Govt to take over Inalum at any cost

JAKARTA. The government appears willing to take any risk in its bid to take over PT Indonesia Asahan Aluminum (Inalum) from Nippon Asahan Aluminum (NAA), including the Japanese consortium’s possible use of a third party for settlement.

Industry Minister MS Hidayat said recently that the Indonesian government would be ready should Japan decide to take the matter to the arbitration court.

“In principle, we are ready to go there [arbitration court] since that is the last option in the legal process,” he said.

The minister said, however, that the government would keep discussing the matter with Japan thoroughly, adding that the two sides still had three months and a week to discuss the matter before the company’s contract expired.

Separately, Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said the government could not control the policy of the Japanese government. However, Indonesia would “face it when it happens”.

Both officials were responding to a statement from an industry player familiar with the issue that the Japanese government may take the matter to an international arbitration court.

The industry player, who asked for anonymity, said recently that the Japanese government would likely take the Inalum takeover to arbitration because the Indonesian government and the Japanese consortium had yet to reach agreement on the value of Inalum’s total assets.

“The Japanese government has threatened to take the case to the arbitration court as debate over the firm’s total assets still continues,” the source said.

As previously reported, the Indonesian government has maintained its view that the firm’s total assets should be based on the book value before asset revaluations in 1997 and 1998, while the Japanese consortium wants to include the value after asset revaluations.

The government previously prepared Rp 7 trillion (US$693 million) for the purchase, but the Japanese calculation is about $140 million higher.

The book value of the firm reached $1.23 billion last year, according to an estimate by the Finance Ministry.

Inalum, which was established in 1976, is 41.12 percent owned by the Indonesian government and 58.88 percent owned by NAA, a consortium of 12 Japanese companies, including Sumitomo Chemical Co Ltd, Sumitomo Shoji Kaisha Ltd, Mitsui Aluminium Co Ltd and Mitsubishi Corporation.

The Japanese consortium has reportedly asked for its contract, which expires on Oct. 31 this year, to be extended, committing to increase Inalum’s annual aluminum ingot production capacity to 317,000 tons, up from the current 250,000 tons.

The Japanese reportedly offered to invest $367 million in return for the contract extension.

Inalum, which started operation in 1983, currently operates the only aluminum smelter in Southeast Asia, in Asahan, North Sumatra, and utilizes hydropower plants Asahan I and Asahan II as its prime energy sources.

The company delivers 40 percent of its product to the domestic market and exports the remainder to Japan.

Separately, publicly listed diversified miner PT Antam finance director Djaja Tambunan said the state-owned firm was ready to take over Inalum’s assets, saying that it would be prepared to pay up to Rp 7 trillion for the assets.

“Inalum is already in the production stage and thus it would not be that hard to find alternative financing,” he said.

Officials at the Japanese Embassy in Jakarta have yet to respond The Jakarta Post’s query concerning the matter.

Amahl S. Azwar/Linda Yulisman/Raras Cahyafitri/The Jakarta Post)