Gresik to spend $670m on new plants

The Jakarta Post, Jakarta

Indonesia's largest cement producer PT Semen Gresik won shareholder approval Monday to press ahead with a plan to build two new cement plants and 10 coal-fired power plants next year.

Speaking to reporters following an extraordinary meeting of shareholders, chief commissioner Rizal Ramli said one of the new cement plants would be built near the company's existing plant in Tonasa, South Sulawesi, and the other one in Java, although the exact location was still under discussion.

The cement plants, each with a capacity of 2.5 million tons a year, are expected to begin commercial operation by the end of 2011 and 2012, respectively.

Semen Gresik's total production is expected to reach 14 million tons this year, an increase of about 3 percent from 13.5 million tons in 2006. The company controls about 45 percent of the country's cement market.

Rizal said the construction of the new plants, which would cost about US$670 million, was a part of Gresik's efforts to take advantage of a government emphasis on infrastructure development projects and also aimed at maintaining the company's position as market leader.

"We will invest US$670 million in the construction of the two plants," said Rizal, who is also former coordinating minister for the economy.

Rizal said that around 30 percent of the funds for the plants would come from the company's retained profits, while the remaining 70 percent would come from bank loans and issuance of bonds.

Simultaneous with the construction of the cement plants, Gresik will build 10 coal-fired power plants, four of them to be constructed near the new plants, and the other six to be constructed in three different locations -- Tuban, East Java, Indarung, West Sumatra and Biringere Pangkep, South Sulawesi.

Semen Gresik's President Director Dwi Soetjipto, who also attended the meeting, said the construction of the power plants would produce between 35 and 65 megawatts.

The company which at present relies on state-owned electricity PLN's power supply will receive a total power supply of up to 100 megawatts.

He said the new plants would help the company improve efficiency and avoid continuous price increases by PLN.

"The power plants will provide an uninterrupted electricity supply for cement production which, according to our calculations, will save up to 15 percent of the cost of electricity as a part of total production costs," he said.

Semen Gresik, which also owns PT Semen Padang in West Sumatra and PT Semen Tonasa in South Sulawesi, is controlled by the Indonesian government, which holds a 51.01 percent stake. Blue Valley Pte Ltd holds a 24.9 percent stake, with the investing public holding the remainder.

The company booked Rp 572 billion in net profit during the third quarter of this year, an increase of 48 percent from the same period last year.

The company's net profit rose by 23.8 percent to Rp 1.27 trillion in 2007 from Rp 1.02 trillion in the previous year.(dic)