Three New Fertilizer Plants To Cover Domestic Demand

Jakarta Globe, Faisal Maliki Baskoro | November 03, 2010

Jakarta. State-owned fertilizer companies Pupuk Sriwijaya (Pusri) and Pupuk Kaltim (PKT) signed an agreement today to enter into a joint venture with Jordan Phosphate Mines to build three fertilizer factories in Indonesia in a deal worth $900 million.

Arifin Tasrif, president director of state-owned fertilizer company Petrokimia Gresik and chairman of the Indonesian Fertilizer Producers Association (APPI) said the joint venture would fill a gap in a domestic fertilizer market that was expected to demand eight million metric tons per year by 2025.

He said the three factories would each be capable of producing one million metric tons of NPK (nitrogen, phosphorous and potassium) fertilizer each year.

“Once these factories start operating in 2015 it will add three million tons to Pusri’s current capacity of 2.2 million tons, matching fertilizer demand in that year,” Arifin said.

“These factories will also meet the demands of 40 million farmers in Indonesia.”

He said the first factory, planned for Gresik, East Java, was expected to be operational in 30 months, while the other two, to be located in Tanjung Siapi-api, South Sumatra, and Bontang in East Kalimantan, were expected to be completed by 2015.

The Pusri-PKT partnership and Jordan Phosphate will each have a 50 percent stake in the company.

Thirty percent of the venture’s financing would come out of the companies’ equity and the rest from bank loans, Arifin said.

The deal is also a positive development for the fertilizer industry as a whole, which needs $6.2 billion from the private sector to upgrade aging factories, he said.

Mustafa Abubakar, the state enterprises minister, said that with the joint venture, Pusri could become the world’s biggest fertilizer company by 2015.

“We will export some to the Philippines, Malaysia and Vietnam.”

Walid Kurdi, chairman of Jordan Phosphates, said this was the first time his company had entered into a joint venture with a company outside of Jordan.

“We’re comfortable investing here. We trust investing here more than anywhere else as it offers facilities for investors’ protection and it is a potential market,” he said.

Petrokimia Gresik signed a joint venture agreement in January with Jordan Phosphate to build a $200 million fertilizer plant in East Java.

The factory is expected to have a production capacity of 200,000 tons annually.

Jordan Phosphate operates three mines in Jordan, where the government owns 26 percent of the company.

Kamil Holding, an investment company owned by the Brunei Sultanate, has a 37 percent stake.