Pupuk Kaltim set to build two urea plants in North Sumatra

Nani Afrida, The Jakarta Post, Jakarta | Wed, 05/19/2010 10:57 AM

State owned fertilizer company PT Pupuk Kalimantan Timur (Pupuk Kaltim) will build two fertilizer plants and develop oil palm plantations in North Sumatra in cooperation with two state owned plantations firms PT Perkebunan Nusantara (PTPN) IV and PTPN V, the fertilizer producer’s top executive has said.

Pupuk Kaltim’s president director Hidayat Nyakman said in Jakarta on Tuesday that the three companies would soon set up a joint venture to operate the two fertilizer plants and to develop oil palm plantations which would absorb an initial investment of about Rp 500 billion (US$55 million).

Pupuk Kaltim will have a 51 percent stake in the joint venture which will be named Nusantara. PTPN IV which is based in North Sumatra, will have a 35 percent stake and PT PTPN V in Riau province will control the remaining 14 percent.

“The construction of the two fertilizer plants will cost about $18 million,” he said adding that the fertilizer factories would have a combined production capacity of 200,000 tons a year.

The joint venture will also spend up to Rp 39 billion to develop the plantations, which will cover an area of between 12,000 and 13,000 hectares, Hidayat said.

He also said that part of the fertilizer production would be used for the joint venture’s plantations, and the rest for the two plantation companies’ own plantations.

Last year, Pupuk Kaltim also established a joint venture with a state plantation company. Joint venture PT Kalianusa is developing 13,000 hectares of oil palm plantations in East Kutai, East Kalimantan.

Besides establishing new joint ventures with several state plantations, Pupuk Kaltim is also building a Nitrogen, Phosphorous, and Potassium (NPK) fertilizer plant, and a new urea plant (Kaltim V) as well as a new coal-fired power station its industrial compound in Botang, East Kalimantan.

“Those projects require Rp 11 trillion in total investment,” Hidayat said. “The projects are financed with our own funds and bank loans. We can also sell bonds if needed,” he added.

Last year, Pupuk Kaltim issued bonds worth about Rp 1.3 trillion partly to finance projects.

The company, which produces three kinds of fertilizers; urea, NPK and ammonia, expects to book net profits of Rp 1 trillion this year, higher than the Rp 832.2 billion recorded in 2009.

Pupuk Kaltim supplies two-thirds of the country’s urea fertilizer production. This year, it expects to produce about 3 million tons of urea, a slight increase over the 2.94 million tons produced in 2009.

Pupuk Kaltim expects that the new Kaltim V urea fertilizer plant will boost the company’s urea fertilizer production nationally to 3.4 million tons a year. At present total domestic consumption of fertilizer reaches about 14 million tons per year. The government predicts that by 2025 Indonesia will need about 23.2 million tons of fertilizer per year to meet growing demand.