Industry Info

Indonesia, Japan unlikely to agree on aluminum firm's nationalization

The Indonesian government and a Japanese consortium are unlikely to reach an agreement on the planned nationalization of an aluminum producer following months of tough negotiations over the amount of Japanese' shares in the company, negotiating sources said Wednesday.

The sources told Kyodo News the Japanese shareholders are now considering to bring the case to the International Court of Arbitration if no consensus is reached over the value by Thursday, the day when the contract of cooperation between Jakarta and the Japanese consortium expires.

The sources said it is "difficult" to get fruitful results in the negotiations by that day.

If agreement is reached, however, the company will be the first foreign company nationalized by the Indonesian government.

During their negotiations, Indonesia made its last offer of US$558 million, which is still subject to an audit by public accountants named by both sides, for the value of the Japanese shares in aluminum producer PT Indonesia Asahan Aluminum, or Inalum.

Earlier, Indonesia insisted that the value of the Japanese shares in the nation's only aluminum producer should be $424 million based on the book value before assets revaluations in 1997 and 1998.

Japanese consortium Nippon Asahan Aluminum, or NAA, however, claims its shares in the North Sumatra Province-based company are worth $626 million, including the value after asset revaluations.

Earlier Wednesday, during a hearing with a budget commission of the House of Representatives, Finance Minister Chatib Basri told the lawmakers that the Japanese side insists on keeping its shares in Inalum.

"What is obvious is that they are considering an option to bring it to the international arbiter, something that also shows how profitable Inalum is," Basri said.

Indonesian chief negotiator Agus Tjahajana Wirakusumah told reporters that the Japanese shareholders continue to do some lobbying efforts, including to President Susilo Bambang Yudhoyono, for a contract extension.

The signing on the takeover agreement was earlier expected last week, but was delayed as no agreement had been reached.

Last Thursday, the parliament approved the disbursement of 7 trillion rupiah (about US$627 million) to finance the whole process of the "nationalization."

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

The consortium earlier asked for its contract to be extended. It was committed to increase the company's annual aluminum ingot production capacity to 317,000 tons, up from the current 250,000 tons, 60 percent of which being exported to Japan, with the remainder sold on the domestic market.

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

Inalum, which began operation in 1983, currently operates the only aluminum smelter in Southeast Asia, in North Sumatra's Asahan Regency.

It utilizes two hydropower plants in the regency as its prime energy sources, keeping its production costs low compared to similar smelters utilizing other energy resources.

Source: Global Post