United Tractors plans to spend $170 million on coal expansion

The Jakarta Post, Jakarta | Sat, 05/17/2008 11:15 AM

Publicly listed heavy machinery supplier PT United Tractors plans to inject up to US$170 million into its subsidiary in the mining sector, PT Pamapersada Nusantara, which is citing the acquisition of a new coal mine this year.

United Tractors director of administration and finance Gidion Hasan said the company was considering several coal mines in Kalimantan with reserves ranging from 20 million to 40 million tons.

"There have been a lot of offers from companies in the Kalimantan region, but nothing is set yet. We are definitely looking to acquire at least one more coal mine there," Gidion said, adding that Pama managed two coal mines in Kalimantan under PT Tuah Turangga and PT Dasa Eka Jasatama.

Dasa Eka produced a total 3.6 million tons of coal last year and expects to increase production by 10 percent to 4 million tons this year.

Tuah Turangga, acquired by Pama in January for $115 million, has yet to start production, but is expected to generate between 2.5 million and 3 million tons a year starting 2010.

Parent company United Tractors, Gidion said, was also budgeting $30 million for its own capital expenditures this year to spend on equipment maintenance and upgrades.

To achieve total spending of up to $200 million -- including on the capital injection for Pama -- Gidion said the company would allocate $30 million from its capital and gather the rest from banks.

The company recently secured a loan facility worth $150 million from Mizuho Corporate Bank Ltd., and Overseas Chinese Banking Corp. Ltd., with Sumitomo Mitsui Banking Corp. of Singapore serving as facility agent.

United Tractors is the largest mining contractor in Indonesia, and supplies heavy construction equipment for mining, agriculture, forestry and infrastructure projects.

It aims to sell 4,250 units of heavy machinery in 2008, a 23 percent increase from 3,454 units sold in 2007. Gidion said around 50 percent of this year's sales would go to the mining industry.

Director of marketing and operations Paulus Bambang said the agriculture and mining industries greatly contributed to the company's rising profit margin.

"In 2006 and 2007, both industries contributed up to 70 percent of our revenues, with mining being the top contributor," Paulus said.

President director Djoko Pranoto said the rising prices of coal and crude palm oil would help the company maintain its profit amid fuel increases proposed by the government to take effect in June.

"Coal prices are also rising, along with crude palm oils, so I don't see the planned fuel increase as having an adverse effect on our company," Djoko said.

UT continues to make profits this year, increasing its first quarter revenue by 55 percent to Rp 5.78 trillion from Rp 3.73 trillion during the same period last year. (anw)