T

he government will take over aluminum producer PT Indonesia Asahan Aluminium (Inalum) in a transaction deal, which will be worth up to US$700 million, when the company’s contract ends in 2013.

Coordinating Economic Minister Hatta Rajasa said in Jakarta on Friday that the acquisition value was based on audits conducted by three independent auditing companies on Inalum.

“All three auditing companies gave a value of between $600 million and $700 million,” Hatta said.

Hatta added that the funds would be taken from reserve funding allocated in the state budget (APBN).

Hatta also said that once the takeover of Inalum was completed, the company would be managed under a related state-owned company in cooperation with a private company.

“The most important thing to do now is to bring Inalum back to Indonesia,” Hatta said.

“We are planning to increase Inalum’s production capacity,” he added.

Inalum was set up in 1976 through an agreement between the government and its Japanese counterpart. The company runs the only aluminum smelter in Southeast Asia, in Asahan, North Sumatra, and utilizes hydropower plants Asahan I and Asahan II as its prime energy source.

The agreement stipulated that the Indonesian government had the option of taking over Inalum when the contract expired in 2013.

The smelter commenced operations in 1983 and produces 250,000 tons of aluminum ingots per annum. Inalum allocates only 40 percent of production for the domestic market, while exporting the rest to Japan.

The Indonesian government has a 41.12 percent stake in Inalum, while NAA, a consortium of 12 Japanese companies including Sumitomo Chemical Co. Ltd., Sumitomo Shoji Kaisha Ltd., Mitsui Aluminium Co. Ltd. and Mitsubishi Corporation, holds 58.88 percent.

The government expects to receive larger royalty shares and tax revenue from Inalum’s operational profit by having full ownership of the smelting company.

The Japanese consortium had previously expressed its wish for a contract extension by offering a commitment to increase its yearly production capacity to 317,000 tons. The consortium planned to invest $367 million to extend the contract.

Hatta said that despite Indonesia’s commitment to take over Inalum, the government was still open to negotiations on a possible contract extension, renewal or termination.

Previously, State-Owned Enterprises Minister Dahlan Iskan had said that the government, represented by the Finance Ministry, would conduct a tender via the Government Investment Center (PIP) to determine which state-owned company would manage Inalum once it was taken over.

Dahlan suggested that the State Electric Company (PLN) should establish a consortium with PT Aneka Tambang (Antam) and PT Timah to manage Inalum.

— JP/ Hans David Tampubolon