Indonesian, Japanese consortiums sign loan agreement for Tuban project

A Japanese consortium has signed an agreement with a consortium from Indonesia to provide US$400 million in loan for the resumption of a petrochemical project in Tuban, East Java, Bisnis Indonesia daily reported Friday.

The two parties signed the loan accord in Japan on Tuesday, Syafruddin A. Temenggung, chairman of Indonesian Banking Restructuring Agency (BPPN, was quoted as saying Thursday.

The Japanese consortium comprises Sumitomo Bank Mitsui Corporation, Nippon Export Investment Insurance and Japan Bank for International Cooperation, while the Indonesian consortium comprises PT Trans Pacific Petrochemical Indotama and state oil and gas firm Pertamina. BPPN acted as witness to the accord signing.

Syafruddin said that loan would be disbursed to the Indonesian consortium in two trenches amounting to $200 million each.

The $400 million will be used to continue the construction of the Tuban petrochemical project in East Java, which was suspended 1998 due to financial problems.

The Tirtamas Group, which controlled Trans Pacific, transferred the project to BPPN as part of the collateral for the conglomerate?s debts worth Rp5.4 trillion to the government. The petrochemical project was 60 percent completed when it was surrendered to BPPN.

Pertamina obtained a 15-percent stake in the Tuban project in return for its agreement to guarantee the $400 million loan from the Japanese lenders. The guarantee was made in the form of Pertamina?s commitment to selling low sulphur wax residue to the petrochemical project. (*)