PRESS RELEASE

A civil lawsuit will be filed with the South Jakarta District Court this week in a new attempt by the Attorney General's Office to retrieve state funds believed to have been siphoned through several charitable institutions, The Jakarta Post reported.

Attorney General Hendarman Supandji said on Thursday (28/6/07) the 12 prosecutors working on the case were still in need of more witnesses to build a strong civil suit against the ailing former strongman but their case was still adequate.

“Many of the witnesses, most of whom were officials in Suharto's New Order government, have died or are too old to testify. And we don't know where the others are,” he told a hearing of the parliamentary law commission.

Multi-million-dollar graft charges against Suharto were dropped by the South Jakarta District Court in September 2000 after he was found to be physically and mentally unfit to stand trial.

Supandji said the team of prosecutors has been drafting a lawsuit against Suharto personally and also against the Supersemar Foundation, which provided scholarships for students.

"The team will demand the two suspects pay a total of Rp11.4 trillion ($1.2 billion) and they are still working on the lawsuit before filing it with the court early next month," he said.

Commission chairman Trimedya Panjaitan said the body will closely monitor the progress of the case because it could serve as an entry point for the retrieval of funds stolen through six other foundations.

"The commission will help the prosecutors find the whereabouts of the remaining witnesses so that they can testify in court and their testimony will force Suharto and the foundations to return a huge amount of state money," he said.

Supandji said his investigators had not yet traced the origin of the $46 million believed to belong to Suharto's youngest son, Hutomo "Tommy" Mandala Putra, which was withdrawn from the Banque Nationale de Paris Paribas in Guernsey in 2004.

He said that in light of the May verdict of the Guernsey court, the government will file a civil lawsuit against Tommy in August to ascertain whether the money now kept in an account belonging to his Motorbike Corporation had come from the now-defunct Clove Marketing and Buffer Agency (BPPC), which he chaired, and his Timor national car project.

Wanting to prove the human rights situation in Papua province has improved, Jakarta is considering allowing US Congressman Eni Faleomavaega, a Democrat from American Samoa, to visit the province.

Foreign Minister Hassan Wirayuda said Wednesday (27/6/07) that Jakarta was yet to make a final decision on whether or not the senator, earlier a staunch supporter of Papuan independence, would be given permission to visit Papua, Antara reported.

However, he said that if Faleomavaega's agenda and schedule were appropriate, the visit would be approved.

Hassan said he was confident the senator would leave the province with a good impression after his visit. "Seeing is believing. People can hear about whatever happens but it is much better if they personally see it happen," he said.

Faleomavaega sponsored a 2005 a bill asking the US government to review its recognition of Papua as part of Indonesia. However, Faleomavaega's stance appeared to have softened when he recently told an Indonesian Democratic Party of Struggle (PDI-P) delegation visiting the US that Indonesia's sovereignty over the province depended not so much on international recognition, but on how the Indonesian government treated the territory, improved the capacity of local governments and empowered Papuan people.

The delegation invited Faleomavaega to visit Papua to see for himself the progress that has been made in the province.

Indonesia urged Australia on Monday (25/6/07) to lift a travel advisory on the country, saying it could hamper commercial ties between the two countries at a time when they are trying to hammer out a free trade pact, Reuters reported.

"The travel advisory could disrupt travel not only for tourism but also potential investors and buyers," Indonesia Trade Minister Mari Pangestu told a news conference after meeting her Australian counterpart, Warren Truss.

Truss, who was in Jakarta for an annual bilateral trade and investment meeting, said the Australian government had assured Indonesia it would review its travel advisory on a quarterly basis. "Our warning has been revised and taken into account the improved security situation in Indonesia. And we will continue to do that," Truss said.

The ministers were speaking as an Indonesian-Australia panel of experts recommended a feasibility study for a possible free trade agreement.

Australia has cautioned Australians about traveling to Indonesia, including Bali, due to terrorist threats.

The city administration is to build three more ‘busway’ routes for exclusive use of air-conditioned buses to ease the city’s traffic problems, The Jakarta Post reported.

Head of traffic at the Transportation Agency M. Akbar said on Monday (25/6/07) the construction of busway corridors eight, nine and 10 would start in July.

The three corridors would link Lebak Bulus in South Jakarta to Harmoni in Central Jakarta; Pinang Ranti in East Jakarta to Pluit in North Jakarta; and Cililitan in East Jakarta to Tanjung Priok in North Jakarta.

The construction will cost the city approximately Rp180 billion (about $22 million) and is expected to be finished by the end of this year. Currently a total of 287 buses operate along seven busway corridors.

The Investment Coordinating Board (BKPM) approved foreign direct investment proposals worth $21.99 billion during the five months to May, up fivefold from a year ago, a senior official of the agency said Friday (30/6/07).

BKPM secretary Yus'an said the solid rise reflects improved investor confidence in Indonesia's
investment prospects.

Domestic investment proposals approved by his office reached Rp110.6 trillion over the same period, up 94.58% percent from the previous year.

"Both foreign and local investors have seen that the government has done something to improve the investment climate," Yus'an told Thomson Financial.

He was referring to the passage of the new investment law in March, which gives the government a legal basis for providing tax incentives to new investors as well as to existing businesses planning to expand their operations.

It also stipulates that domestic and foreign direct investment "will be treated equally" in terms of rights, obligations and facilities.

Bank Indonesia (BI) Governor Burhanuddin Abdullah, meanwhile, said the same day there was still room for further reductions in the benchmark rate, although he did not provide any timeframe, Reuters reported.

Inflation and trade figures are due out this Monday, with most analysts tipping a further slight reduction in inflation but a likely pause in rate cuts. The central bank will meet on Thursday to decide its position on the rate, which now stands at 8.50%.

"The important thing for us is inflation ... As inflation can be pushed down to a low level, there is no reason for high interest rates," Abdullah told reporters.

A Reuters poll of analysts saw successful stabilization of rice prices as a major factor in controlling inflation.

The analysts also forecast May exports grew 10.5% from a year earlier, slowing from a 15.8% annual rise in April. Imports are also expected to slow.

Moody's Investors Service reaffirmed its positive outlook on Indonesia’s ‘B1’ local and foreign currency bond ratings, saying the position reflected improving political and economic stability, a diversified economy supporting stable growth, prudent fiscal policy and an improving debt trajectory and external payments position, Thomson Financial reported.

"In 2007, Indonesia's fiscal deficit is likely to exceed the government's original target of 1.1% of GDP, and reach 1.8%, based on an acceleration of VAT refunds, and some additional spending on infrastructure and disaster prevention," said Moody's vice president and regional credit officer for Asia, Tom Byrne, in Mumbai.

"That said, the overall trend reduction of the government debt/GDP ratio will remain on track owing to a combination of relatively strong economic growth, lower inflation and interest rates, a stronger rupiah and an expected pickup in privatization receipts," he added.

In Jakarta, Deborah Schuler told a briefing that banking sector health has improved greatly and will continue to improve as rates decline, and with improved earnings and shrinking bank non-performing loans.

She said Moody's expects Indonesian banks to continue their risk management reforms and restructuring, and to gradually move towards global best practices, though she added that the process would take time.

A survey by the Gallup organization found that major business leaders were generally positive about prospects.

Gallup interviewed 75 senior figures in the business community as part of a new Business Optimism Index (BOI) and found that 78% believed business conditions were improving, with 72% saying conditions were already positive.

On the Jakarta Stock Exchange, share prices ended down 0.60% on the week after recovering from earlier lows. The composite index closed at 2,139.278.

The rupiah strengthened to 9,045/9,055 to the dollar, compared to 9,075/9,080 late Thursday.

The government has raised its 2007 budget deficit forecast to 1.6% of the gross domestic product (GDP), from an earlier projection of 1.1%, to reflect an expected shortfall in its revenue target, Finance Minister Sri Mulyani Indrawati said.

In cash terms, the deficit is now seen at Rp62 trillion, from Rp40.5 trillion earlier.

Revenue for this year are expected to reach only Rp684.5 trillion, 5.3% below its initial forecast of Rp723.1 trillion, Indrawati was quoted as saying by XFN-Asia on Tuesday (26/6/07).

She noted that the government has also adjusted its domestic tax revenue estimate down to Rp489.9 trillion from Rp509.5 trillion earlier. Non-tax revenue is seen at Rp191 trillion, from Rp210.9 trillion projected earlier.

Government spending meanwhile is seen at Rp746.6 trillion, 2.2% short of the previous estimate of Rp763.6 trillion.

The government expects the country's non-oil and -gas exports to grow by up to 16% next year, Trade Minister Mari Pangestu said on Monday (25/6/07), although she warned that performance would depend partly on global demand.

"The target was set based on the government's work plan and a department 'exercise'. However, based on the government's macro-assumption it will be 12% to 16%," Pangestu was quoted as saying by Antara.

"The strategy on the demand side is opening market access through lobbies to reduce trade barriers and negotiations for bilateral, regional and international free trade," she said.

From the supply point of view, efforts have to be made to overcome trade barriers at home, especially those relating to exports, she said.

"In view of that, next year's budget's main priority will be put on facilities, including investment development. Hopefully, there will be a lot of investment this year so that there will be increased expansion of export capacity," she said.

The Finance Department sold Rp1.9 trillion ($209.5 million) worth of a reopened May 2008 treasury bill issue in an auction on Tuesday (26/6/07) at an average yield of 8.445%.

The department expects to use the proceeds from the treasury bills, which carry a maturity of 11 months, to help plug the budget deficit and improve liquidity on the short-end of the yield curve. The amount sold was below the target of Rp2 trillion,

"Markets still see room for lower interest rates (ahead), therefore investors are buying longer-term bonds," Rahmat Waluyanto, Director General of Treasury at the department, was quoted as saying by Reuters.

He also said that the department is planning to buy back Rp1.3 trillion worth of treasury bonds this year, depending on market conditions.

The department sold Rp2 trillion worth of T-bills last month as targeted in its first auction. The bills carried an average weighted yield of 8.496%.

The government has decided to give the entire island of Batam in Riau Islands province free
trade area status, Asia Pulse reported.

Industry Minister Fahmi Idris said after a meeting of economics ministers on Friday (29/6/07) that the decision had been made to give legal certainty for investors in the industrial island.

Many foreign investors were already reported to be leaving the island because of uncertainty about its status, he said. The decision to opt for free trade status for the whole island settles a long-running debate over whether the whole island or just an enclave should be given the status.

There will be additional incentives for investors in Batam, and its two neighboring islands of Bintan and Karimun, Idris said, but the incentives are yet to be decided.

He said the government hopes that the new status given to Batam will result in faster growth of investment.

The Rajawali Group is planning to invest $400 million to expand its natural resources business, including bringing a coal mine on-line by the end of the year and more than doubling its oil palm plantations over the next five years, the company's chief executive said Thursday, Dow Jones Newswires reported.

Rajawali, which owns some of Indonesia's biggest commodity companies, plans to increase its area under oil palm cultivation over the next five years from 40,000 hectares to 250,000 hectares, said Darjoto Setyawan.

Rajawali, via its unit PT Mandiri Sukses, already owns 100,000 hectares of palm oil plantation in Kalimantan province, of which 60,000 are idle, Setyawan said.

Rajawali unit PT International Prima Kalimantan will aim to start producing coal from its mine site in Kalimantan by the end of this year, Setyawan said.

Australia's largest fertilizer maker Incitec Pivot Ltd on Tuesday (26/6/07) signed a preliminary agreement with two Indonesian partners to look into the feasibility of investing in a gasification plant to convert coal into synthesized gas, Agence France-Presse reported.

If it goes ahead, the project would see Incitec invest $700 million to $800 million in the plant, which would provide three fertilizer plants in Aceh with feedstock, electricity and steam.

The plants have a production capacity of more than 1.7 million tons annually but currently produce only 300,000 tons because of limited natural gas supplies.

In return for investing in the plant, Incitec would receive some of the ammonia and urea produced by the three plants.

The pact was signed with PT Pupuk Sriwijaya (PUSRI), the holding company of PT Iskandar Muda, which owns the three plants, and state-owned engineering company, PT Rekayasa Industri.

Incitec managing director Julian Segal said assessment of the project is still in its early days and his company would have to be satisfied that any project would meet its strict investment criteria before proceeding, he said.

Singapore’s MediaCorp has bought a 6.5% stake in one of Indonesia's largest broadcast players, Media Nusantara Citra (MNC), which made its debut on the Jakarta bourse on June 22.

MediaCorp will also partner MNC in producing programs and developing their businesses in the Asia-Pacific region, said top executives of both sides, Business Times reported on Monday (25/6/07).

The Singapore company paid $90 million for its stake, making it the largest public shareholder in MNC. It forked out another $93 million to acquire nearly 5% of MNC's listed parent company, Global Mediacom, formerly known as Bimantara Citra.

MNC is best known for its flagship free-to-air television network RCTI. Its stable includes two other TV networks, 15 radio stations, and several newspapers and magazines.

MNC president director Hary Tanoesoedibjo told reporters recently that he was interested in a “strategic cooperation” with MediaCorp. “Together, we will develop our television, magazine and radio businesses in the Asia-Pacific region,” he said, adding that he is also interested in exploring opportunities in “new media” such as the Internet, mobile phone and other digital fields, where “we have to start from nothing”.

For 2005, MNC ranked top among local media companies for advertising revenue (estimated at Rp3.3 trillion) as well as total viewership (53 million), according to AC Nielsen Media Research figures.

Australia and Indonesia are considering a feasibility study into a Free Trade Agreement (FTA) as a way to boost trade between the two countries.

Australian Trade Minister Warren Truss warned any deal would be at least two years off.

The recommendation was made by an Australia-Indonesia Trade and Investment Framework (TIF) expert group to the 7th annual bilateral meeting of trade ministers in Jakarta on Monday (25/6/07), Australian Associated Press reported.

Truss described the trade relationship between the two neighbors as "robust and growing strongly". "(But) there is potential for more to be done to help grow the trade and to ensure that both our countries benefit," he said.

He expected a feasibility study, if approved, would take about a year to complete. "That will be undertaken presumably jointly by governments and by experts, to help us assess what the potential benefits are from a FTA, what issues would need to be resolved and then whether or not we could actually progress to that formal negotiation stage.

“I think that normally a feasibility study of that nature takes up to a year or so and then negotiations perhaps another year or so after that.”

Indonesian Trade Minister Mari Pangestu said Australia is one of the country's most important markets. Two-way trade between Australia and Indonesia is worth about A$10.4 billion annually. But Pangestu said the relationship is still "underdeveloped".

Indonesia and China have been making serious efforts to boost tourist arrivals between the two countries and will do more to boost cooperation in tourism and culture, Culture and Tourism Minister Jero Wacik said Wednesday (27/6/07).

"We have been working to boost arrivals between the two countries by giving 'visa on arrival' service and increasing flights from China to Indonesia and vice versa to 16 times a week," Wacik said, according to Xinhua.

He made the remarks after hosting a meeting with his Chinese counterpart Sun Jiazheng in Jakarta.

Government data show that 200,000 Indonesian tourists traveled to China in 2006, while 100,000 Chinese tourists visited Indonesia. He said that this year, the government aims to lure 200,000 Chinese tourists to the country.

Wacik said the two governments are in talks on the opening of direct flight between Guilin and Bali.

The Indonesian Cocoa Board was launched on Friday (29/6/07) in an effort to improve the
livelihood of farmers, grinders and exporters in the world's third-largest cocoa-producing country.

"The most important task is give recommendations to the government on policies related to the development of cocoa in Indonesia," said Teguh Wahyudi, director of the Indonesian
Coffee and Cocoa Research Institute, which is one of the five founders.

"This is a group that represents stakeholders from farmers, bean producers, grinders to exporters," he told Reuters after the launching at a cocoa conference in Bali.

Indonesia had 1.17 million hectares of cocoa plantations in 2005 with 92% owned by small farmers, according to data from the Agriculture Minister.

Shareholders of state-owned cement producer PT Semen Gresik have approved the management's proposal to build two cement plants and a power plant starting next year, according to the head of the company's investor relations division, Agung Wiharto, Thomson Financial reported.

He said each cement plant would have the capacity to produce 2.5 million tons per year and cost Rp2.8 trillion ($310 million). At present, Semen Gresik's production capacity is 16.92 million tons of cement per year.

Wiharto said the proposed capacity of the power plant was 350 MW. He said it might cost around $350 million to build.

Meanwhile French cement company PT Semen Andalas Indonesia said its new plant will come on line next year to replace one destroyed by the tsunami in Aceh in December, 2004.

The new factory, which will start operation in September next year, will have an annual production capacity of 1.6 million tons or 25% more than the capacity of the old factory, Asia Pulse reported.

The company spent $150 million for the reconstruction of the factory, including $20 million for a new port and packing center.

State-owned telecommunications giant PT Telkom is reviewing the possibility of an acquisition to meet a government target to boost the firm's market capitalization to $30 billion by 2010, Reuters reported.

State-run Telkom, the biggest company on the Jakarta bourse, with a market capitalization of around $21 billion, did not provide details on the target or the value of the potential deal in its letter to the Jakarta Stock Exchange on Friday (29/6/07).

"Telkom is reviewing and discussing the possibility of an acquisition, in line with its strategic roadmap to achieve a target of $30 billion market capitalization by 2010," the company said in the letter.

Analysts cited by Reuters say Telkom's shares have been underperforming the market partly because rising costs have offset its rising subscriber numbers.

They added that business will also get tougher as new customers are likely to be lower-income users, generating lower average revenue per users in its mobile business, PT Telkomsel.

Meanwhile the association of cellular telecommunication operators (ATSI) said the cellular telecommunications business in Indonesia is expected to grow 78% to Rp80 trillion ($8.9 billion) this year.

In the first half of this year the value of cellular phone business reached an estimated Rp40 trillion, Asia Pulse reported.

State-owned steel maker PT Krakatau Steel plans to acquire Malaysian steel company Perwaja Steel (Terengganu) Sdn Bhd to facilitate its expansion in the highly protected Malaysian market, Antara reported on Tuesday (26/6/07). Malaysia imposes a 25% import duty on steel products.

Krakatau Steel president Daenulhay said the acquisition will expand the company's production capacity, which is projected to reach 10 million tons in 2013 from 2.5 million tons at present.

Details of the plan have yet to be discussed, Daenulhay said, adding Krakatau Steel wants to have a majority stake in the Malaysian company.

Saudi Telecom Co said on Tuesday (26/6/07) it had agreed an 11.4 billion riyal ($3.04 billion) deal that would give it a 25% stake in Maxis Communications, Malaysia's biggest mobile operator.

The deal would also see Saudi Telecom, the largest Arab operator by market value, take a majority stake in Maxis' Indonesian operations, Saudi Telecom said in a statement on the Riyadh bourse website.

Retailer PT Ramayana Lestari Sentosa said it plans to buy a 55% stake in supermarket chain PT Alfa Retailindo at Rp1,600 a share, Reuters reported on Wednesday (27/6/07).

Ramayana, which runs department stores, said in a statement to the Jakarta Stock Exchange late on Tuesday (26/6/07) that it plans to buy the stake from PT Sigmantara Alfindo, a shareholder of Alfa, without elaborating.

Shares in Alfa, which has a market capitalization of nearly $80 million, ended 2.7% higher on Tuesday at Rp1,540. The company has a chain of supermarket and small convenience stores in the country.

Ramayana has 88 stores under the name of Ramayana and Robinson, mostly catering to low and middle income consumers. Its enterprise value was about $820 million.

Property developer PT Bakrieland Development said it has bought an additional 8.8 hectares of land in the Rasuna Said business district in South Jakarta, raising its total land ownership in the area to 53.5 hectares, Thomson Financial reported.

Corporate secretary Nuzirman Nurdin said the firm paid Rp9.5 million per sq meter, well below the average market price in the area of Rp10.7 million.

The company is developing a site in Rasuna Said for a cost of about Rp3.5 trillion, which will include an office tower, apartments, a concert hall, a media center and a park.

Nurdin added the company has also purchased 110 hectares of land in Bogor, about 60 km east of Jakarta, raising its total land bank in the area to 210 hectares.

PT Telkomsel has signed a Rp3.5 trillion ($385.6 million) syndicated loan agreement with the country's top four banks to help finance its $1.5 billion capital expenditure this year, its president Kiskenda Suriahardja said on Wednesday (27/6/07).

"We have signed an agreement with a consortium that comprises Bank Mandiri, Bank Rakyat Indonesia, Bank Central Asia and Bank Negara Indonesia," Suriahardja said, according to Reuters.

"This is part of our effort to meet the capital spending requirement this year, in the second half we will spend 60% of our total capital expenditure in 2007, or an equivalent of $900 million."

He also said the company, which controls more than half of the country’s some 70 million mobile phone users, would still go ahead with its plan to issue bonds, although the proceeds from the debt are likely to be used to finance next year's capital expenditure.

The country’s third largest lender, Bank Negara Indonesia (BNI), said Thursday (28/6/07) it aims to raise about Rp4 trillion ($438.2 million) by offering new shares.

The state-owned bank said in a statement it will hold a shareholders meeting on July 30 to seek approval for the new issue, priced at Rp2,025 each, lower than its Thursday (28/6/07) price of Rp2,425.

"The net proceeds from the offering will be used to strengthen the bank's capital base and develop BNI's business," the bank said, according to Reuters.

The bank is offering a total of 1.99 billion shares and for every 20 shares stakeholders have, they can buy three new shares.

The government holds a 98.12% stake in the lender and BNI said the government will exercise its right to buy new shares.

The rights issue is part of a wider process of asset sales. The bank announced on Thursday that it would also seek approval from shareholders to sell around a 26% stake worth nearly $900 million.

The government will sell a 13% stake in August, the bank said. It also plans to simultaneously sell a 13% stake through another secondary public share offering, in an effort to plug the state budget deficit.

The share sale will reduce the state's shareholding to 73% from 99% comes as the government expects to capitalize on strong gains in the Jakarta stock market.

The Commonwealth Bank of Australia (CBA), through its subsidiary Bank Commonwealth, has made a tender offer for all the shares of Bank Arta Niaga Kencana (ANK) held by the public, which amount to 26%, for Rp1,660 per share, Thomson Financial reported on Tuesday (26/6/07).

Bank Commonwealth has already purchased Bank ANK stock held by private shareholders amounting to 57% of the bank.

The offer price represents the stock's highest recorded price in the 90 days of trading before last December 29, when CBA revealed its plan to acquire Bank ANK shares from public and private shareholders.

Bank Commonwealth told the Jakarta Stock Exchange that it would seek regulatory approval to delist Bank ANK after the completion of the tender offer.

Bank ANK is a medium-sized bank, with an asset base of Rp1.31 trillion at the end of last year.

The Bank of India has made a tender offer for all the shares in Indonesia's Bank Swadesi held by the public, which together amount to a stake of 6.91%, for Rp960 per share, Bank of India said, according to Thomson Financial.

The bank has already purchased 76% of Bank Swadesi from PT Putra Mahkota, PT Panca Mantra Jaya and private shareholders.

The offer price represents the stock's highest recorded price in the 90 days of trading before last December 12, when Bank of India revealed its plan to acquire Bank Swadesi shares from private shareholders and the public alike.

State-owned gas firm PT PGN has reached an agreement to supply natural gas to the state power company PLN, a PGN official told Reuters on Tuesday (26/6/07).

PGN will supply 50 million cubic feet per day of natural gas for two years to PT PLN’s power plants near Jakarta via a pipeline from South Sumatra from 2008. "PGN has agreed on a gas price of $4.5 per million British thermal units (mmbtu) for two years. PGN will see the development after that period," said Widyatmiko Bapang, PGN's corporate secretary.

Separately, PGN president director Sutikno said the company is selling the gas to some industries in West Java at a price of around $5 per mmbtu. "It is still profitable for PGN to sell at $4.5 per million Btu to PLN. PGN could supply PLN for five years but we just agreed for two years and after that we will see whether PLN will extend or not," he told Reuters.

He did not specify the date when supply would start, but said that the firm had agreed to a lower price because PLN would have to build an 8 km pipeline to connect with the PGN pipeline in Bekasi in West Java.

Separately, a PLN official said the gas supply from PGN will save PLN around 1 million kiloliters of diesel oil. The gas will come from US oil major ConocoPhilllps' working area in South Sumatra.

Developing a nuclear power plant to boost the nation's energy supply is the most feasible way of preventing a future energy crisis, experts said at a seminar on nuclear waste management held Tuesday (26/6/07).

The experts agreed a nuclear power plant is necessary because domestic oil reserves are dwindling and alternative energy sources had yet to be tested.

"When it comes to nuclear reactors, the public will always highlight the (1986) Chernobyl case, but they don't know that the safety technology has been improving," The Jakarta Post quoted Hudi Hastowo, chairman of the National Atomic Energy Agency (BATAN), as saying on the sidelines of the seminar.

"Moreover, the quality of every nuclear facility, including nuclear power plants, is subject to the review of various national and international institutions."

In 2006, following the formulation of the National Energy Policy 2003-2020 by the Energy and Mineral Resources Ministry, President Susilo Bambang Yudhoyono announced a plan to begin construction of a nuclear power plant in 2010.

Expected for completion by 2016, it will produce 1,000 MW of electricity for Java, Bali and Madura. It will be the first nuclear power plant to provide energy to the public and industry.

Hastowo also said that alternative, safe energy sources such as wind, solar, microhydro and biofuel were not yet being developed in Indonesia because of the high generating and technology costs involved in their utilization. "The electricity crisis we are now facing will not be eased by 2025 unless we start developing a nuclear power plant now," he said.

The government is considering setting a price floor for domestic natural gas sales in a bid to encourage producers to divert supplies to domestic users rather than export gas as LNG, a government official said Wednesday (27/6/07).

The proposed gas price floor will be based on the cost of production plus 20% profit margin for the gas producer, Platts Commodity News quoted Luluk Sumiarso, Director General for Oil and Gas at the the Energy and Mineral Resources Ministry, as saying.

The gas price floor would be decided by the government and would not be the same for all fields, Sumiarso said. Factors such as the location of the field as well as the location of the customer would be taken into consideration, he said.

In the event that a domestic buyer cannot afford to buy gas at the floor price, the government will provide a subsidy, he added, but declined to provide further details.

Industrial customers pay around $5/MMBtu currently for their gas supplies, but fertilizer companies are only able to afford around $3.5/MMBtu.

Indonesia has plans to expand its area under jatropha cultivation to 1 million hectares, producing roughly around 2.3 million tons of crude jatropha oil annually and is targeting China as a key market, Dow Jones Newswires quoted deputy minister for the development of disadvantaged regions, Tatang Wiranto, as saying.

Speaking on the sidelines of a biodiesel conference late Wednesday (27/6/07), Wiranto said Indonesia has signed a memorandum of understanding with PT Indo Wellable, a local subsidiary of Chinese energy group Wellable, to look into the feasibility of supplying jatropha oil to the Chinese market.

The company will work with provincial governments to identify suitable areas for growing jatropha curcas, a fast growing perennial plant that can grow on wasteland and begins producing oil in its second year of growth.

A trial project involving several thousands of farmers in underdeveloped Nusa Tenggara began in May and their yield, expected in less than a year, will be closely monitored for future projects, said Sani Santoso, president director of PT Indo Wellable. The project involves planting jetropha in an area totaling 30,000 hectares.

In West Kalimantan, 300,000 hectares of wasteland have already been acquired for future plantations, and possible locations in Central and East Kalimantan, as well as West Sumatra, should provide additional land, said Wiranto.

Funding for the project, however, is still uncertain and a target date for the supply of the 2.3 million tons of jatropha oil has yet to be determined.

State oil firm Pertamina is considering using sour crude at its Balikpapan refinery, as sweet crude is more expensive and its output is falling, Reuters quoted a company official as saying on Thursday (28/6/07).

He said Pertamina would have to change equipment and build a cracking unit in the Balikpapan refinery before using sour crude. "Sour crude has a high sulfur content, but we can build a de-sulfurization unit. We need to spend about $3.7 billion to realize this project in the Balikpapan refinery," he told journalists.

The 260,000 barrels per day (bpd) Balikpapan refinery is the second biggest in Indonesia after the 348,000-bpd Cilacap refinery, which already uses sour crude as its feedstock. He said Pertamina already imports 3.6 million barrels per month of sour crude from Saudi Arabia for Cilacap.

State-owned railway company PT KA is exploring the possibility of cooperating with the Australia Railway Industry Corporation (ARIC) in the development of railway transportation facilities to transport mining products, Antara reported.

"We are forming a team of negotiators who will explore cooperation and meet with their Australian counterparts," PT KA's commissioner Agus Gurlaya Kartasasmita said on Tuesday (26/6/07). He made the remarks after accompanying State Enterprises Minister Sofyan Djalil to receive Australian Trade Minister Warren Truss.

Kartasasminta said that mining companies in East Kalimantan, South Kalimantan and South Sumatra had no adequate transportation infrastructure and facilities. "In sending their production to the nearest ports they have to pass through forest areas," he said.

Truss said Australian companies had the capabilities to construct and operate trains for the transportation in bulk of such products as coal, cement and other types of mining products. He said Indonesia's mining industry had quite promising business potentials but it needed a reliable transportation system.

Kartasasmita said it was agreed to identify areas that hampered the realization of cooperation. Among the areas mentioned was the law on the railway sector, including land clearance around mining locations. But, he noted, foreign companies were now allowed to enter the rail transport business.

PT Bumi Resources said it has received payment from India's largest private power producer Tata Power for the sale of its 30% stake in each of its five coal producing and trading subsidiaries, Thomson Financial reported on Wednesday (27/5/07).

Under a deal worth $1.1 billion signed on March 30, Bumi agreed to sell a 30% stake in its 95%-owned unit PT Kaltim Prima Coal, and in wholly-owned units PT Arutmin Indonesia, Indocoal Resources, PT Indocoal Kalsel Resources and PT Indocoal Kaltim Resources.

Bumi president Ari Hudaya said in a statement most of the proceeds will be used to fully redeem the outstanding balance of its $900 million IndoCoal 2006-2 Notes and repay all intercompany debt in the coal units.

He said following the financial closure of the deal, Tata Power has appointed its representatives to the board of directors and commissioners of Bumi.

In addition, a coal off-take agreement for the sale of 10.8 million tons of thermal coal per annum to Tata for 12 years starting from 2009 has become effective.

Tata Power Co, the energy arm of the Mumbai-based Tata industrial group, said it would buy ships or stakes in shipping companies to transport thermal coal for its plants from Indonesia. "Acquiring a vessel or a stake in a shipping group would help us cut transportation costs. We are talking to various shipping companies and agents; and have appointed an adviser to look at all options, including long-term charters," said a company official.

South Korea's Kenertec Co. said Thursday (28/6/07) it has signed a cooperation deal with Indonesian energy company, Nuansa Group, to set up a joint venture for a steady supply of coal, Reuters reported.

South Korean power generators, heavily dependent on overseas coal for power, are paying $10-$15 more per ton for Indonesian coal compared to a year ago.

The joint venture, to be set up in Indonesia within six months upon signing the deal, will aim to secure exploration, mining and distribution rights for mines, the company said.

The value of the joint venture was not yet determined. "We predict to bring in about 1 million tons of coal starting next year for the initial period under the joint venture," said Suh Dong-hoon, director of coal overseas business at Kenertec. "We will sell the supplies to domestic users such as power generators.”

The venture also includes POSCO Engineering and Construction, a unit of POSCO Co. Ltd., which will be responsible for building railways and logistics terminals in Indonesia in exchange for securing coal mines.

The timeframe and the value of these projects have yet to be decided, Kenertec said.