INALUM PROPOSES CONTRACT EXTENTION AS MARKETING PROSPECT LOOKS GOOD

In seeing the good prospect of aluminium business, in domestic as well as overseas market, PT Indonesia asahan Aluminium (Nalum) proposed extension of contract when it expired by October 31, 2013. Based on the explanation of Chairman of Asahan authorities Effendi Sirait in a discussion with the Forum of Industrial Journalists (Forwin) in Jakarta Friday (14/5) and based on Master Agreement (MA) per November 1, 2013, after operating commercially for 30 years, Water Generated Powerhouse Asahan II (Sigura and Tangga) automatically became the possession of the Indonesian Government, after paying compensation fee as much as the updated value (MA Article VII.1).

“The Management of Inalum has applied for extension of contract to the Asahan authorities (OA) as executor of the Asahan project policies (PA). The proposal would be dissected by the technical team which was in charge of making in-depth study of PA. This team, set up by the Indonesian Government would focus on various aspects of the matter including preparing negotiation materials whereby to optimize benefits of PA to the advantage of the Indonesian Government” Effendi remarked.

In the proposal of collaboration extension, PT Inalum proposed uplifting of factory capacity of aluminium melting plant into ingot bars from 250 thousand tons per year to become 317 thousand tons per annum with investment worth US$ 367 million. He added that Inalum had the right to proposed extension of operational period at least 3 years before period expired. Proposal of extension must include new investment which was significant by amount for innovation and smelter expansion.

“PT Inalum has presented the proposal of contract extension to OA by May 2010. In accordance with Master Agreement, the proposal was submitted to OA to be conveyed to the Government. Therefore OA will bring the matter to the directive body. From the Japanese side, a team representing Japanese Investors called Nippon Asahan Aluminium (NAA) was set up. Most likely they propose to hold share bigger than that of Indonesia; for that matter, an exchange of information has been held twice” Effendi was quoted as saying.

Performance of Inalum

The share composition of PT Inalum, a foreign company (PMA) by status is as follows the Indonesian Government 41.12 percent, Japan 58.88 pecent. Sixty percent of products were marketed in Japan, the remaining 40 percent in Indonesia. Since 2004 Inalum started to show improvement, with production output exceeding the capacity of 225 thousand tons per year to become 250 tons per year. In March 2010, production reached 21,485 tons but the amount sold was 27,523 tons of aluminium.

Each year Inalum made profit which reduced accumulated loss from US$ 1.255 billion by end of 2003 to become US$ 1.1 billion in 2004, leaving only US$ 72 billion to remain by 2009. In addition to that debt installment had been accelerated, leaving only US$ 122 million of debt by end of 2009.

Therefore based on performance projection of 2009 – 2013 and in accordance with Long Term Projection (LTP) in the future the company was predicted to make profit of US$ 100.6 million on the average by 2013. Meanwhile the company also managed to pay company taxes to the amount of US$ 42 million per year on the average, hence the value of total asset would reach US$ 1.272 million which included cash balance amounting to US$ 628 million.