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ingapore-listed Golden Agri Resources (GAR), the world'€™s second largest plantation company, is disbursing up to US$150 million in capital to establish two biodiesel facilities, to benefit from Indonesia'€™s anticipated energy mixture policy that is expected to boost sustainable fuel consumption.

The company'€™s head of investor relations, Richard Fung, told reporters in a teleconference held on Thursday that GAR was aiming at seeking benefits from the government'€™s policy to blend more biofuel in diesel by being directly involved in the efforts of boosting sustainable energy.

'€œWe are currently in the process of building two biodiesel plants of 300,000 tons per annum each in capacity, of which we expect can be completed by next year,'€ he said.

'€œThe construction for one of the plants started earlier so it is expected to be fully completed in the first half [of next year] while the second one has just started recently so it will be done toward the second half.'€

For the two plants, Fung said that a total of $150 million in investments would be disbursed, and the expansion was carried out by one of GAR'€™s subsidiaries. The new plants, he explained, are located in Marunda in North Jakarta and Tarjun in South Kalimantan.

The production from the facilities, he said, was expected to be fully absorbed by the Indonesian government'€™s biodiesel program.

'€œWe have to go through a tender process with [state oil and gas company] Pertamina but we are fully confident that the production will be fully utilized by the policy. The process [for the tender] is starting right now,'€ he said, refusing to further elaborate on the tender process.

The government has planned to increase the mandatory mix of biofuel in diesel fuel from 10 to 15 percent to encourage sustainable energy use and as part of its solution to easing the volatility of the rupiah, as reduced oil imports will improve the country'€™s current account situation and in turn improve its economic fundamentals.

The move, albeit causing delays, has been applauded by CPO producers, including GAR, to benefit the company in terms of pricing, given that more absorption in fuel usage is projected to lessen CPO supplies in the market and thus boost the commodity'€™s already low prices.

The plunging commodity prices and low production impacted by El Niño have hurt performances of CPO companies, although the latter are expected to result in less supply in the marker and boost prices in the future.

GAR, according to its financial report published on Thursday, booked about 14 percent lower growth on a yearly basis at $3.38 billion during the first half, while its core net profits attributable to owners slide by nearly 27 percent to $109.52 million.

Its fresh fruit bunch (FFB) production in the first six months of the year slipped by 3 percent year-on-year to 4.58 million tons, while its CPO output shrank by around 9 percent to 1.09 million tons, due to weather disruption in the first quarter, Fung said.

'€œImproved second quarter performance is not enough to compensate for lower first half production output and CPO prices'€ Fung said.

'€œWe are pretty much in agreement with general analysts consensus, which is unfortunately fairly bearish in the short term. We are pretty much at the bottom right now, we expect the CPO price not to recover significantly until next year.'€

GAR, whose subsidiary Sinar Mas Agri-Resources and Technology (SMART) is listed in the Indonesia Stock Exchange (IDX), operates a 460,000 hectare plantation. The company has recently started using a new kernel crushing plant with a capacity of 270,000 tons per annum, and has expanded its downstream capacity by 300,000 tons per annum to make a total of 3.8 million tons of annual production combined. Its capital expenditure for this year is $300 million in total for upstream and downstream units.