State-Owned PAL May Get $60m Rescue Loan

Janeman Latul, The Jakarta Globe,  January 11, 2009 

The State Ministry for State Enterprises is expected on Monday to approve a $55 million to $60 million loan package it hopes will save ailing state-owned shipbuilder PT PAL Indonesia, a ministry official said on Sunday. 

The mechanism and time frame for the rescue package is to be drawn up by state-owned asset management firm PT Perusahaan Pengelolaan Aset, or PPA. 

PAL has suffered several huge losses recently, including a Rp 120 billion ($11.04 million) deficit in 2006 and a Rp 40 billion loss in 2007. 

Since 2003, the ministry has described the company as “unhealthy” because it has struggled to remain profitable. 

“We will have a general meeting on Monday with PPA to discuss its assessment of several troubled state firms,” said Muhammad Said Didu, the state ministry’s secretary. “One of those is PAL.” 

Didu said that PAL was one of the country’s most strategically significant businesses and would have to be given new loans. 

“The company must be rescued because our defense industry relies on it,” he said. 

Renny A. Rorong, PPA’s corporate secretary, on Sunday also confirmed that the meeting would determine the company’s future, but he did not reveal specific loan amounts under consideration. 

“PPA sees that PAL is a strategically important company and the government maintains a huge interest in keeping it running,” he said. 

Harsusanto, PAL’s president director, said over the weekend that PAL was at work on 17 shipbuilding projects. 

The company, he said, is counting on a capital injection from the government to finalize those projects. He confirmed that the specifics of the loan package would be determined at Monday’s meeting. 

“They already agreed to give new loans to PT PAL [in December],” he said, adding that the package will likely include several different loans with terms of between two and eight years. 

The company has set a revenue target of Rp 1.6 trillion for 2009, up from Rp 1.2 trillion last year. 

“We can achieve our target this year if we complete at least 80 percent of last year’s carryover projects,” Harsusanto said, adding that PAL had managed to improve upon its 2007 loss by posting a Rp 2 billion profit in 2008. 

The shipbuilder has earmarked $10 million for capital expenditure this year, which it expects to use to improve its docking facilities and boost its engineering division. 

The value of PAL’s assets currently stands at Rp 3 trillion, Harsusanto said, adding that the company has $120 million in short-term debts to local private and state banks. 

Data from the ministry indicates that PAL’s total debts amount to Rp 1.9 trillion. 

The firm is at work on carryover projects from both the government and private clients. For the public sector, PAL is building two ships for the Navy and three 38-meter boats for the Directorate General of Customs and Excise. 

PAL is also building four escort tugs worth about $26 million for BP Plc., the world’s second-biggest oil producer, and a 50,000-dead-weight- ton ship for Turkey’s Geden Lines. 

Harsusanto said the shipbuilder was also in talks with potential partners from China, Singapore and South Korea to build offshore rigs. 

“They were impressed by our ability to build 3,000-ton offshore rigs, because not many companies in Asia can do that,” he said, adding that the German and Italian navies had also ordered ships from PAL. 

PT PAL Indonesia was started in 1939 by the Netherlands colonial authority. 

In 1980, the government changed PAL’s status to a general company, after years as a company under the Navy.

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