State plantation company to spend Rp 300 billion on expansion drive

The Jakarta Post, Jakarta | Fri, 04/10/2009 1:39 PM

State-owned plantation company PTPN VII will spend Rp 300 billion (around US$26 million) in capital expenditure this year in support of an expansion drive.

"We've actually set aside total capital of around Rp 500 billion from our internal cash as well as from state banks, but we will only use Rp 300 billion for this year," president director Andi Punoko told reporters on Wednesday.

He said the funds would be used to revitalize a sugar plantation along with the replanting of around 30,000 hectares of rubber plantations and 40,000 hectares of palm oil plantations.

The Bandar Lampung-based company had announced that it would expand its plantation areas by 10,000 hectares for rubber, 8,500 hectares for palm oil and 6,800 hectares for sugar cane.

The move was part of the company's effort to boost production capacity in its sugar refineries in Cintamanis, South Sumatra, to 7,000 tons per year from the existing 4,000 tons and in Bungamayang, Lampung, up to 10,000 tons from the previous 5,500 tons.

With the expansion plan set to continue beyond this year, Andi said the company had also secured supporting long-term loan commitments of up to Rp 600 billion from two state banks, Bank Mandiri and Bank Rakyat Indonesia (BRI).

"Long-term loans with relatively loose requirements from banks are good leverage to fund our activities or expansion plans. This is also an alternative just in case our planned initial public offering (IPO) failed," he said.

The company plans to sell a 30 percent stake to raise up to another Rp 1.5 trillion through an IPO later on this year.

"We will wait for the market to get better before going public, meanwhile we will use the time to replant and revitalize our plantations" he said.

In addition to market volatility, other factors hindering the implementation of the proposed IPO, included various formal and legal aspects, internal preparations, and the current condition of the plantations, according to Andi.

PTPN at present has 62,713 hectares of palm oil plantations, 55,617 hectares of rubber, 18,780 hectares of sugar cane and 1,580 hectares of tea in Lampung and Palembang, South Sumatra. (fmb)