Govt only needs $120 million for Inalum takeover

The Indonesian government will only need about US$120 million in cash to buy out Japanese companies? 58.88 percent stake in PT Asahan Aluminium Indonesia (Inalum), if it decides to take over the company when its contract ends in 2013, The Jakarta Post reported on Thursday.

Effendi Sirait, the head of the Asahan Authority, which oversees Inalum's operation, said in Jakarta on Wednesday that the funds needed to buy the Japanese companies? stake would be much lower than its actual value because the government could use the company?s own cash to partly finance the takeover.

The Indonesian government owns a 41.12 percent stake in the company, with the remaining 58.88 percent held by a consortium of 12 Japanese companies, including Sumitomo Chemical Co. Ltd., Sumitomo Shoji Kaisha Ltd., Mitsui Aluminium Co. Ltd. and Mitsubishi Corporation.

With Inalum?s total assets estimated at $1.23 billion, the value of the Japanese consortium?s 58.88 percent stake in the joint venture company will be about $723 million, according to data provided by the Asahan Authority, an agency established by Indonesian and Japanese governments to oversee the operation of Inalum.

At the end of 2013, Inalum is also estimated to have cash of about $628 million. ?It means the government will only need $120 million to fully take over the company. About $95 million of the funds will be used for the compensation for the Japanese consortium and another $25 million for working capital,? he said.

?Although cash positions will be zero after the takeover, Inalum still has $20 million of receivables and $147 million of inventories. That should be enough to run the company to cover for at least two months after the takeover,? he said during a hearing with the House of Representatives? Commission VI overseeing state enterprises, trade, industry and investment.

?That?s why we asked for an addition of $25 million to fund operational activities, for the working capital? Effendi said.

Japanese representatives, who attended the hearing session, asked for a 30-year contract extension after 2013, with plans to expand its Aluminium smelting factory capacity and build a 150 megawatt power plant.

If the contract is extended, Japan plans to raise Inalum?s factory capacity from 250,000 to 317,000 tons per year, with a total value of $367 million in new investment.

Sixty percent of Inalum production goes out to Japan, and the remaining is distributed to the domestic market. Beside operating an Aluminium smelting plant, In-alum also manages two hydropower plants to support the smelter?s operation.

The company?s contract to operate an Aluminium smelter in Asahan, North Sumatra, will end in 2013, but the Indonesian government should decide whether it will extend the contract three years before the contract ends.

The Indonesian government has not decided whether it will fully take over Inalum or raise its ownership to 51 percent. (*)