Exclusive: Indonesia to set up $5.6 billion plantation firm

Reuters News
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Posted: Feb 02, 2012 5:13 AM
Exclusive: Indonesia to set up $5.6 billion plantation firm

By Janeman Latul and Fathiya Dahrul

JAKARTA (Reuters) - Indonesia's government plans to create one of the world's largest palm oil and rubber firms in March by combining state planters with total assets of $5.6 billion.

The plan will consolidate the assets of 15 state plantation firms with revenues last year of around 40 trillion rupiah ($4.45 billion) into one parent company, PT Perkebunan Nusantara III, which the government aims to list to tap investor interest.

"This holding will become one of the largest plantation firms in the world with one million hectares of palm oil and rubber," Dahlan Iskan, the state enterprises minister, told Reuters in an interview.

The sprawling archipelago of 17,000 islands is the world's biggest exporter of palm oil, second biggest producer of rubber and robusta coffee and third biggest producer of cocoa.

Indonesia is Southeast Asia's largest economy and is drawing strong investor interest to tap its domestic economy and resources, after recently being upgraded to a sovereign investment grade status.

The Indonesian Palm Oil Association (Gapki) said before the minister's comments that the country's palm oil plantation area will be 8.2 million hectares in 2012, a 100,000-200,000 hectares rise from the previous year.

Analysts said the consolidation of state firms is not going to create much of a supply change for now.

"They have been producing. It is not new supply coming into the market. This is just a rationalization of government linked assets," said Carey Wong, an analyst with OCBC Bank in Singapore.

BORNEO RICE BOWL

Indonesian state plantation firms will combine to produce an extra 500,000 tonnes of rice from planting 100,000 hectares of new paddy fields in east Kalimantan on Borneo island, Iskan said, without giving a timeframe for the production.

Indonesia is trying to become self-sufficient in production of its staple grain but surprised regional markets last year with hefty imports from Thailand and Vietnam and says it plans not to import again this year. Expanding paddies could cut the need for imports.

Iskan said the combined profits of the firms were around 3.6 trillion rupiah. The government plans to first list one of the firms, PT Perkebunan Nusantara VII, as a unit of the holding firm this year on Jakarta's stock exchange.

"After PTPN VII, we're open for other units to list on the stock exchange but eventually we will list the parent company, and I don't think we should retain a majority stake once it is listed," he added.

The combined palm oil and rubber landbank of the holding company Perkebunan Nusantara III will be bigger than that of the main existing listed regional planters. Malaysia's Sime Darby currently tops the list with 525,795 hectares for palm oil.

"If there is going to be an IPO for these assets, I think we will see more interest in the Indonesian stock exchange as well as regional indices that have plantation counters," said OCBC's Wong.

($1 = 8,985 rupiah)

(Additional reporting by Matthew Bigg and Michael Taylor in JAKARTA and Niluksi Koswanage in KUALA LUMPUR; Editing by Neil Chatterjee and Matthew Bigg)