TPPI offers Pertamina 13% stake to pay off debts
Monday, January 11 2010 - 01:37 AM WIB
TPPI operates an integrated petrochemical refinery in Tanjung Awar-awar, Tuban, East Java. Pertamina currently has a 15 percent stake in TPPI, while PT Tuban Petrochemical Industries (Tuban Petro) has a controlling stake of 59.5 percent. The remaining 25.5 percent is owned by foreign shareholders.
?TPPI has offered to convert part of its debt into equity,? a source at Pertamina was quoted by the newspaper as saying over the weekend.
?In its proposal, the company offered Pertamina a total 28 percent equity shares and [15 percent from existing share and 13 percent from additional shares] in TPPI.?
Both Pertamina spokesman Basuki Trikora Putra and Tuban Petro president director Amir Sambodo confirmed TPPI had proposed converting the debt into equity, but declined to give the exact figures proposed by TPPI.
?Part of our discussion with Pertamina is about the possibility of debt-to-equity conversion,? Amir said, adding the exact equity percentage proposed by TPPI was still being discussed.
Trikora said Pertamina had appointed energy and petrochemical business consultant Nexant to evaluate TPPI?s proposal.
?We?ve hired Nexant to evaluate an appropriate figure [for the additional equity] for Pertamina,? he said.
The source, however, said Pertamina considered the additional 13 percent equity too little in light of TPPI?s debt.
?TPPI?s proposal was made on the extremely optimistic assumption that their business model would perform very well in the coming years? the source said.
Pertamina?s involvement in TPPI began in 2004 when it was asked by the government to provide a guarantee for TPPI, as TPPI was about to secure financial commitments amounting to $600 million from the Japan Bank for International Cooperation and other private Japanese banks to complete the construction of its Tuban refinery.
Pertamina?s guarantee was provided through a product swap. Under this mechanism, Pertamina supplies low-sulfur waxy-residue (LSWR) fuel oil to Japan?s Mitsui, without payment.
Mitsui then pays JBIC and other banks for TPPI?s debt. In return, Pertamina gets middle-distillate products (MDP), including kerosene, from TPPI?s refinery
Pertamina also supplies oil condensate to the refinery. Following the agreement, Pertamina was granted the 15 percent stake in TPPI.
Since the third quarter of 2007, however, Pertamina said TPPI had stopped the MDP supply.
To date, TPPI owes Pertamina $350 million, which includes $100 million for unpaid oil condensate and $250 million for failure to supply the MDP.
Up to $50 million of the debt matures every six months.
Pertamina has said it would take the case to arbitration if the negotiations failed. (*)