POSCO acquires PT ISI from Selamat Sempurna

Pohang Steel Co acquires 65% shares in PT International Steel Indonesia from PT Selamat Sempurna, Mr Naam Han Woo, and Daewoo International Corporation.

PT International Steel Indonesia (ISI) is currently controlled by PT Selamat Sempurna, a manufacturer of automotive parts, with 40%, while Daewoo 51% and Mr Nam Han Woo 9%. After the acquisition, Selamat's ownership will decline to 15%, while Daewoo will drop to 20%. 

Selamat Sempurna is a member of ADR Group. POSCO, meanwhile, has just signed a cooperation agreement with PT Krakatau Steel (KS) to build an integrated steel plant with ultimate capacity of 7 million tons per annum and investment of US$6 billion in Banten province.The first stage of the project will produce 3 million tons of steel and is scheduled to start commercial production in 2013.

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Latinusa offers 20% shares

PT Pelat Timah Nusantara (Latinusa), a subsidiary of state-owned steel giant PT Krakatau Steel, is offering 20% of its issued shares to public investors. The IPO will be followed with divestment of Krakatau's majority shareholding to Japanese companies. 

According to Latinusa's prospectus published this morning, Krakatau Steel, which currently controls 93.87% shares in Latinusa, will offload 55% shares to a consortium of Nippon Steel Corporation, Nippon Steel Trading Co Ltd, Mitsui & Co Ltd, and Metal One Corporation. That means, Krakatau will retain 20% shareholding in Latinusa after the IPO, while PT Baruna Inti Lestari will have 4%.

According to the sale and purchase agreement (SPA) dated November 11, the Nippon Steel-led consortium agreed to pay US$59.95 million for 55% shares in Latinusa, valuing the company at US$108 million. Using the current rate, the Japanese consortium pays Rp383 per share. If the 20% shares offered to public use the same price, Latinusa could generate Rp193 billion from the IPO.

State-owned investment bank Bahana Securities is the underwriter of the IPO with scheduled listing on Indonesia Stock Exchange (IDX) in December 14, 2009.

Latinusa is the biggest tinplate producer in Indonesia with sales volume of 111,400 tons last year or 57.5% market share. Latinusa reported net sales revenue of Rp1.467 trillion last year and net profit of Rp72.7 billion.

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Mittal’s USD1.5 billion investments

Started out his steel business by setting up PT Ispat Indo in Surabaya, East Java 23 years ago, ML Mittal’s Arcelor Mittal (an amalgamation of Arcelor & Mittal) is currently the No.1 steel producer in the world with combined production capacity of 130 million tones, represent 10% of world's capacity. Now, he is planning significant investment in Indonesia up to USD1.5 billion in the next five years.


Mittal executive told the press about the investment after a meeting with VP Jusuf Kalla, who is in a state visit to India. Mittal is not alone. Tata Group and Essar also pledged similar interests to invest in the country’s ailing steel industry. While Mittal knows well the country, there is no guarantee that he would definitely invest USD1.5 billion here. In the next two months they’ll collect data to be followed by feasibility study (few months), and by June the giant will make the final decision.
Nine years ago, Mittal rocked Indonesian politic when Tanri Abeng (that time minister for state-owned enterprises under Soeharto & BJ Habibie administration) quietly signed a MoU to sell 51% shares of PT Krakatau Steel, Indonesia’s largest steel producer to Ispat. But Tanri faced strong opposition from the state-owned steel company’s board of commissioners, directors, and workers union.
As reported by Financial Times in June 1998, Soeharto administration had already agreed to sell 51% of Krakatau Steel to Ispat as early as May 7, two weeks before Soeharto’s downfall for around USD400 million without seeking additional bids.
Pressures mounted toward Tanri to cancel the deal. Tanri, a long-time friend of Mr Mittal, defended his decision saying, “As the shareholder’s representative, I have every rights to do that.”
But with the downfall of Soeharto, the deal was cancelled accordingly. Tanri is survived. He is the president commissioner of PT Telkom Tbk, lot healthier than Krakatau, and one of key supporters of Kalla.
There is huge difference between Ispat & Krakatau Steel in nine years time. Ispat/Mittal has become No.1 in the world, while Krakatau only No.1 in Indonesia with stagnant 2 million tones/year of capacity.
Now, both companies are on expansion mood. I don’t need to put a note on Mittal’s worldwide expansion. But Krakatau has several major projects to come. The largest is an iron ore plant to be built in Kalimantan with USD450 million investments. The company has signed a MOU with Al Tuwairqi, Saudi Arabia for the project last year during MSOE Sugiharto’s road show to Middle Eastern countries.
Are these guys, Al Tuwairqi & Mittal, looking from the same project with Krakatau Steel with different entry gates?
No idea. But the most important thing, they could really invest such big amount to create more jobs and strengthen our industrial structure.

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Krakatau to build new power plant

PT Krakatau Daya Listrik, a subsidiary of steel manufacturer PT Krakatau Steel, is expanding its power generating capacity with a new coal-fired power plant (300 MW capacity) which may cost around USD300 million.

Amir Sambodo, president commissioner of Krakatau Steel told me this morning that the new power plant will be coal-fired to meet increasing demand as the group expand facilities.
"KDL operates 400 MW gas-fired power plant at the moment. The new plant will be 2x150 MW," he said.
Krakatau wants the new plant will be built with BOT scheme. "We're hoping to accomplish the pre-qualification bidding before the end of this quarter," he said.
Krakatau has several corporate actions this year. The pipe manufacturer subsidiary PT KHI Pipe will enter stock market with IPO of up to 30% shares next quarter. "We're conducting beauty contest to select financial advisors for KHI Pipe," he said.
Most of the funds raised through that IPO will be used to finance capacity expansion.
Another subsidiary, tinplate manufacturer PT Latinusa, is looking for strategic partner to buy 10% of its shares before it launch IPO next year.

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Latinusa IPO next year

PT Latinusa, a subsidiary of state-owned steel producer PT Krakatau Steel, is scheduled for IPO to raise Rp300 billion next year. Latinusa is a tin plate producer with installed capacity of 130,000 t/y. The money raised from IPO would be used to expand tin plate capacity to 160,000 t/y.

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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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Banten gubernatorial race

Hold your breath for the Jakarta gubernatorial race which is a year away. Let's talk about the breathtaking race in the newly established Banten province at the western tip of Java island only weeks away. Who are the candidates?

Three pairs to contest:
First, Rt Atut Chosiyah (Golkar) endorsed by PDI-P as governor candidate. She won the PDI-P Banten chapter convention, beating PDI-P's own cadre and popular artist Mrs Marissa Haque (PDI-P legislator). Mrs Atut also won Golkar Party's convention in Banten to make her the front runner in the election.
Second, Dr Zulkieflimansyah (legislator from PKS). His running mate is Mrs Marissa Haque (PDI-P).
Third, Tubagus Iman Aryadi (Golkar executive), endorsed by president SBY's Partai Demokrat.
The election is worth attention as Banten is the stronghold of Golkar party which won the 2004 election with 16 seats at the local legislative (DPRD), followed by PDI-P (12), PKS (11), Partai Demokrat (8), and PPP (8).
Banten is the home of many multinational investments. Cilegon regency is the largest center of chemical industry in Indonesia. Mitsubishi Chemical, for example, operates the largest purified therepthalic acid (PTA) plants of South East Asia in Cilegon regency. Chandra Asri (olefin center), Titan's PENI (polyethylene), Tri Polyta (polypropylene), Asahi Chemical's EDC to PVC plants, Cabot's carbon black, Amoco Mitsui's PTA plant, Polyprima's PTA plant, Polychem's glycol, Bayer MaterialScience, etc. Cilegon is also the steel-related industry center with the largest steel manufacturer PT Krakatau Steel and Australia's BHP Steel facilities there.
The much-talked-about Bojonegara port is also there with efforts to make it a special economic zone (SEZ). The Merak port is main access linking Java and Sumatra islands.
Banten raised public's attention on social issues when Tangerang, Banten's most populous municipality, under the spotlight after the issuance of a controversial bylaw to eradicate prostitution in 2005. Bylaw No. 8/2005 bans people in public places, places visible from the street or in red-light districts, from persuading or coercing, either through words or gestures, others into acts of prostitution.
The municipality's council also promulgated bylaw No. 7/2005 which bans the distribution and the sale of alcoholic drinks, except in three to five-star hotels and licensed restaurants for on-the-spot consumption.
There's so much at stakes, but I have no clues in which directions these governor candidates would take the province to. Anybody?

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Krakatau Steel profit drop 42%

State-owned steel producer PT Krakatau Steel booked net profit of Rp236 billion in 2005, dropped 42% from Rp414 billion in 2004 on lower margin.

According to its financial report published today, Krakatau reported total revenue of Rp11.63 trillion (US$1.18 billion) in 2005, increased 23.8% from 2004. But its cost of goods sold increased higher by 30%, resulting in lower gross profit. Combined with increasing operating costs, Krakatau booked operating profit of only Rp638 billion, significantly reduced from Rp922 billion in 2004.
Krakatau, the largest steel manufacturer in Indonesia, also hurt by huge increase in interest expenses.
The company has total assets of Rp10.689 trillion (US$1.1 billion) as of December 2005.

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Bakrie company bags US$84 million contract

State-owned gas transmission and distribution company PT Perusahaan Gas Negara (PGN) Tbk awarded a US$84 million contract to PT South East Asia Pipe Industries (Seapi), a subsidiary of PT Bakrie & Brothers Tbk, to supply pipes for the Labuhan Maringgai-Muara Bekasi undersea gas pipeline project.

Seapi will work with Indian company Welspun Gujarat Stahl Rohren Ltd to supply 32 inch diameter pipes for 160 km. Contractor for the project is in the bidding process.

It is interesting because only few months ago, Indonesian Pipe Producers Association (Gapipa) accused Indian pipe producers had dumped their products in Indonesian market to get the PGN project. Seapi President and deputy chairman of Gapipa Abas F Soeriawidjaja in early July accused three Indian pipe producers involved in a conspiracy to dump their products at 30% cheaper than local products. I don't know how we interpret Seapi's cooperation with Welspun this time.
Late last month, PGN awarded smaller contract worth US$15 million and Rp29 billion (US$3 million) to PT KHI Pipe Industries, a subsidiary of state-owned PT Krakatau Steel, to supply pipes for Muara Bekasi-Rawamanyu segment.
Few years ago, Seapi also won the contract to supply 65% of pipes for the Grissik-Singapore gas pipeline project. That time Seapi worked with Pohan Steel Company (Posco), South Korea.
Previously Welspun also bags US$92 million and Rp195 billion (US$20 million) contract from PGN to supply Grissik-Pagardewa linepipes of 199.5 km with 36 inch diameter. Welspun won the contract with other Indonesian partner PT Abadi Kuasa Karya.
Japanese JFE Engineering Corporation had been appointed as contractor for engineering, procurement, and construction of Pagardewa-Labuhan Maringgai of 270 km with 32 inch diameter. The contract price for the South Sumatra West Java (SSWJ) Phase I pipeline, approved by the Japan Bank for International Cooperation (JBIC), is US$161 million.
Meanwhile contractor for pipeline design, construction, and quality test for SSWJ Phase II Pagardewa-Labuhan Maringgai is Punj Loyd Ltd with contract value of US$17.5 million and Rp308.4 billion (US$30 million). PLL will also install fiber optic network along the pipeline.
The SSWJ Phase I pipeline is developed to meet gas demand for industries in Western part of Java island by transporting gas from Pertamina's Pagardewa gas field in Sumatra. The transmission pipeline, funded mostly by soft-loan from JBIC, has the capacity of 460 MMSCFD which can be extended to 600 MMSCFD. The project is expected to complete in March 2007.
PGN is concurrently develop SSWJ Phase II transmission from Grissik in Sumatra to Rawamaju in West Java to transport gas from ConocoPhillips Coridor Block in Grissik. The capacity of SSWJ Phase II is 520 MMSCFD which can be extended to 600 MMSCFD. The completion of this project is scheduled by the end of October 2006.
Tomen Corp and Nippon Steel also awarded the SSWJ Phase I for 105 km pipeline from Labuhan Maringgai to Cilegon, Java.

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Ary Ginanjar: G-Spot Business

We are not talking about sex. We are talking about management and business. While sex educators had introduced G-Spot few decades ago, only recently that we could discuss G-Spot, this time God-Spot, openly in this country. Board of directors should discuss G-Spot as it has budget impact. The state agencies, including tax agency, also has to take this issue seriously as a new source of tax income.

Ary Ginanjar Agustian, the owner and president of Emotional Spiritual Quotient (ESQ) Leadership Center, is the man who make it popular and it is a good business. Some even believe Ginanjar found the G-Spot Theory.

Eight years ago, scientist in California, USA announced a research result that they have discovered a God Module (G-Spot) in the brain, which could be responsible for man’s evolutionary instinct to believe in religion. A study of epileptics who are known to have profoundly spiritual experiences has located a circuit of nerves in the front of the brain, which appears to become electrically active when they think about God.

That was the report published by Los Angeles Times in 1997.

Dr. Ebrahim Kazim in his article Activate your God-Spot few months ago said that Allah might have put a God-spot in the brain because it is His sovereign choice to be in relationship to humankind in order that we could develop it further if we want to understand more about Him.

In Indonesia, G-Spot Training is a lucrative business. Just like some trainers in Western Countries quoting phrases from Bible, ESQ's God-Spot Training mix modern management with Koran's teaching. According to staffs at ESQ Center, cost for such training is Rp2.75 million per head. ESQ is also introducting group pilgrimage to Mecca, Saudi Arabia for its alumni in a program called ESQ 99 Flight.

Ask the staffs, managers, and directors of state-owned enterprises, what kind of training that they should attend?

The answer is Emotional Spiritual Quotient (ESQ). As quoted by Kompas newspaper, Minister of State-Owned Enterprises Sugiharto asked all SOE staffs to take the ESQ training conducted by ESQ Leadership Center.

Even though no formal letter, Indonesian, especially executives at SOE sees Sugiharto’s statement as an order. They have to abide!

The result is clear. PT Telkom Tbk, the largest company in Jakarta Stock Exchange, had sent 500 of its executives to attend the training for 4 days.

Was it good?

“The result of ESQ training is extraordinary,” Kristiono, CEO of Telkom commented in the paper. Kristiono had been kicked out last month from his post.

Do you know how much Telkom should pay? Rp1 billion minimum.

Pertamina, the largest SOE in the country, already sent thousands of staffs to attend the training. Peruri, the company that print money and bank notes, have sent 2,500 staffs.

Pertamina, PLN, Telkom, Pupuk Kaltim, Pupuk Sriwijaya, Krakatau Steel, Taspen, Rajawali Nusindo, Peruri, PTPN, and Garuda Indonesia are some of clients listed in ESQ’s website. Even Director General for Tax and Corruption Eradication Commission (KPK) are other non-SOE clients. But rarely we see private-owned companies in the list except Medco Energy.

Imagine that ESQ has trained 47,000 people. Take Rp2 million per head, ESQ has made almost Rp100 billion.

With such achievement, business magazine SWA named Ginanjar as one of The Most Powerful People and Ideas in Business 2004.

Born March 24, 1965, Ginanjar enrolled at engineering school of Udayana University in Bali and then Tafe College in Adelaide, Australia. Cleric KH Habib Adnan (chairman of Bali MUI branch) was his main mentor.

In a relative short period, ESQ Leadership has branch in 10 provinces accross the nation. Most of the trainers are young guns in their 20s or 30s. Skepticism arise though, especially staffs at SOEs, especially effectivity of ESQ in daily working condition. "Sometimes, people like us just has no choice. But as long as the company pay the training, I don't care," said one of SOE staffs.

Others simply attend the training to follow the order. "If the minister ask us to have ESQ training, we will do it. Regarding corruption in SOEs, well...it has nothing to do with that," said one executive at a state-owned company.

Some are questioning the leadership experience of ESQ trainers. "They are so young and no experience in dealing with business world and real working environment," said other executive.

But nobody doubt Ginanjar's leadership that bring God-Spot into a big business, just like Aa Gym (famous Moslem cleric & preacher) with his Qolbu Management. Tax officers should start to look into their balance sheet then....

And since G-Spot is a business, government and SOEs should implement business approach as well in its decision whether to use ESQ, Qolbu Management or the likes. State officers should open a transparent bid to make sure competition is there.

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