[Kabar-indonesia] 2: RI Trade and Investment News, 31 July 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
Monday, July 31, 2006

Trade and Investment News, 31 July 2006

Part 2 of 2

STATE CONCERNS

All Villages to Have Phone Service by 2010

Communications Minister Sofyan Djalil said the government is determined to 
provide all villages in the country with telephone facilities by 2010, Antara 
reported on Friday (28/7/06).

"This is possible because investment in a telephone installation has become 
relatively cheap, thanks to the availability of the Code Division Multiple 
Access (CDMA) technology," Djalil said when inaugurating the operation of rural 
telecommunication networks and school computer facilities in Way Kanan, Lampung 
recently.

He said the development of telecommunication networks is being financed by 
funds taken from 0.75% of the profits of telecommunication companies.

Saefullah said the rural telecommunication project is carried out jointly by 
the government and private telecommunication companies.

Govt. to Set Up Micro-Finance Institutions 

The government plans to set up 6,143 micro-financial institutions across the 
country to help people who need small amounts of capital, State Minister for 
Cooperatives and Small and Medium Businesses, Suryadharma Ali, said on 
Wednesday (26/7/06).

He said the micro-financial institutions would be developed at district and 
sub-district levels. "Each sub-district will later be given capital funds of 
about Rp100 million ($10,982) and an institution will be set up in the form of a 
cooperative to manage it through a loan and saving service," he said.

The minister said banks are usually reluctant to extend small loans.  
Extending Rp1 billion to one debtor is easier than extending it to 1,000 people, he 
said.  "That is why few banks are willing to issue retail or micro-credits.  
Therefore, micro-financial institutions will be very important," he said.

SOEs

Rajawali Says Gresik Deal Completed

The Rajawali Group said Thursday (27/7/06) it had completed its $337 million 
purchase of a 24.9% stake in the country's largest cement maker, PT Semen 
Gresik.

Semen Gresik shares previously owned by the world's third largest cement 
maker, Cemex SA, now officially belong to Rajawali, spokesman Fritz Simandjuntak 
was quoted as saying by Reuters.  Before the sale, Cemex held a 25.5% stake in 
state-run Semen Gresik.

XFN-Asia reported on Thursday that a total of 147.69 million shares of Semen 
Gresik were crossed at Rp20,050 each by JP Morgan Securities Indonesia, 
dealers said.  The transaction was made to execute the sale of Cemex's 24.9% stake 
in Semen Gresik to Rajawali, they said.

Semen Gresik's H1 Net Profit Doubles

Indonesia's largest cement maker, PT Semen Gresik, said on Friday (28/7/06) 
its first-half net profit reached Rp663.45 billion ($73.18 million), more than 
twice the Rp321.21 billion reported a year ago.

State-run Semen Gresik also said its sales revenue for the period was up by 
24.9% to Rp4.09 trillion compared to the first half of 2005, despite weaker 
cement sales volume, Reuters reported.

Domestic cement sales from all makers in the country fell by 3.3% in the 
January-June period this year to 14.55 million tons, partly due to a slowdown in 
the economy after the government's decision to sharply raise fuel prices last 
year.

However, Semen Gresik, with an annual capacity of about 16 million tons, beat 
the overall industry as its domestic sales volume expanded by 3.4% to 6.9 
million tons, accounting for 47.5% of the market, up from 44.4% in the same six 
months of 2005.

The company's net profit margin improved to 16.2% from 9.8% over the period 
while its operating margin reached 22.5%, up from 15.7% a year ago.  Indonesia 
consumed 31.5 million tons of the building material last year, up 4.9% from 
30.4 million tons a year before but below analysts' expectations of a 7% to 8% 
increase.

Adhi Karya Looks Offshore 

State construction firm PT Adhi Karya is planning to seek more projects in 
the Middle East after winning a Hotel Shangri-La construction project in Qatar, 
Antara reported on Thursday (27/7/06).

"We are indeed eyeing more projects in the Middle East because the 
opportunity is big," president director Saiful Imam said.

He said projects in the Middle East contributed much to the company's profit 
in 2006.  Adhi Karya this year won a railway project in India worth Rp1 
trillion ($109.5 million) for a three-year period.

Among the projects offered to Adhi Karya is the development of apartment 
buildings, high-rise commercial buildings and hospital projects.  

Although the company is eyeing overseas projects, domestic projects mostly 
from the state (about 60%) are still expected to contribute Rp3.1 trillion out 
of the company's income target of Rp4.1 trillion.

PRIVATE SECTOR

Qantas may Seek Tie-up with Adam Air 

Qantas Airways Ltd, Australia's biggest airline, may expand in Indonesia to 
take advantage of increasing demand for flights in Asia's third most populous 
nation, Bloomberg reported.

"We're still investigating the opportunities in Indonesia," chief financial 
officer Peter Gregg said in Brisbane Wednesday (26/7/06).  "Adam Air is a 
possibility, there's a couple of others as well."

PT Adam Skyconnection Airlines, a low-cost carrier known as Adam Air, said in 
February it was in talks with Qantas to sell it a stake in the Jakarta-based 
airline.

Qantas is looking to bolster earnings and revive its international market 
share amid increasing competition from global carriers.  The company already has 
an investment in Jetstar Asia, a Singapore-based low-cost carrier. 

Footwear Exports Seen Jumping 13% - Report

Indonesian shoe exports are expected to increase by at least 13% to $1.7 
billion this year, as several foreign producers shift to Indonesia and others 
expand, a report said Monday (24/7/06).

Indonesian Footwear Association chairman, Eddy Widjanarko, was quoted by 
Media Indonesia as saying that exports could rise a further $600 million if 
producers also grab market share in the European Union left free by China and 
Vietnam.

The two countries were last year accused of dumping their products in the 
European Union and were slapped with high anti-dumping fees, forcing the closure 
of shoe manufacturing plants in the two countries.

Widjanarko told the daily that four leading international shoe brands plus 11 
other smaller producers are relocating manufacturing plants from Vietnam to 
Indonesia this year, while several existing major producers are expanding their 
production.

The new investment and expansions are expected to employ some 250,000 
workers, he added.

BANKS

H1 Results Show Mixed Fortunes 

Persistent high interest rates appear to be having an impact on profitability 
in the banking industry, with major lenders seeing slowdowns in profit growth 
as high borrowing costs sap the demand for loans, The Jakarta Post reported 
on Wednesday (26/7/06). 

Indonesia's largest bank, Bank Mandiri, said its net profit in the first half 
rose 32.4%, helped by lower bad loan provisions and a slightly higher net 
interest margin.  The bank posted a net profit of Rp815.44 billion in the 
January-June period compared to Rp616.046 billion in the same period last year.  

Mandiri said its net interest income rose 6.5% to Rp4.85 trillion over the 
same period last year.  Its second-quarter net profit stood at Rp305 billion, 
three times the year-ago period's figure, according to a Reuters calculation.

Bank Danamon, the country's fifth largest lender by assets, has seen its 2006 
first-half profit more than halved from the same period last year.  Danamon's 
net profit during the first six months to June 30 plunged to Rp558 billion 
from Rp1.28 trillion a year earlier, the lender said in a statement announcing 
its first-half results. 

By quarter, however, it still managed to grow its profit by 22% to Rp307 
billion during 2006's second quarter compared to the first.  In 2005, Danamon's 
half-year profit rose 16% on a yearly basis, while its second quarter profit 
rose by 0.7%. 

Danamon's poor half-year figures are the result of its net interest income -- 
the interest revenue it receives from borrowers after interest paid to 
depositors -- rising by only 16% to Rp2.61 trillion from a year earlier on lending 
that grew by 9% to Rp36.5 billion from last year's first-half, or 6% from this 
year's first quarter. 

Danamon's first-half gross non-performing loan (NPL) ratio stood at 3.6%, up 
from last year's 2.7%, although still far below the industry's 8% average.  
Its funds from depositors grew 15% to Rp51.7 trillion, leading to a capital 
adequacy ratio (CAR) of 22.9% and a lending-to-deposit ratio (LDR) of 62%. 

Danamon remained upbeat despite the poor showing.  "We are optimistic about 
the business outlook and our loan growth potential going forward," Vera Eve Lim 
said in the statement. 

Bank Niaga, the seventh largest lender, managed to book an unaudited net 
profit of Rp353.5 billion in the first six months to June 30, up nearly 15% from 
the same period last year. 

By quarter, however, Niaga's Rp176.25 billion second-quarter profit for 2006 
was 0.5% down on that for the first quarter.  Niaga's good showing amid the 
recent unfavorable trading environment for the banking sector was a result of 
its net interest income rising 29% to Rp1.1 trillion from a year earlier on the 
back of lending growth of 19% to Rp30.65 trillion, it said in a statement. 

Niaga's net NPL ratio improved slightly to 4.11% from 4.44% last year, while 
its CAR stands at 18% and its LDR at 90%.  Meanwhile, its depositor funds grew 
23% to Rp33.5 trillion. 

Niaga president director Peter Stok admitted that business was difficult amid 
high interest rates and low demand for loans, and said that the bank might 
have to revise downward its total lending for this year to Rp33 trillion from 
the previously forecast Rp35 trillion. 

Niaga would, however, try to diversify its lending away from the current 
focus on mortgage lending so as to prevent net interest income and profit from 
falling back in the year's second half. 

Bank Bukopin's first half to June net profit rose to Rp217.96 billion from 
Rp201.78 billion in the same period last year, XFN-Asia reported.  Interest 
income climbed to Rp1.46 trillion from Rp937.22 billion in 2005, while net 
interest income was up Rp599.08 billion from Rp486.8 billion.  Operating profit 
jumped to Rp214.29 billion from last year's Rp186.04 billion.

Bank Panin's first half to June net profit slid to Rp290.32 billion from 
Rp329.12 billion in the corresponding period last year.  Interest income was 
slightly up to Rp1.91 trillion from Rp1.2 trillion in 2005, while net interest 
income increased to Rp667.79 billion from Rp634.01 billion.  Operating profit 
however fell to Rp395.83 billion from Rp444.51 billion a year ago.

Bank NISP's  first-half unaudited net profit climbed to Rp103.96 billion from 
Rp100.98 billion in the same period last year, according to Dow Jones 
Newswires. 

Bank Internasional Indonesia, the country's sixth largest bank, recorded an 
11% decrease in net profit to Rp352 billion in the first half of the year, from 
Rp397 billion in the corresponding period in 2005.  Its net interest income 
rose to Rp1,399 billion from Rp1,129 billion.

Bank Buana Indonesia posted a net profit of Rp199.12 billion in the first six 
months of the year, down from Rp215.08 billion in the same period last year.  
Its interest income rose to Rp1.07 trillion from last year's Rp734.95 billion 
while its net interest income was up Rp549.87 billion from Rp454.75 billion a 
year ago.  Operating profit fell to Rp290.3 billion from Rp304.9 billion.

Indonesia's fourth largest bank, Bank Rakyat Indonesia posted a 3.1% rise in 
first-half net profit to Rp2 trillion, despite high domestic interest rates, 
thanks to its lucrative micro-financing business, according to Reuters.

"This is the result of our focus on lending to small- and medium-sized firms, 
which are known to have a strong ability to survive in different cycles of 
the economy," the state-owned bank said in a statement.

BRI said its total outstanding loans rose 19.7% year-on-year to Rp82.27 
trillion in the first half of the year.  About 88% of the loans were extended to 
small- and medium-sized firms.

The country's oldest bank, which has a market capitalization of $5.3 billion, 
said its net interest income increased 9.6% to Rp6.71 trillion in the first 
six months of the year from the same period last year.

Bank Permata saw its net profit plummet to Rp142.78 billion in the first six 
months of the year from Rp218.8 billion in the same period last year.  Net 
interest income over the period was up Rp921.06 billion from Rp847.66 billion in 
the first half of 2005.  Operating profit over the period plunged to Rp192.07 
billion from Rp304.18 billion in the same period a year ago.

Khazanah to Rethink Equity Structure 

Khazanah Nasional Bhd may need to adjust its ownership structure in PT Lippo 
Bank and PT Bank Niaga as a proposal by Bank Indonesia disallowing any single 
party to own a dominant stake in more than one commercial bank is expected to 
be launched in August. 

Under the proposed Single Presence Policy, companies that own stakes in more 
than one commercial bank will have to reduce their holdings by either merging 
the banks or forming a holding company that has control of the banks, 
Malaysia's The Edge Financial Daily reported on Tuesday (25/7/06).

Controlling interest is defined as more than 25%.  The deadline for the 
completion of the implementation is end-2008.

Khazanah owns 87.5% of Lippo Bank via its subsidiary Santubong Investment BV 
and 66.1% indirect interest in Bank Niaga through Bumiputra-Commerce Holdings 
Bhd.

In a research note, Mayban Securities Research said although it is purely 
speculative, an option for Khazanah is to merge Lippo Bank with Bank Niaga.  
Another alternative is for Khazanah to sell Lippo Bank.

"In the first scenario, the enlarged Bank Niaga-Lippo Bank entity is 
estimated to have an asset base of Rp70.7 trillion.  This comfortably creates an 
enlarged entity that would be the fifth largest bank in Indonesia by asset size."

More Bank Lending Needed - BI 

The central bank is pushing the country's banks to boost their lending amid 
poor credit growth in the industry during the first half of the year.

"We will ask the lenders to review their business plans for this year, which 
we will then assess to pinpoint the problems they are facing in increasing 
their lending," Bank Indonesia (BI) Governor Burhanuddin Abdullah was quoted as 
saying by The Jakarta Post on Monday (24/7/06).  

"Based on this, we can then take the necessary policy actions to improve 
credit growth so as to achieve the target set for this year." 

Lending grew by a meager 2.4% to some Rp747.7 trillion during the first six 
months of 2006, as compared to some 10% in the same period last year. 

Abdullah said he hoped the banks would expand their lending by at least 18% 
in the year's second half so that 2006's planned 20% lending-growth target 
could be achieved.  Lending grew by 22% to Rp730.2 trillion last year. 

A credit-growth level of 18%, he further said, would be enough to help propel 
Indonesia's economy to a growth of between 5.7% and 5.9% this year.  "The 
economic growth target can be achieved if lending can be accelerated.  If not, 
then it will be quite difficult," he said.  However, he did not elaborate on 
what policy actions 

BI might pursue to encourage more lending. 

POWER

PLN, Pertamina to Use Domestic Bio-fuel

Research and Technology Minister Kusmayanto Kadiman said the domestic market 
for bio-fuel products is guaranteed because state electricity firm PT PLN and 
state-owned oil and gas company PT Pertamina are ready to absorb all 
alternative energy produced domestically.

"We have two major stand-by buyers, namely Pertamina for the transportation 
sector and PLN for the electricity sector," the minister said on Tuesday 
(25/7/06), according to Antara.

Kadiman said Pertamina is selling bio-fuel in only 100 refueling stations 
because its supply is still limited.  Bio-fuel, particularly fuel produced from 
Jatropha curcas and cassava crops, is relatively cheap because its price is not 
affected by the fluctuation of the world oil price, he added.

He said by developing bio-fuel, Indonesia is expected to reduce the use of 
fossil fuel oils by 10% in the transportation sector and 50% in the power 
generation sector by 2010.  For this purpose, the minister said, Rp100 trillion 
($10.9 billion) in funds would be needed to develop bio-fuel energy.  The amount 
would be taken from the state budget.

To develop alternative energy, President Susilo Bambang Yudhoyono decided to 
set up a national team in charge of formulating government policies on the 
development of bio-fuel, including on matters related to cultivation land, 
infrastructure, processing, marketing and funding.

The investment per hectare is estimated at Rp30 million for oil palm, Rp15 
million for sugarcane, Rp3 million for jatropha curcas and Rp3.5 million for 
cassava.

PLN in Gas Supply Deal with Amerada

State power firm, PT PLN, signed an agreement with state oil company PT 
Pertamina and US firm Amerada Hess on Monday (24/7/06) on the supply of natural gas 
to a power plant in central Sumatra.

Under the agreement, which takes effect in 2008, Pertamina and Amerada Hess 
will jointly supply 80 million cubic ft of gas per day to a 90-MW PLN power 
plant in Jambi for 12 years, PLN's acting president director said.

"This will replace the usage of existing diesel fuels in the Jambi plant.  
Over 12 years, this can save the usage of some 8.8 million kiloliters of diesel 
oils," Djuanda Nugraha Ibrahim was quoted as saying by Reuters.  The gas will 
be supplied from the Jambi Merang block operated by Pertamina and Amerada.

Ibrahim also said the firm plans to build a new power plant in Jambi, but did 
not give details.

Pertamina to Spend $27m on Geothermal 

State oil company, PT Pertamina, plans to spend as much as $27 million to 
develop nine geothermal wells in West Java, Sumatra and Sulawesi, and sell the 
steam to state electricity company PT PLN, a company official said Monday 
(24/7/06).

The company wants to drill wells in Kamojang in West Java province, Ulubelu 
in southern Sumatra, Lumut Balai in South Sumatra province and Lahendong in 
Sulawesi, its upstream director Sukusen Soemarinda said, according to Bloomberg 
News.  

Indonesia's electricity need is forecast at 29,500 MW by 2010. The country's 
geothermal potential exceeds 27,140 MW, or about 40% of the world's reserve 
of geothermal power, the Mines and Energy Department said in a report on 
December 29.

Pertamina has 15 geothermal concessions, yielding 8,480 MW of power.  
Geothermal plants use wells to tap underground deposits of heated water.  The water, 
which turns into steam upon reaching the surface, is used to power turbines 
and generate electricity. 

OIL AND GAS

Govt. to Offer Bigger Share of Output 

Indonesia plans to attract increased oil and gas investment by offering 
companies a greater share of production in certain areas, such as frontier acreage 
and remote and deepwater blocks, a senior official at the Mines and Energy 
Department said Wednesday (26/7/06).

"We want to give incentives to investors by giving a better split in 
frontier, remote and deep sea.  But the split will not be the same, because it depends 
on the difficulty in each area," Director General for Oil and Gas Luluk 
Sumiarso was quoted as saying by Platts Commodity News.

Oil production in Indonesia is currently split, with 85% going to the 
government and the remaining 15% to the contractor.  For gas, the government 
currently gets 70% and the contractor 30%, although this can be changed to 60:40 in 
favor of the state in areas categorized as "difficult".

Sumiarso said the government hopes the incentives would help the country 
boost its oil production.  "We will do our best effort to increase and meet our 
output target of 1.3 million barrels per day (bpd) by 2009."  The government 
would also increase the number of oil and gas blocks on offer to help reach the 
target.  This year it plans to invite bids for 41 oil and gas blocks.  The 
government also scrapped taxes on equipment imported for exploration last year in 
a bid to lure investors.

Indonesia has 60 hydrocarbon basins but only half have been explored.  The 
government is aiming to achieve an average production of 1.05 million bpd this 
year.

Oil Prices May Fall Next Year - Minister 

Mines and Energy Minister Purnomo Yusgiantoro said Thursday (27/7/06) that 
international oil prices are likely to slip next year as global supply growth 
will outpace growth in demand, 

"(Global) demand growth next year will be 1.3 million barrels per day, but 
supply growth will be 1.7 million bpd.  So there will be an oversupply next 
year," he said in an interview with Dow Jones Newswires in Vientiane.

One major reason behind the current high prices is the political premium, he 
said.  "What we are assuming is that the political premium is about $15-$20 a 
barrel," he said.  "Oil prices are now around $75 a barrel, but I think if you 
remove political concerns or the political premium, the true price should be 
$55." 

Govt. Mulls Changes in Crude Export Price 

The government may change the formula that oil companies in the country use 
when setting their export prices, a government official said Wednesday 
(26/7/06). 

The government hopes to reduce reimbursements given to oil companies, which 
have been exporting crude at prices below international market levels due to 
the formula.  "We are studying the possibility of changing the formula," Luluk 
Sumiarso, Director General of Oil and Gas at the Mines and Energy Department, 
was quoted as saying by Dow Jones Newswires. 

Sumiarso added that the new formula -- should the government decide to change 
the current one -- won't affect prices of Indonesia's liquefied natural gas, 
which are linked to Indonesian crude oil prices. 

Oil companies in Indonesia are allowed to claim exploration costs from the 
government after they begin producing oil.  The costs are linked to Indonesian 
crude prices. 

Sumiarso declined to provide further details on how the government would 
change the formula, also known as the Indonesia Crude Price, which is the average 
price of several Indonesian crudes based on a formula using assessments made 
by Platts (40%), Japan's Rim Intelligence Company (40%) and the Asian Petroleum 
Price Index (20%). 

He also declined to confirm a statement made earlier this month by an 
official at the upstream oil and gas regulating body BP Migas that the move was 
sought to reduce the gap between Indonesian crude prices and benchmark oil prices 
in the global market. 

He added that Mines and Energy Minister Purnomo Yusgiantoro would decide 
whether to change the formula.  The government earlier this month extended the 
current formula, which is valid for six months. 

Govt. to Offer 41 New Oil, Gas Blocks 

The government will next month offer 41 new oil and gas blocks to local and 
foreign oil companies, Mines and Energy Department's Oil and Gas Director 
General Luluk Sumiarso said Wednesday (26/7/06).

Sumiarso said 10 blocks will be offered via regular tender, while 31 blocks 
will be offered directly.  The blocks are located in Natuna, Makassar Strait 
and Java, he said, according to Dow Jones Newswires.

The government will within 45 days decide on the winners for the blocks 
offered directly, while the winners for the blocks offered via regular tender will 
be made known in four months.  The government usually grants 30-year 
production sharing contracts to the winners.

Meanwhile, the government has been asked to design a new strategic policy to 
boost local oil and gas production, which has dropped in the last few years.

"The high oil prices should motivate Indonesia to revise its policy on oil 
and gas with a view to empowering private Indonesian firms to take part in oil 
exploration and production," Effendi Siradjuddin, chairman of the Association 
of Indonesian Oil and Gas Companies (Aspermigas) said on Sunday (23/7/06), 
according to The Jakarta Post. 

Siradjuddin said Indonesia could still increase its crude oil production if 
the government creates a new policy involving more local companies to explore 
new fields or to operate brownfields left behind by foreign oil companies. 

He said at least 60 brownfields could still be exploited.  "They were mostly 
owned by foreign firms.  If we manage them well, we will be able to provide an 
additional production of about 300 thousands barrels per day from the old 
fields alone," he was quoted as saying by Antara. 

Pertamina Eyes 43% Rise in Oil Output 

State oil and gas firm, PT Pertamina, is aiming to increase its oil 
production to 193,000 barrels per day to 200,000 bpd and gas output to 2.060 Bcf/d by 
2014 with an investment of $2.5 billion, its upstream director Sukusen 
Soemarinda said Monday (24/7/06), according to Platts Commodity News.

He did not offer details as to which fields or projects the incremental 
production would come from.

Pertamina and its joint venture partners produce 140,000 bpd of oil and 1.03 
Bcf of gas daily, Soemarinda said.  The oil target for this year was 149,000 
bpd, of which 55,000 bpd was to come from fields operated solely by Pertamina.

Indonesia expects its crude and condensate output to slip below the 1 million 
bpd mark to just above 909,000 bpd this year because of a fast decline in 
output from some of the mature fields.  The state budget had set a production 
target of 1.05 million bpd of crude and condensate for 2006.

The country averaged 1.060 million bpd in 2005, against a target of 1.075 
million bpd.

Natural Gas Producers Sign $1.5b Deals 

Three Indonesian natural gas producers on Monday (24/7/06) agreed to sell 
$1.5 billion worth of gas to local buyers, chairman of upstream oil and gas 
regulator BP Migas, Kardaya Warnika, said, according to Dow Jones Newswires. 

Warnika said 467 trillion British thermal units (Btu) of gas will be sold 
under the pacts signed Monday. 

BP Onshore Northwest Java, a unit of BP Plc (BP), agreed to supply 137 
trillion Btu of gas to fertilizer maker PT Pupuk Kujang for 11 years starting next 
year.  PT Medco EP Indonesia, a unit of PT Medco Energi International, will 
sell 6.8 trillion Btu of gas to PT Mitra Energi Buana for 6.5 years from next 
year. 

Amerada Hess Jambi Merang, a unit of Amerada Hess Corp (AHC), will sell 323.7 
trillion Btu of gas to state power company, PT PLN, for 12 years from 2008.  
The gas will fire a power plant in the central Sumatra province of Jambi. 

Bakrie to Seek Partners to Build Pipeline 

PT Bakrie & Brothers will seek partners to build and operate the natural gas 
pipeline linking the islands of Kalimantan and Java.

Bakrie, Indonesia's biggest publicly traded metal products producer, won the 
right from state oil refining and pipeline regulator BPH Migas on July 17 to 
build a 1,115-km pipeline at a cost of $1.26 billion.  The company plans to 
finance 70% of the project by loans and the rest through equity, Finance Director 
Yuanita Rohali said Friday (28/7/06), according to Bloomberg News.

"We may seek a partner, we're open to anybody," Rohali said. "We have a 
pipeline manufacturing and construction unit.  The profit from them will be enough 
to fund part of the equity."

Deutsche Bank AG, Malaysia's CIMB Bhd, and Japan's Sumitomo Mitsui Banking 
Corp and Mizuho Corporate Bank Ltd may fund the project, Saryono Hadiwidjoyo, 
head of the tender team of the project, said on July 19.  Bakrie will conduct a 
"beauty contest" to select where it will get the loans from, the company's 
president director Bobby Gafur Umar said on July 18.

Bakrie will have to pay $1.26 million to the government in case it fails to 
start building the pipelines by January, BPH Migas chairman, Tubagus Haryono, 
said.

Bakrie needs at least six months from July to start building the building the 
pipeline, Umar told reporters on July 18.  The government wants the pipeline 
to be completed by July 2009.  "We'll start the field's activities in January 
2007, including land preparation," AD Airlangga, Bakrie's vice president of 
infrastructure support, said Friday. 

Nippon Oil to Build Bio-diesel Plant 

Japan's Nippon Oil Corp will build a bio-diesel plant with an annual 
production capacity of 30,000 tons in Jambi, the provincial administration's spokesman 
Erwan Malik said Tuesday.

A Nippon Oil Corp management team had visited Jambi to observe land which 
could be planted with jatropha and oil palm trees and to meet with local farmers 
who will plant the bio-fuel crops, he said, according to Antara.

The government has earmarked vast areas of land across the country for the 
cultivation of bio-diesel crop needed for raw materials for producing bio-fuels. 
 It said on Monday (24/7/06) that 6.5 million hectares of idle land would be 
allocated for investors interested in planting bio-fuel crops.

Mines and Energy Minister Purnomo Yusgiantoro also said on Monday that the 
government plans to offer tax breaks to foreign companies that would invest in 
alternative fuels, Bloomberg reported.

The government wants foreign companies to develop plantations yielding 
alternative fuel products such as palm oil, cassava, jatropa and sugar left from 
processing, he said.  "We'll introduce regulations that will serve as incentives 
to investors.  These will include tax breaks."

The government announced earlier a crash program to build 11 bio-fuel plants, 
with production targets of 187 million liters next year and 1.3 billion 
liters by 2010, or equivalent to 3% of the country's total fuel consumption of 41 
million kiloliters in 2005.  It estimated a Rp100 trillion ($10.8 billion) 
investment would be needed in the sector within the next five years.

-End 2 of 2-

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Joyo Indonesia News Service
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