Business

Pertamina to wrap up acquisition
of Rekind

State-controlled oil and gas firm PT Pertamina hopes it will be able to conclude the company’s acquisition of a majority stake in state-owned engineering and construction company PT Rekayasa Industri (Rekind) by the end of this year.

Pertamina investment planning and risk-management director Afdal Bahaudin said on Wednesday the company was speeding up the process to take over Rekind, which is engaged in various engineering and construction projects.

Currently, state-owned fertilizer producer PT Pupuk Indonesia Holding Company (PIHC) owns a 95.03 percent stake in Rekind while the remaining 4.97 percent is owned by the Indonesian government.

 “We will reactivate the [acquisition plan] this year by examining the value [of the company] including the legal and commercial aspects,” Afdal said in a text-message sent to The Jakarta Post.

It is still unclear what kind of transaction the firm would pursue in taking over Rekind, whether it will be a share swap or a cash transaction.

 However, on Wednesday, Afdal mentioned Pertamina would likely allocate funds from its mergers-and-acquisition budget or divert directorate funds to acquire Rekind.

As the Post has previously reported, Pertamina has allocated US$6.77 billion in investment this year to finance upstream and downstream projects and increase production, as well as strengthening the nation’s energy infrastructure.

The upstream business will receive the largest allocation of $3.1 billion or around 46 percent of the total investment, while $638 million and $546 million will be allocated to finance its refinery projects and marketing and trade business respectively.

Afdal said the firm was seeking to complete the acquisition of Rekind by the end of 2013. Previous reports had said the company was supposed to wrap up the plan last year.

Rekind has been working on a variety of engineering and construction projects, including fertilizer plants as well as oil and gas facility projects.

This year, Rekind, along with Pertamina’s Pertagas, is building Pertamina’s pipelines that will link Cirebon in West Java and Semarang, Central Java.

Last year, Pertamina named Rekind as the winner of its tender for engineering, procurement and construction (EPC) of its planned gas-receiving terminal in Aceh, which will be built following the modification of the company’s Arun liquefied natural gas (LNG) plant.

Rekind has also been awarded a $226 million contract to build the Banyu Urip pipeline and mooring tower in US-based ExxonMobil’s subsidiary Mobil Cepu Limited’s oil-rich Cepu block in Bojonegoro, East Java

Separately, State-Owned Enterprises Minister Dahlan Iskan said in Jakarta that he would push Pertamina to take over Rekind from PIHC in a bid to further strengthen the engineering firm into a world-class company.

 “If [Rekind] remains under the management of Pupuk Indonesia, they will not be able to join any international tender as they must submit their financial reports,” he said as quoted by Antara news agency.

Pertamina, on the other hand, has a better financial position, which can boost Rekind’s status among its competitors pursuing projects overseas, according to Dahlan.

The minister also mentioned he hoped the money that PIHC would receive following the acquisition could be used by the company to finance its core business, which is strengthening the country’s food security.

Currently, there are seven companies under PIHC: Rekind, PT Pupuk Kalimantan Timur (PKT), PT Pupuk Sriwidjaja Palembang (Pusri), PT Petrokimia Gresik, PT Pupuk Kujang, PT Pupuk Iskandar Muda and PT Mega Eltra, the trading company.

The country’s ailing shipping firm PT Djakarta Lloyd has been projected as a replacement for Rekind’s vacant position should the acquisition plan go ahead as planned, the Post has reported.

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