Golden Agri to build $150m biodiesel facility

SGX-listed Golden Agri Resources (GAR), the world?s second largest plantation company, is disbursing up to US$150 million in capital to establish two biodiesel facilities, to benefit from Indonesia?s anticipated energy mixture policy that is expected to boost sustainable fuel consumption, The Jakarta Post reported Friday.

The company?s head of investor relations, Richard Fung, told reporters in a teleconference held on Thursday that GAR was aiming at seeking benefits from the government?s policy to blend more bioftuel in diesel by being directly involved in the efforts of boosting sustainable energy.

?We are currently in the process of building two biodiesel plants of 300,000 tons per annum each in capacity, of which we expect can be completed by next year,? he said.

?The construction for one of the plants started earlier so it is expected to be fully completed in the first half [of next year] while the second one has just started recently so it will be done toward the second half.?

For the two plants, Fung said that a total of $150 million in investments would be disbursed, and the expansion was carried out by one of GAR?s subsidiaries. The new plants, he explained, are located in Marunda in North Jakarta and Tarjun in South Kalimantan.

The production from the facilities, he said, was expected to be fully absorbed by the Indonesian government?s biodiesel program.

?We have to go through a tender process with [state oil and gas company] Pertamina but we are fully confident that the production will be fully utilized by the policy. The process [for the tender] is starting right now,? he said, refusing to further elaborate on the tender process.

The government has planned to increase the mandatory mix of biofuel in diesel fuel from 10 to 15 percent to encourage sustainable energy use and as part of its solution to easing the volatility of the rupiah, as reduced oil imports will improve the country?s current account situation and in turn improve its economic fundamentals.

The move, albeit causing delays, has been applauded by CPO producers, including GAR, to benefit the company in terms of pricing, given that more absorption in fuel usage is projected to lessen CPO supplies in the market and thus boost the commodity?s already low prices. (*)