Indonesia Works To Secure Lead in "Ring of Fire" Geothermal Market

Renewable Energy World, By Ivan Castano, Contributor , November 2, 2011    

Jakarta, Indonesia -- Indonesia is aggressively moving to build up its geothermal industry with plans add as much as 9,000 MW of installed capacity by 2025. However, industry observers say the Southeast Asian country's government must do more to attract foreign investment if it wants to achieve that target.

"The tenders are out there, they just need the investors to come in," says Paul Brophy, president and chief executive of geothermal consultancy GES, which is working with the Indonesian government to help boost foreign investment and develop the geothermal industry. "So far, some 20 to 30 concessions have been issued so there is still lots of room for new companies to come in and develop the resources."

Industry observers say Indonesia, with the world's highest number of active volcanoes, has the greatest geothermal potential in the so-called Ring of Fire volcanic region straddling the country as well as New Zealand, Philippines, Japan and the Eastern part of Russia. Of all those countries, Indonesia, Philippines and Japan have the strongest development potential, observers say.

However, Indonesia has more volcanic "hot spots" (some 265) and a more aggressive development scheme than the other countries. Developers are using these hot spots to drill holes that can produce steam from volcanic energy. So far, Chevron is the leading foreign developer in the sector but others including Indian industrial conglomerate Tata, Shell, Canada's Raser Technologies and Australia's Origin Energy are also looking to set up geothermal plants.

Investment Challenge

Brophy said the biggest stumbling block in the way to Indonesia's development dream is a dearth of foreign investment as the government does not want to finance the 9,000-MW build-up, estimated to cost $30 billion, on its own.

To do this, the government recently issued a law that would allow foreign developers to pursue their own projects as long as an Indonesian player receives a five percent stake in them. To meet this requirement, international developers must set up consortiums that include at least one Indonesian company, Brophy explained, adding that he thinks that the law will boost investment. This is because before, foreign companies were mostly restricted to partner with state energy group Pertamina if they wanted to build a geothermal project in Indonesia.

"They don't need to partner with Peternina anymore. They can go on their own as long as an Indonesian player has at least five percent equity in the project," adds one industry observer.

Jennifer Derstine, a renewable energy analyst at the U.S. Department of Commerce's international trade mission, agrees that the government is working to attract more international players. She adds that when the department of commerce launched a geothermal trade mission two years ago, the investment framework banned foreign companies from pursuing small geothermal projects on their own. However, that is now allowed and is expected to bolster interest from U.S. and other foreign companies to roll out projects.

"The law had reserved smaller-size development permits of geothermal plants under 10 MW for Indonesian companies. Now, the market is open to U.S. geothermal developers and investors," says Derstine.

"Uncompetitive" Tariffs

However, echoing other views, she says tariffs are still too low to make geothermal projects competitive.  Brophy says Jakarta is also working to address this issue. State electricity company PLN recently established a U.S. $0.097 feed-in tariff per kilowatt-hour (kWh) for geothermal plants, but the region is wiling to negotiate a higher price for projects located far from the power grid. However, some investors are concerned about whether debt-ridden PLN will ultimately be able to pay those prices as state coffers are already burdened with high subsidies for the energy sector, observers say.

Because building geothermal plants is expensive, with the ultimate capacity that can be extracted from them, uncertain, developers are looking for the highest possible tariffs and assurances that the projects will be profitable before jumping into the market. Brophy adds that the government is aware that tariffs must be more competitive and that it is likely to shift some traditional power subsidies into renewable energy to develop the geothermal space as well as other green technologies. 

The Indonesian tariff is lower than in the U.S. where developers are paid $0.10 to $0.12 per kWh. Development costs are much lower in Indonesia, however, Brophy says.

If all goes well — and barring a prolonged and deeper global recession — Brophy hopes Indonesia will be able to attract enough foreign money to meet its 2025 geothermal targets, which could ultimately make the country the world's biggest producer of geothermal power. But it will need to watch over rivals like the Philippines and Japan. The former is looking to install 3,000 MW by 2020, up from 1.95 MW now. And as it moves to diversify its energy matrix following its recent nuclear disaster, Japan could also draft ambitious plans to develop its "vast" geothermal resources, Derstine adds.

For now, eyes are on Indonesia as a potential leader in geothermal energy as long as it can get the funds it needs to meet its ambitious development targets.

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Two Japanese firms ready to relocate plants to Indonesia

Antara News, Tue, November 1 2011

Jakarta (ANTARA News) - Two Japanese companies are ready to relocate their plants from Thailand to Indonesia because of protracted flooding in the former, an official said.

"Because of the floods we have received a request from Japanese automotive and electronic manufacturers to relocate their plants from Thailand to Indonesia," the deputy for industry and trade to the coordinating minister for economic affairs, Edy Putra Irawady said here on Tuesday.

Edy said at least four companies, three of them from Japan and one from Europe, intended to relocate their plants to Indonesia.

The companies were automotive and electronic manufacturers which were currently operating in Thailand, he said.

"Two of the four companies are really new investors, while two others intend to relocate their plants and they are Japanese companies," he said.

But the companies had yet to file a formal request to the Indonesian government, he said.

"They phoned us to ask what incentives the Indonesian government can give to them if they relocate their plants here. For instance, will they receive tax holiday or not?," he said.

But Edy stopped short of revealing the names of the Japanese companies.

Asked whether they were large-scale automotive and electronic manufacturers such as Honda and Nissan, he said they were in the same class as the two Japanese companies.

He said two automotive companies which intended to expand their investment in Indonesia were Toyota and Mercedes Benz. Toyota planned to raise its investment by Rp7 trillion next year.

"They will make Indonesia their production base for their exports," he said.

Editor: Suryanto

No cuts in scholarship allocations for Indonesians: Netherlands

The Jakarta Post, Jakarta | Tue, 11/01/2011

The Netherlands has no plans to cut the portion of scholarships it has been allocating for Indonesians despite the debt crisis currently plaguing the Eurozone, a Dutch official said here on Tuesday.

“Don't worry about budgets. We're still offering wide opportunities for Indonesians who want to study in the Netherlands,” Nuffic NESO Indonesia director Mervin Bekker told a press gathering in Jakarta.

Nuffic Neso Indonesia is the official representative of Nuffic -the Netherlands Organisation for International Cooperation in Higher Education- in Indonesia; for all matters concerning Dutch higher education.

Bekker said the Dutch government was even planning to further expand its partnership with Indonesian education institutions.

He said the Netherlands considered Indonesia important in its international education cooperation policy, citing127 partnerships that had been established between Dutch and Indonesian higher education institutions, 22 percent of which covered student exchanges and 19 percent were in the form of research partnerships, Antara news agency reported.

Nigeria to invest Rp 24t in Indonesian refinery deal

The Jakarta Post, Wed, 10/12/2011

Nigeria plans to invest Rp 24 trillion (US$2.68 billion) in Indonesia to fund the construction of three oil refineries, an official says.

The Industry Ministry's director general for manufacturing-based industry, Panggah Susanto, was quoted by kompas.com as saying that both countries had agreed to build the refineries in Indonesia.

Nigeria, which produces 2.6 million barrels of oil per day (bpd), was looking for a partner to refine its crude oil, Panggah said.

"Previously they wanted the refineries to be built in Nigeria," he said Tuesday. "However, as Indonesia is currently improving its downstream industry, Indonesia wanted the refineries to be built here instead."

The refineries, which are projected to produce 300 bpd each, will be used to process crude oil from Nigeria.

"State firm PT Pertamina will buy the crude oil from Nigeria and process it here," he said.

Ministry to build micro-hydro power plant in Hukurila, Maluku

Antara News, Tue, October 11 2011

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Ambon, Maluku (ANTARA News) - The ministry of public works will build a micro hydro power plant in Hukurilla village, South Leitimur sub district, Ambon city, Maluku province with a capacity of 3.30 KiloWatt, a local official said here Tuesday.

Guntar Maha, an official of the Maluku River Center for Raw Water Commitment, said the power plant would be a pilot project using renewable energy, namely the watershed of Way Rupa.

The project would be built in Hukurilla village because the village was close to the Way Rupa river which had potential discharge and height differences that would be turned into micro-hydro energy sources, he said.

According to Guntar, the construction of the micro-hydro power plant project required the clearing of land and procurement of such things as turbines, concrete wire, tranquilizer tank, pillars for supporting concrete pipes, house plants and channel release.

The project would be located 20 kilometers from Ambon city and be inaugurated by Public Works Minister Djoko Kirmanto who also would attend the 18th Annual Scientific Meeting (PIT) of the Indonesian Hydraulic Engineers Association (HATHI) on October 28 to 30, 2011, Guntar said.

The project would also include the building of a one-kilometer-long transmission network from the waterfall`s location to Hukurilla beach which had a population of 147 households or 623 people.

Thus the project would also support the development of maritime tourism in Hukurilla which has a beach with coral panorama, underwater caves and various types of reef fish that make it an ideal dive site for domestic and foreign tourists, he added.

"We will involve staff from the Public Works Research and Development Agncy in Bandung to build the micro-hydro power plant Hukurilla. Similar plants would be developed in other areas in Maluku which have waterfalls with water flows and high difference potential," said Guntar.

The goal was to reach areas that do not have electricity from State-owned Electricity Company (PT PLN) of Maluku and North Maluku region.

Micro-hydro power plants use the potentials of waterfalls to generate electricity.

The objective was to provide environmentally friendly electric power at low operating and maintenance costs in order to improve the quality of life and fostering the economic growth of the rural communities, Guntar said.

Editor: Suryanto

Slovakia to invest $1 bn in Indonesia

The JakartaPost, Mon, 10/10/2011

Slovakia was planning to invest US$ 1 billion in Indonesia, visiting Slovakia President Ivan Gasparovic told reporters on Monday in Jakarta.

He said the investment plan would be included in seven agreements due to be signed on Tuesday.

Gasparovic delivered the plan after meeting with President Susilo Bambang Yudhoyono in Merdeka Palace Jakarta on Monday.

“There are fields to be explored in the areas of trade, agriculture, electricity, power plant generators and heavy machinery,” President Gasparovic said.

President Yudhoyono said Slovakia planned to construct a cement factory in Central Java and West Papua, a tire factory in Banten and electrical power plants in Lombok (West Nusa Tenggara) and Batam (Riau islands.

“Indonesia has sent nine proposals to Slovakia. The proposals are in food and agriculture, renewable energy, trade and investment, banking, education, mass media, infrastructure and manufacturing, tourism and culture,” he said.

US, Indonesia announce $28.5 million debt swap for forests

Antara News, Mon, October 3 2011

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Jakarta ( ANTARA News) - The United States and Indonesia on signed a $28.5 million debt-for-nature swap agreement on Monday, the US Embassy here said in its official website on Monday.

The agreement was signed under the U.S. Tropical Forest Conservation Act (TFCA) of 1998 that will reduce Indonesia`s debt payments to the U.S. Government over the next eight years by nearly $28.5 million.

In return, the Government of Indonesia will commit these funds to support grants to protect and restore the country`s tropical forests in Kalimantan. This agreement, in partnership with World Wide Fund for Nature-Indonesia (WWF) and The Nature Conservancy (TNC), will be the second TFCA debt-for-nature swap in Indonesia.

The first agreement was signed in 2009 and supports forest conservation activities on the island of Sumatra.

Both of these agreements contribute to the climate change and environment objectives of the US-Indonesia Comprehensive Partnership.

Kalimantan - Indonesian Borneo - historically has contained some of the world`s most remote and biologically-rich forests. There are presently up to 15,000 different flowering plants on Borneo and the island is home to a large number of treasured animal species such as orangutans, clouded leopards, and "pygmy" elephants.

The second Indonesia TFCA marks the 18th TFCA deal, following agreements with Bangladesh, Belize, Botswana, Brazil, Colombia, Costa Rica (two agreements), El Salvador, Guatemala, Indonesia (now two agreements), Jamaica, Panama (two agreements), Paraguay, Peru (two agreements), and the Philippines.

Editor: Heru

Telkomsel allocates CSR funds for peoples’ empowerment

The Jakarta Post, Jakarta, Sun, 10/02/2011

Indonesian telecommunication giant Telkomsel has spent 65 percent, or Rp 18 billion, of its Rp 28 billion (US$ 3.16 million) Corporate Social Responsibility (CSR) budget. The assistance has been committed to community empowerment programs, a company official said on Sunday.

“We have been using the funds to support student capacity building initiatives in schools throughout the country. We are likely to continue with these endeavors because we have received consistent positive feedback,” Telkomsel CSR general manager Tubagus Husniyullah said as quoted by tribunnews.com.

Tubagus said Telkomsel was particularly focused on regions recovering from disaster and assisting the organization of activities intended to support local residents during their recovery stages.

Australia to Help 300,000 Children Go to School

Jakarta Post, September 30, 2011

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The Australian Government has signed an agreement to disburse 210 million Australian dollars to the Indonesian Government to build schools.

Through this education partnership, up to 2,000 junior secondary schools will be built in poor and remote areas where they are most needed, according to a release sent by AusAid to the Jakarta Globe.

The program builds on the highly successful Australia - Indonesia Basic Education Program which built more than 2,000 schools between 2006 -2010.

“Education is a fundamental human right and critical for individuals to lift themselves out of poverty. This new education partnership will enable a further 300,000 Indonesian children to attend school,” said Australia ’s Ambassador to Indonesia , Greg Moriarty.

The two governments are working together to achieve Indonesia’s goal of providing nine years of basic education for all Indonesian girls and boys, regardless of their gender, where they live or how much their family earns.

“Better educated children result in a more productive workforce. Better educated girls lead to lower child and maternal mortality, improved child nutrition and stronger political participation,”  Moriarty said. 

 This assistance is part of the $500 million five-year Education Partnership announced by Australian Prime Minister Julia Gillard and President Susilo Bambang Yudhoyono in Jakarta in late 2010.

The schools will be constructed by local communities, using local labour, equipment and materials and each will include facilities for the disabled and separate toilets for boys and girls.

The Education Partnership will also improve school management through training provided to 293,000 school principals, school supervisors and district education officials.

Unilever invests Rp 1.1t in N. Sumatra

The Jakarta Post, Jakarta, Thu, 09/29/2011

Multinational company, Unilever, is planning to open a palm-processing plant in Semangke, North Sumatra with a total investment of Rp. 1.1 trillion (US$122 million).

“Unilever is developing a new facility in Semangke, North Sumatra. It is a Fatty Acid Oil Chemical plant,” Investment Coordinating Board Chief Gita Wirjawan said on Thursday as quoted by Antara news wire.

Gita was among ministers who accompanied President Susilo Bambang Yudhoyono in welcoming Unilever top officials at the State Palace on Thursday.

Visiting Unilever top officials included Chairman Michael Treschow; CEO Paul Polman; Chief Supply Chain Officer Pier Luigi Sigismondi; President Director of PT Unilever Indonesia Tbk Maurits Lalisang, and Corporate Secretary Sancoyo Antarikso.

Gita said it would take two years to finish the new facility.

Gita said the company was also committed to investing US$600 million for its expansion in Indonesia.

“It has a number of plants in Java. It accepted our suggestion to build plants outside Java,” he said.

The company will cooperate with 10 firms to invest 50 million euro in Nusa Tenggara.

RI gets US$500,000 in assistance from ADB

Esther Samboh, The Jakarta Post, Jakarta, Mon, 09/19/2011

The Asian Development Bank (ADB) has announced plans to channel grants and loans to improve the Indonesian government’s capacity in developing infrastructure projects through public and private partnership (PPP).

“The technical assistance, amounting to US$500,000, provided by the government of Japan through the Japan Fund for Poverty Reduction (JFPR) will support the government in preparing PPP projects that are economically sound, financially attractive to private sector financiers and affordable to the government,” the Manila-based regional development lender says in a statement released Monday.

The technical assistance is planned to be implemented in 2011, with the National Development Planning Agency (Bappenas) as an executing agency and Sarana Multi Infrastruktur

state infrastructure fund manager being responsible for implementing the activities.

ADB’s technical assistance program is aimed at assisting developing countries in planning and executing projects that it finances with grants and loans, its website says.

“This will support the government’s objective in increasing the number and value of commercially attractive and sustainable PPP projects offered to the private sector,” ADB's principal infrastructure specialist Bob Finlayson said.

The government is seeking to mobilize about $140 million worth of investment in infrastructure over the next five years, of which 60 percent is to be sourced from the private sector. While the government has developed a number of PPP projects, they have not attracted significant market interest due to concerns over project design, preparations and implementation, the ADB statement says.

RI, China ink US$6b deal for SE Sulawesi nickel smelter

Esther Samboh, The Jakarta Post, Jakarta, Mon, 09/19/2011

Chinese representatives on Monday signed an agreement with Indonesian officials to invest US$6 billion in a nickel smelter in Southeast Sulawesi.

Jilin provincial government’s Jilin Horoc Nonferrous Metal Group Co Ltd will develop the nickel smelting industry in Bombana and North Konawe regencies of Southeast Sulawesi and work with local firm Billy Indonesia with operations starting next year.

“First of all, mining materials should be processed domestically — no more raw material exports. Secondly, there will be job creation for thousands of people,” Coordinating Economic Minister Hatta Rajasa said after witnessing the agreement by representatives and officials of the related firms, regencies and provinces.

Hatta and Investment Coordinating Board (BKPM) chairman Gita Wirjawan said they expected the project to have a multiplier effect on the regencies’ economies and create jobs for local residents.

PT KAI receives US grant to upgrade railway signal system

The Jakarta Post, Jakarta, Thu, 09/15/2011

State railway firm PT KAI on Thursday announced that it had received a grant worth Rp 5.2 billion (US$598,000) from the US Trade and Development Agency (USTDA) to be spent on a strategic plan development study to improve its telecommunication and signaling system.

The grant was handed by US Ambassador to Indonesia Scot Marciel to PT KAI chief director Ignasius Johan, in Bandung on Thursday.

The railway signal system, operated by the train travel chief, is a guide for train drivers, telling them when to start trains, when to stop them and when to travel at certain speeds.

PT KAI signals, telecommunication and electricity deputy chief Ira Nevasa said the company hoped the study would result in a safer, more efficient and better quality operating procedure.

Jakarta Turns to Dutch Experts for Sea Dike Plan

Jakarta Globe, Dofa Fasila, September 14, 2011

The Jakarta administration is receiving help from the Rotterdam authorities in preparing a master plan for a massive sea dike that will help the capital deal with its perennial flood problems.

Jakarta Governor Fauzi Bowo, speaking after receiving the Dutch technical assistance team, said preparations for the plan would take about nine months.

Completing the plan, he added, would likely take two years, and implementing it would take at least a decade.

“We hope this project can proceed, and not be delayed, because it will really determine the future of Jakarta,” Fauzi said.

The Indonesian team spearheading the endeavor will also involve the Public Works Ministry and the National Development Planning Board (Bappenas), Fauzi said.

The same team completed a study, the Jakarta Coastal Defense Strategy, in May. The study foresees the need for the giant sea wall to be built off the coast of Jakarta by 2025.

The massive sea wall, besides helping Jakarta cope with flooding, will also fortify the city’s water supplies, long a problem in the capital, Fauzi said.

“The emphasis in the building of this giant sea wall as part of the Jakarta Coastal Sea Defense project is not only to safeguard the northern coastline of Jakarta but also to make use of this project in an integrated manner for the future benefit of the city,” Fauzi said.

The giant sea wall, he said, will also serve as a reservoir to collect water from several rivers running through Jakarta.

“It is planned that water from 13 rivers in Jakarta ... will in the future not just be left to flow into the ocean. We will collect the water within the giant sea wall so that it can become a primary source of water for the city. This is in the long term,” Fauzi said.

To deal with a possible water shortage while the wall is being planned and built, Fauzi said city authorities would accelerate a pipeline plan to link Jakarta with the Jatiluhur reservoir in Purwakarta, West Java, and plan a desalination plant. The governor has previously referred to the plant a decades-long project.

The pipe network from Jatiluhur, the desalination plant and the reservoir formed by the giant sea wall would buttress the city against floods and protect it from water shortages, Fauzi said.

The giant wall has become increasingly urgent as land subsidence in Jakarta has worsening while sea levels have risen, he added.

Officials in Rotterdam, home to one of the world’s largest ports, have substantial experience in protective construction. Sitting below sea level, the city is built mostly behind dikes.

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Geothermal Investors Want Additional Government Guarantees

Jakarta Globe, Ririn Radiawati Kusuma, September 14, 2011

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Indonesia’s ambitious plan to boost power capacity by 10,000 megawatts in three years might be in jeopardy because of additional geothermal investor demands, an executive said.

The government issued a regulation early this year that stipulated state-owned Perusahaan Listrik Negara would buy electricity from geothermal power plants at less than $9.70 per kilowatt hour but at a rate higher than for coal.

The finance ministry then issued a ruling that would back PLN’s financial condition should PLN face bankruptcy.

But investors aren’t satisfied with the decrees and want a promise that PLN will buy geothermal energy in any price, said Saunusi Satar, vice president for external affairs of Star Energy, on Wednesday.

“We have done the exploration activities which involves a lot of risk. We demand a full guarantee in all of our geothermal activities,” Sanusi said. “PLN should buy power at any price.”

Geothermal plants that face possible construction delays include Supramu Energy, Star Energy, Bakrie Power, Tata Power, and Golden Spike.

Sanusi explained that the companies would not start drilling into the geothermal well until the demands are met.

Star Energy has set aside $210 million to invest in Wayang Windu unit 2, with capacity of 227 megawatts, from the geothermal block in West Java, Sanusi said, and moving from the exploration stage to power production takes approximately four to five years.

“It may be completed after 2015, I think,” Sanusi said, meaning the government’s 2014 goal will not be met.

The government’s 2014 power plan includes 4,000 megawatts from geothermal sources.

Muhammad Sofyan, head of renewable energy division at PLN, said that private companies should not be worried with PLN’s ability to purchase power.

“We are committed to buying the power from geothermal power plant,” Sofyan said, adding that PLN also plans to boost geothermal as the second biggest energy source by 2020.

Toyota Toots Its Horn Over Massive New W. Java Plant

Jakarta Globe, Faisal Maliki Baskoro, September 13, 2011

Toyota chief executive Akio Toyoda arrived in style in Jakarta on Tuesday,
posing beside an orange 1977 Toyota Kijang, a popular model during the
company’s four decades in Indonesia. (AP Photo/Achmad Ibrahim)    

          

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Toyota’s supply chain may have been hit by the impact of the March tsunami in its home country of Japan, but the automotive maker is pushing ahead with expansion plans abroad, including in Indonesia.

Visiting the archipelago to mark 40 years of Toyota’s presence here, Akio Toyoda, the company’s chief executive, formally announced its plan to build a second plant in West Java.

Toyoda met Indonesia’s president and vice president on Tuesday, as well as an Industry Ministry official, to provide details of Toyota’s Indonesia plans.

“Our expansion plan shows our commitment to Indonesia,” Toyoda said, after briefly driving an orange 1977 Toyota Kijang, once the company’s most popular model.

Toyoda said Indonesia had become a focus of investor attention and a leader among developing nations as economies in Japan and Europe were clouded by economic crises.

Despite global production plans being disrupted by the March 11 earthquake and tsunami, Toyoda said that by June, Toyota had recovered “100 percent,” ahead of initial projections.

This was “thanks to the hard work and support of our people and thanks to the support from other countries like Indonesia,” he said.

Toyota announced it would build its second factory in a 76,000-square-meter facility next to its existing plant in Karawang, 60 kilometers east of Jakarta.

Toyota increased its investment to Rp 2.9 trillion ($336 million) from the Rp 1.7 trillion it committed in March in a sign of the growing automotive demand in Indonesia.

The factory is expected to be completed by 2013 and add 70,000 units of annual production capacity. Toyota is also keen to boost the local content of its cars and hopes the factory will generate 15,000 jobs.

Toyota expects to boost its exports from Indonesia, which last year represented 42 percent of its 107,000 unit output in the nation.

Toyota leads the market in Indonesia with a 37 percent share. Toyoda attributed that success to the Kijang, a family van.

“It’s the road that makes the car. Making cars that suit the characteristics of Indonesian roads is our way to catch our customer,’’ Toyoda said.

The Toyota Kijang has been sold in Indonesia for three decades. “Together with the Kijang Innova, these two models are our stars,” Toyoda said.

Johnny Darmawan, the president director of local distributor Toyota Astra Motor, said the trend in Indonesia was toward multipurpose vans to accommodate families, while there was also likely demand for a low-cost hatchback.

“We are also looking to export some of the cars produced in the new plant, but our priority is still satisfying the local demand,” he said.

Johnny said Toyota and the government were still in talks over tax incentives, but that infrastructure such as ports was more important.

Edwin Sebayang, the head of research at MNC Securities in Jakarta, said Indonesia’s growing economy and easy financing would drive car sales.

“It’s not surprising at all that automotive companies are posting high revenues with high margins,” he said.

Nestle Begins Construction of $200m Factory in Indonesia

Jakarta Globe, September 13, 2011

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Geneva. Swiss food giant Nestle said on Monday it began construction of a $200 million (146.7 million euros) factory in Indonesia which will produce infant cereals, chocolate malt drinks and milk powder.

“Our decision to invest USD 200 million in Karawang is consistent with the growth in demand and our confidence in the rapidly developing economy of Indonesia,” Arshad Chaudhry, President Director of Nestle Indonesia said in a statement.

The factory in the town of Karawang, West Java, will create over 600 jobs and is expected to open in early 2013, the company added.

Agence France-Presse

Goldman, Morgan in Talks to Buy Indonesian Brokers: Sources

Jakarta Globe, September 12, 2011

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Goldman Sachs and Morgan Stanley are each in talks to buy an Indonesian brokerage firm to expand their reach into the booming capital market of Southeast Asia’s biggest economy, sources said.

Goldman is in talks to buy Tiga Pilar Sekuritas and expects to complete the acquisition before the end of 2011 as it aims to start a local brokerage operation next year, two sources with direct knowledge of the deal told Reuters on Monday.

Goldman does not have an underwriting or broking license in Indonesia, while Morgan Stanley secured an underwriting licence in 2008, but is seeking a bigger presence through a full-fledged broker license.

Both banks plan to add research analysts as well as sales and trading staff to the brokerages next year, while Goldman could also add investment bankers, as they seek to win fees from equity offerings and debt deals, the sources said.

“I think this signals a positive view on our capital market ... It has really become an important destination for global investment banks,” said Winston Sual, who manages nearly $1 billion in funds at Panin Sekuritas in Jakarta.

“This will give more competition for fees among global bankers like JPMorgan and Credit Suisse.”

The banks’ plans in Indonesia, which has seen its stock market hit records this year on surging foreign investment, follow moves by Nomura Holdings and Citigroup to ramp up equity research teams in Jakarta this year to challenge leaders Credit Suisse and Deutsche Bank.

Investment interest in the G20 member is set to rise again next year, when Indonesia hopes to get an upgrade by Fitch Ratings to an investment grade sovereign rating that will put it alongside top emerging BRIC nations such as Brazil. 

Goldman has completed due diligence for Tiga Pilar and both parties are now negotiating the deal structure and valuation, said one of the sources, who all declined to be identified.

“Goldman has already asked Tiga Pilar to start looking for prospective staff and bankers as a precondition before they complete the deal,” said the source. No financial details were immediately available.

Officials at Tiga Pilar and Goldman declined to comment.

The Tiga Pilar deal size is likely to be small as Goldman is only seeking to buy the operating licenses that the deal will provide. It will need to at least inject the Rp 50 billion ($6 million) in license costs and required brokerage capital.

Tiga Pilar, partly owned by the family of Tan Pia Sioe, traded Rp 445 billion by stock value in the first six months of this year, ranking it 102 out of 117 active brokerages, according to stock exchange data.

The IDX composite index has jumped over 5 percent so far this year, topping the list of gainers in Southeast Asia. 

Goldman’s rival Morgan Stanley has also identified a target brokerage firm to acquire and hopes to conduct due diligence this year in order to start operations next year, said three other sources with direct knowledge of this deal.

“Talks are ongoing. It is still early to mid-phase. Morgan Stanley is talking to people,” said one of the sources. Sources declined to give the name of the target brokerage and no financial details were available.

A Morgan Stanley spokesman declined to comment. The talks are aimed at either buying a brokerage to get their seat on the stock exchange or to buy a seat from an existing brokerage, one of the sources said.

A full broking license would allow the firm to cover the secondary side of sales and trading as well as research, the source added.

Citigroup bought Indonesian brokerage Republik last year and this year added bankers and analysts, including veteran analyst Ferry Wong from Macquarie as its new head of research.

Citi was not in the top five for underwriting Indonesian equity deals last year but this year has surged up the league table to rank second among global banks, behind Deutsche.

Reuters

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Toyota to build new factory in Indonesia-Nikkei

Reuters, Sept 9, 2011

(Reuters) - Toyota Motor Corp plans to spend nearly 30 billion yen($387.8 million) to build an assembly plant in Indonesia that it hopes to launch in the first half of 2013, the Nikkei business daily reported.

The plan calls for nearly doubling the firm's capacity in that country to about 200,000 vehicles a year, the paper said.

The decision comes after three years of holding off judgement on any plant construction in Japan and abroad, said the business daily.

Japan's leading carmaker seeks to maintain its lead in Indonesia, which is set to become Southeast Asia's largest auto market, the Nikkei said.

The new facility will be built adjacent to its existing factory in the Jakarta suburbs of Karawang and is expected to assemble three subcompact models, including a low-priced strategic vehicle under development for that country, the paper reported.

Last year, auto sales in Indonesia was around 750,000 units, approaching Thailand's roughly 800,000, with the number seen exceeding 1 million units in the coming years, the paper said.

Toyota controls about 60 percent of the Indonesian market when contributions by group firms such as Daihatsu Motor Co are included. But as competition grows with Nissan Motor and Suzuki Motor announcing plans to boost output, Toyota aims to improve cost competitiveness through increased local production, the Nikkei reported.           

(Reporting by Sumit Jha in Bangalore;Editing by Sriraj Kalluvila)

Freeport familiarizing Jayapura schoolers with environmental awareness

Antara News, Thu, September 8 2011

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Jayapura, Papua (ANTARA News) - PT Freeport Indonesia in cooperation with the Jayapura City administration is conducting a program to familiarize local primary and secondary school students with environment-related subjects under the theme "Towards Environmentally Aware Schools."

The head of the PT Freeport Indonesia representative office, Anthon Raharusun, said here Wednesday the program was a manifestation of the company`s constant attention to the environment and part of its efforts to work in partnership with local stakeholders.

"We have been doing a lot of cooperation with various parties as well as local administrations and private sectors, not only in Papua but also throughout Indonesia, especially in terms of environmental problems. Because PT Freeport Indonesia is concerned about the environment," he said.

He also hoped the cooperation with the Jayapura city administration can be done continuously in the future, not just familiarization for schools but also for regional task force units.

"All parties who wish to conserve the environment can cooperate with Freeport," he said.

The supervisor for environmental awareness and education of PT Freeport, Jimmy Rumainum, said the environmental awareness familiarization program for primary and junior high school students was also aimed at creating an environment-based school (locally named Adiwiyata).

"The activity itself in Jayapura city is still in its early stage but in Mimika district and several other areas in Papua it was in an advanced stage. In fact, in Mimika there is already an Adiwiyata school," he said.

Meanwhile, the vice mayor of Jayapura city, Nur Alam, on behalf of the city administration welcomed the concept of cooperation and initiatives offered by PT Freeport Indonesia.

Moreover, the administration has outlined the Five-Year Development Program (2011-2016) of Jayapura City, among others, the Clean and Beautiful City, and Lighting the City in the night.

"Many things can be supported by PT Freeport as a world class company. We hope the activities that give positive values ​​such as this can become a sustainable program," he said.

The Freeport program is highly synergistic with Jayapura city administration`s work program, so it can join hands to save the environment in Jayapura city area," he added.

Editor: Jafar M Sidik

French Miner Eramet to Invest $450m in Halmahera Nickel Project

Jakarta Globe, Camelia Pasandaran, September 07, 2011

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In a move expected to give eastern Indonesia an economic boost, a French mining group plans to invest in a nickel mining project in North Malaku.

“Eramet will have spent around $450 million on this project before the final investment decision,” Eramet’s chairman and chief executive officer, Patrick Buffet, said on Wednesday after meeting with President Susilo Bambang Yudhoyono.

The $450 million is part of the first phase of a $6 billion investment that would develop a nickel and cobalt mine as well as a processing plant on North Malaku’s Halmahera Island, he said.

He added that Eramet would provide a complete investment plan for the project by the end of 2012 after settling permits and agreements on key issues with the Indonesian government.

After the first phase is complete, the Weda Bay Nickel project is expected to produce 35,000 tons of nickel a year. After the second phase, that should increase to 65,000 tons. Buffet said the project could employ about 6,000 people.

It will include the development of several mining centers in Halmahera, a hydro-metallurgical plant and facilities that provide electricity, water treatment and other basic infrastructure like roads and housing.

Hatta Rajasa, the coordinating minister for the economy, said the president welcomed the plan.

“This is one of the biggest investments in eastern Indonesia and will support the government’s Master Plan for the Acceleration and Expansion of Indonesia’s Econo mic Growth,” Hatta said.

Energy Minister Darwin Zahedy Saleh said the project should be completed by 2015.

Eramet has mining operations in New Caledonia for nickel and in Gabon for manganese.

Weda Bay Nickel is a joint venture with Japanese trading house Mitsubishi and Indonesian state-owned miner Aneka Tambang, commonly known as Antam.

Eramet holds a stake of 54 percent, Antam 10 percent and Mitsubishi the remainder.