No details available on how much Bakrie Group would pay the two companies. Neither available the impact on Energi's portfolio considering Brantas PSC's contribution in the past.
The spin-off plan, while criticized by many of washing-hands operation, would pave the way for Energi's plan to merge with PT Bumi Resources Tbk. Bumi itself is struggling to convince investors about its future after the collapse of US$3.2 billion divestment of coal mines assets (PT Kaltim Prima Coal, PT Arutmin Indonesia, and Indocoal). Bumi is scheduled to have analyst meeting on Wednesday to explain its financial performance in first half which some says below expectations. Earlier reports said Bumi's EBITDA for first half 2006 was only US$104 million. The company has been rumored of recorded net loss of US$1 million in the period. But others says Bumi would come up with more promising figures in the analyst meeting today.

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Wider cracks at Democratic Party

The cracks at Democratic Party led by Hadi Utomo, president Susilo Bambang Yudhoyono's brother-in-law, is getting wider with the recent internal friction at Banten province branch ahead of gubernatorial race schedule in November.

But Hadi denied the cracks and told Antara news agency that the nomination of Banten governor candidate has nothing to do with internal friction in the party that helped SBY to a unanimous victory in 2004 presidential election.
Central Board of Democratic Party had dismissed Usamah Hisyam, a former journalist, as the party's Banten branch chairman accusing Hisyam of violating the party's policy on Banten gubernatorial race.
Hisyam nominated himself as the party's candidate for the race while the central board tend to support Irsyad Djuweli, a Golkar Party cadre who also secured support from PPP (Islamic party). Hisyam rejected to pull out from the race and registered his candidacy on Saturday.
Two candidates have secured their respective parties support. They are Ratu Atut Chosiyah (Golkar & PDI-P) and Zulkiefliemansyah (PKS).
Read my previous articles:
1) Banten Governor Candidate (1): Ratu Atut

2) Banten Governor Candidate (2): Zulkiefliemansyah

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The Richest Indonesians & The Ironies

What a coincidence! Out there, Dow Jones quoted Forbes Asia's rich list, naming Sukanto Tanoto (owner of Raja Garuda Mas/RGM) as its Indonesia richest. At home, newspapers quoted SOE Minister Sugiharto pledge his support for state bank PT Bank Mandiri Tbk to take legal action toward recalcitrant debtors. Mandiri had named RGM as one of the debtors with no good faith.

While it's difficult to verify the exact figures, Sukanto's wealth according to Forbes reached US$2.8 billion, well above Putera Sampoerna (2.1), Eka Tjipta Widjaja (2), Rahman Halim (1.8) or R. Budi Hartono (1.4) and Aburizal Bakrie (1.2). In the previous list, Forbes named Halim as Indonesia's wealthiest while Sukanto was not even in the top five list. Wondering how the Forbes list has changed so significantly in the last few months.
Detik.com reported Sukanto is still in the police's fugitive list. But I'm not sure whether he is listed there still.
It's true that Sukanto once named a fugitive. His name also linked closely with Unibank which was closed down in 2001 but none held responsible for third party liabilities in the bank. The case isn't closed yet.
Sukanto's wealth mainly derived from palm oil business. He has pulp & paper empire, and recently oil and gas as well.
Surprisingly, no Sjamsul Nursalim in the top 10 list. Riady family, Tommy Winata, and Mum'in Ali Gunawan are out of top 10 as well. Riady family is partnering with Forbes for Indonesian edition, scheduled early next year.
Like it or not, agree or disagree, Forbes list could help Indonesia's tax officers chasing their tax payments or Bank Mandiri's bargaining position on bad loans. The list also useful for politicians, regent, governor candidates, or hopeful president candidates.
If you follow years of Forbes’ rich list, there is no significant change on the names of Indonesian richest. The difference is only on the amount of wealth & the rankings. The wealthy Indonesians could be categorized in several groups based on how they got their fortunes.
First, cigarette groups. We have Sampoerna family (even though they sold out the cigarette business to Phillip Morris), Wonowijoyo (Gudang Garam), Hartono (Djarum), and Peter Sondakh (Bentoel).
Second, forestry & plantation groups. We have Eka Tjipta Wijaya family (Sinar Mas Group), Sukanto Tanoto (Raja Garuda Mas), & Prajogo Pangestu (Barito).
Third, consumer goods. We have Salim and Wings Group.
Fourth, energy & engineering groups. We have Bakrie family, Panigoro (Medco), Kris Wiluan (Citra).
Fifth, property group. In this group we have Tan Kian (Dua Mutiara), Haliman Trihatma (Podomoro), Tommy Winata-Sugianto Kusuma (Artha Graha), Riady Family (Lippo).
Sixth, manufacturing. In this group we have Nursalim (Gajah Tunggal) for example.
So, mainly they got the fortunes from Indonesia’s rich & cheap resources (natural & human).
While most of these groups have expanded overseas (mainly China, India, or Brazil), Indonesian operations are still their main source of wealth. Most of these conglomerates were hurt by financial crisis, with the exception of cigarette groups.
But they have recovered in the last few years, thanks to the generosity of Indonesian people, the taxpayers. The state bailed out their bad debts. Some surrendered assets, but others managed to escape the financial responsibility easily.
Salim Group, for example, surrendered assets in 107 companies to pay around Rp56 trillion (US$6 billion) debt following the turmoil at Bank Central Asia (BCA). Government sold almost all the pledged assets with recovery rate of around 35%. Nursalim also did the same to pay his Rp28 trillion (US$3 billion) debt, with lower recovery rate.
Government also spent almost US$2 billion to bail out Bank International Indonesia (previously owned by Eka Tjipta’s Sinar Mas, currently controlled by Temasek).
That’s why there is almost no significant change in names listed in Forbes, the latest edition and in 1990s. The fact that Sukanto & Eka Tjipta are listed as number one and third in the ranking sparked criticism about how they created the wealth.
Both Sukanto & Eka Tjipta have strong pulp/paper & plantation (mainly crude palm oil) businesses through APRIL (RGM) Holdings & Asia Pulp & Paper (APP) respectively. Both groups have been the subject of continues allegation of environmental groups over massive deforestation in Sumatra Island.
WWF report few months ago 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.
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. 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.
One NGO leader wrote cynically in Indonesian media recently that if you want to be rich, do the forestry business in Indonesia like Sukanto & Eka Tjipta. Other names listed in the Forbes report also have been regularly accused of various illegal practices such as fraud on reforestation funds or involvement in drugs & narcotics trading, gambling operation, or fishy deals with government and the military. But none of them convicted or worse various interest groups make huge chunk of money from the allegations on these richest men.

/Named a Suspect/
Apart of environmental concerns, the Forbes report has also been responded by Indonesia’s largest lender (by asset), Bank Mandiri, which happens to be the largest lender to Sukanto’s RGM. The bank has, several times, classified RGM as the debtor without good faith in settlement of almost US$500 million debts. Mandiri demands an increase in debt installment following the huge jump in pulp prices worldwide.
The day Forbes announced the rich-list, Indonesian minister for state-owned enterprises (Mandiri’s shareholder) pledged his support for Mandiri’s plan to take legal action against recalcitrant debtors, especially RGM. RGM denied all the charges arguing it follows the debt restructuring agreed upon few years ago.
A director at Mandiri was quoted by Indonesian newspapers saying, “You may rich, but pay your debts,” responding the list.
But it’s the police who surprised many when it announced the plan to reopen the investigation on Sukanto, not for the alleged environmental crime or his debts at Mandiri, but on a suspected banking crime that almost untouched in five years.
Just days after Forbes published the list, Indonesian police announced that it has resumed the investigation on Sukanto, named a suspect in a banking crime few years ago. Police declared that the case, involving Unibank---a bank initially owned/controlled by Sukanto and his wife Tinah Bingei, has been reopened after five years of almost no significant progress in investigation despite the fact that Sukanto had been named a suspect.
Unibank was closed down in 2001 leaving the state paying all third party liabilities (Rp3.9 trillion, almost US$400 million) with no shareholders held responsible. Sukanto was named a suspect on irregularities of export L/C worth US$230 million.
"Based on a meeting between Police Chief and Attorney General in August 2006, Sukanto's case has to be reopened and his status is still as suspect. The case is being handled by police team for corruption crime (Tipikor)," Paulus Purwoko, chief of public relations division at National Police Headquarter as reported by Indonesian media.
The sudden announcement failed to surprise the media at the time of eroding trust on the country’s campaign to fight corruption. Many raised the question, would the police be serious this time? Why the police reopen the case after so long? Could this be just part of ‘political’ game?
"Whatever the results might be, the reopening of the case has made Sukanto, well-known for his generosity overseas, shivering," a journalist from respected magazine commented the move. So far, police has not confirmed yet on when they would summon Sukanto for investigation.
The fellow journalist mentioned about Singapore-INSEAD's Tanoto Library or Carnegie Mellon's Tanoto Professorship. The owner of Raja Garuda Mas (RGM) also established Tanoto Foundation, which provide scholarships.
It’s not about his donations that make people doubt the investigation, but mainly the power politics in the country’s corrupt-legal system. Police might finalize the investigation, but state prosecutors may drop the case like what’s happened with the recent corruption allegation on Eddie Widiono (state-owned electricity company PLN).
Other intriguing issue is the unavailability of legal cooperation between Indonesia and Singapore. While Sukanto normally come to Indonesia, he stays in Singapore. “The problem, we have no bilateral agreement on this,” sighed the deputy attorney general Basrief Arief, who is also the Chief of Corruptors Hunting Team.
Besides, the five-year time lag since the Unibank’s closure in October 2001 is critical especially when it comes to witnesses. That’s why Attorney General’s Office said they would start the investigation all over again. This is clearly a big test for the country’s tattered image on corruption eradication campaign. Without serious efforts to end bad governance in Indonesian business, we can’t expect a cleaner sheet in the future rich lists.

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Monday, September 04, 2006

Farallon-Rajawali to acquire Bumi assets?

PT Bumi Resources Tbk is reportedly engaged in a negotiation with a new alliance of a global fund manager & Indonesian conglomerate to replace PT Borneo Lumbung Energi as the buyer of its assets (PT Kaltim Prima Coal, PT Arutmin Indonesia, and PT Indocoal) with financial back-up from Credit Suisse.

Rumors in the investment bankers circle said Farallon Capital is reportedly the global fund manager, while the Indonesian group is Rajawali Corporation. Both companies---allied in the acquisition of Cemex SA shares at PT Semen Gresik---denied the rumor.
"They are working together to try to do that. But I don't think they will succeed...," an investment banker in Singapore said. He said JP Morgan, which also involved in the Cemex deal, approached Farallon-Rajawali. JP Morgan, an advisor for Bumi in the collapsed US$3.2 billion deal with Borneo, also denied the negotiation and rumor of the close relationship between JP Morgan and Farallon Capital.
JP Morgan helped Willow Finance (a vehicle owned by Bakrie family) in the issuance of US$205 million facility linked with Willow's shares in Bumi, exchangeable at Rp500/share. Farallon was the key financier for Bakrie family when they bought KPC from Rio Tinto through Merrill Lynch. Farallon also lent huge amount of money to Berau Coal investors when they bought the company from Astra.
Why doubt?
"It's too big even for them. They also don't have the operational expertise in coal mines. Besides, they already bussy with very ambitious goals for the company they just bought recently," he said.
Are they interested in buying minority stakes?
"No I doubt. These guys are only interested in if they can take the whole thing."
So, I other friends-analyst about Rajawali's chance.
"Where you got the information from? Let me check. But from what I read in the newspaper, with EBITDA below US$300 million in the first half, the assets would have low price. I don't think Bumi would proceed with the divestment."
Well, the poor EBITDA news is considered by some as the door to wage a hostile takeover. (By whom?)
What if Bumi cut the price?
"I think Bumi won't do that because it will send negative sentiment to the company's shares. Even if they do that Borneo has the biggest chance because the deadline for their the sales and purchase agreement (SPA) actually by the end of this month."
How serious? Could it be just part of efforts to boost market sentiment ahead of JSX's plan to lift the suspension on Bumi shares trading? Or to save the hedge funds who bought Willow Finance EB?
But, hostile takeover?
"I think, the Bakrie family is vulnerable to investors. If Bumi shares plunge, it would make sense for Willow bondholders to exchange into shares...sensing that, I wouldn't be surprised if the family is becoming defensive. I know some people out there would resort to hostile measures," said a senior analyst.
Tired or bored with the issue, go to Porong, Sidoarjo, enjoy the hot mud treatment there! They have new entertainment there...mud wrestling!

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GSIC boost ownership at Budi Acid

Government of Singapore Investment Company (GSIC) acquired 120 million shares of PT Budi Acid Jaya Tbk last week to boost its ownership to 19.21%.

According to Standard Chartered report to Bapepam (Indonesia's SEC) today, with the additional purchase, GSIC currently owns 236 million shares of Budi Acid. Budi Acid shares were traded at Rp105 last week.
The company is engaged in the production of tapioca & its derivatives such as glucose, fructose, and mono sodium glutamate (MSG.

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People on the move

State-owned pharmaceutical company PT Indofarma Tbk appointed M. Syamsul Arifin as CEO replacing Danny Pratomo. Mr Arifin is former finance director at PT Kimia Farma Tbk (also a SOE).

Ahmad Fuad Afdhal and Rhenald Khasali were also replaced as commissioners at Indofarma.
Meanwhile PT Excelcomindo Pratama Tbk has appointed Hasnul Suhaimi, former PT Indosat Tbk, as the new CEO. Bisnis Indonesia reported Evan Ball has been replaced as managing director of PT Kaltim Prima Coal, a subsidiary of PT Bumi Resources Tbk. Mr Ball is replaced by Mr Endang Ruchijat, previously former managing director at PT Arutmin Indonesia, also a subsidiary of Bumi Resources.

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Sunday, September 03, 2006

Lapindo Stop The Mudflow Contest: Win US$9,000!

Kompas newspaper run a headline on Sunday about Village Chief/Housing Complex Developer who initiate a contest to stop the mudflow from Lapindo Brantas Inc's oil/gas drilling. The newspaper called it an expression of desperation. The winner could get US$9,000 (not in cash, but a US$9,000-worth house) as long as he/she could stop the mudflow in one day operation! Superstitious? Could be. But who knows that would be a world's best practice for oil/gas disaster management?

Meanwhile The Jakarta Post's headline, also on Sunday, tells us another hillarious twist to the continuing mudflow. The Post reported a local TV station claims Lapindo Brantas Inc had agreed to pay for a 13-episode soap opera (we call it sinetron) titled Gali Lubang Tutup Lubang (Digging a hole, Filling a Hole).
East Java station Jawa Post Televisi (JTV) executive producer Awi Setiawan said all production costs (Rp520 million or almost US$49,000) would be covered by Lapindo. But Lapindo denied.
Let me combine the two stories to be like this...Lapindo would pay the 54-episode TV series about the mudflow, in which 53 episodes about the failed attempts (high technology) and the last episode about someone who managed to stop the mudflow with less than one day of superstitious operation!

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Saturday, September 02, 2006

Gov't ordered to annul coal export tax

Supreme Court has ordered government to annul the 5% coal export tax, newspapers reported today.

Government is also ordered to return the collected tax to coal exporters, Kompas daily quoted the Supreme Court verdict in August 22 on petition filed by Indonesian Coal Mining Association (ICMA) over Minister of Finance decree No. 95 and No. 131/2005. Government imposed 5% tax on coal export since late last year amid protest from coal producers. Indonesia's coal export is predicted well above 100 million tones this year.

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Friday, September 01, 2006

Export growth 16.42%, manufacturing the weakest

Indonesia recorded total export of US$55.77 billion in January-July 2006, grew 16.42% from the same period last year, thanks to higher commodity (oil, gas, coal & agriculture products) price.

According to the latest report from Central Bureau of Statistics (BPS), manufacture products only posted 13.78% growth while its contribution to the total export is 64.64%. Oil & gas export growth was 19.19% with mining products the highest growth of 29.36%. Agriculture products booked a healthy 17.24% growth thanks to 63.8% export growth of rubber and articles, followed by 15% growth in vegetable oil.
Coal export grew almost 42% in the period.
Manufacturing sector deserved serious attention due to its huge contribution in employment, especially in urban areas. Export of products under HS 85 (Electrical Machinery, Sound Recorders, Television Image), for example, decreased 0.5% while HS 84 (mechanical machinery) down 11.9% and organic chemical slipped 6%. Textile and apparels surprisingly recorded 9.6% growth in Jan-Jul, but decreased 12.7% in Jul against June.
Like the previous reports, my other concern is the oil and gas trade balance. In the Jan-Jul period, Indonesia booked net surplus of US$1.647 billion in oil and gas trading, almost double from US$981 million in the same period last year. But the refined oil products deficit has grown from US$4.1 billion to US$4.74 billion in Jan-Jul 2006.
Increasing domestic demand for fuel amid relatively no additional refining capacity would boost significanty the import and cut further the oil & gas surplus (mainly contributed by natural gas export).

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Steel giants compete for Krakatau project

Giant steelmakers such as Essar Ltd and Ispat from India, Sino Steel & China Metallurgical Construction (CMC) from China, and Trans Asia International (Uzbekistan) are competing to be investment partner of Indonesia's largest steel manufacturer PT Krakatau Steel in a US$120 million steel pellet & pig iron project.
The project is slated to start commercial operation by 2008

These giants are competing with 15 local investors in the project, slated to start commercial operation by 2008 to produce 1 million t/y of steel pellet and 300,000 t/y of pig iron. The plants would be built in South Kalimantan.
Read my previous posts for background:
1) Krakatau drops HRC project

2) Krakatau Steel profit drop 42%

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Lapindo disaster: Check out the weather report!

The Jakarta Post published a photo in its Today's front page of State Minister for the Environment Rachmat Witoelar pours processed mud into the frame of a building under construction at Porong market, Sidoarjo, East Java. The minister said the mud from Lapindo Brantas Inc's oil and gas operation was safe and ready for use as building material after undergoing treatment to remove toxins.

So, the mud is an alternative for property developers and considering its huge volume it pose a threat to cement makers, especially to PT Semen Gresik Tbk, the market leader in the area. He3.
Other business venture is SPA-like hot mud treatment to be campaigned very soon as the largest SPA in the world. No Kidding!
Kompas reported today PT Jasa Marga's plan to relocate the Surabaya-Gempol turnpike after series of mudflow attack on the major transportation infrastructure. It means the state-owned toll operator would have to build new road as thousands of companies complained of heavy traffic that cost them additional expenses for transporting export goods to seaport.
The largest business opportunity might be the wastewater treatment. President SBY and Mr Rachmat have agreed to dispose the wastewater to river or sea only after being treated at wastewater treatment facilities to make sure the liquid would be free of any toxic substances. I have no idea how many such facilities needed to process millions of cubic meter of mud in the area. But I'm sure it's huge.
Housing rent business might flourishing as more than 10,000 residents have been forced to leave their houses. They get Rp300,000 per month of meal compensation.
But all of these calculations would collapse if rain comes earlier than predicted. Mr Rachmat said the disposal (of mudflow to the sea) might begin in six months' time after the construction of wastewater treatment and dams around the gas drilling site were completed. Check out the weather channel. I'm afraid the rainy season is coming and that would cause more environmental damage. The cost of the damage would well above US$1 billion as estimated by environmentalist. Who will bear the costs?

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