SOEs to help KKA resume operation

State-Owned Enterprises Minister Mustafa Abubakar has invited four state-owned companies to revive ailing paper producer PT Kertas Kraft Aceh (KKA), which is expected to resume operations in mid-2012.

The four firms are cement producer PT Semen Gresik, coal mining company PT Bukit Asam (PTBA), forestry firm Perum Perhutani and asset management company PT Perusahaan Pengelolaan Aset (PPA).

Mustafa said Saturday that PT Semen Gresik would buy KKA’s cement sack products in an off-take arrangement due to the latter’s urgent needs for funds while no bank loans were available.

“Semen Gresik can act as an investor by introducing its subsidiaries to fund KKA,” Mustafa said in Banda Aceh, as quoted by news portal.

The government also opened possibilities for private domestic and foreign companies to re-activate KKA’s factory, he said.

Mustafa further explained that PTBA would supply coal to support KKA’s operations, while Perum Perhutani, itself or under PPA supervision, would provide pine wood to the paper manufacturer.

“PPA will try to restructure and revitalize KKA, as well as supply pine wood,” he said.

Mustafa said it would require a Rp 800 billion (US$88.8 million) investment to revive the company.

“With Rp 800 billion, the company can hopefully restart its operations. The funds will be raised from state-owned enterprises under PPA coordination, or private investors,” he said.

The ministry said earlier that it required $60 million to restructure KKA, including $12 million to finance a series of planned layoffs.

According to Mustafa, it will take around 18 months to prepare for resuming the operation, including activities such as ordering wood for raw materials.

“If all preparations have been finalized, KKA can resume its operation in the middle of 2012,” he said.

KKA was founded in 1983 under a joint venture between the government, businessman Bob Hasan’s PT Alas Helau and US-based Georgia Pacific. The paper factory could produce 135,000 tons of cement sacks annually.

The company ceased operations in 2007 due to debts and raw material shortages after the Aceh provincial administration revoked the permit of PT Tusam Hutani Lestari, KKA’s main pine wood supplier, to reduce deforestation in the province.

PT Semen Gresik has expressed its interest in acquiring KKA since 2009 to back up its cement packaging business. The government said Semen Gresik would cooperate with a Japanese company to invest in KKA.

PPA president Boyke Mukijat said in 2010 that his company already allocated Rp 125 billion to finance KKA in laying off 1,000 workers.

PPA is currently supervising KKA due to poor performances posted over several years.

Environmental group Greenomics Indonesia estimates that KKA will need around 52,675 hectares of pine forest to support its long-term operations.