Exclusive: Indonesia to set up $5.6 billion plantation firm

By Janeman Latul and Fathiya Dahrul

JAKARTA | Thu Feb 2, 2012 6:24am EST

(Reuters) - Indonesia's government plans to create one of the world's
largest palm oil and rubber firms in March by combining state planters
with total assets of $5.6 billion, a government minister told Reuters on
Thursday.

A planned listing of the firm will tap investor interest in a country
with a recently acquired "investment grade" rating and create a rival to
top regional planters such as Malaysia's Sime Darby and Singapore's Wilmar.

The government will consolidate the assets of 15 state firms, whose
revenues last year stood at around 40 trillion rupiah ($4.45 billion),
under parent company PT Perkebunan Nusantara III.

"This holding will become one of the largest plantation firms in the
world with one million hectares of palm oil and rubber," State
Enterprises Minister Dahlan Iskan said in an interview.

The sprawling archipelago of 17,000 islands is the world's biggest
exporter of palm oil, second biggest producer of rubber and robusta
coffee and third biggest producer of cocoa . The state firms produce all
these commodities as well as tea, rice, cassava and sugar.

Analysts said the consolidation of the state firms would produce some
economies of scale but would not have a dramatic impact on commodity supply.

"They have been producing. It is not new supply coming into the market.
This is just a rationalization of government linked assets," said Carey
Wong, an analyst with OCBC Bank in Singapore.

The last mega-plantation merger was in 2008 when Malaysia's government
pushed for the tie-up of three state-linked planters to form Sime Darby,
which it touted as the largest plantation firm by assets.

BORNEO RICE BOWL

Indonesian state plantation firms will combine to produce an extra
500,000 tonnes of rice from planting 100,000 hectares of new paddy
fields in east Kalimantan on Borneo island, Iskan said, without giving a
timeframe for the production.

Indonesia <http://www.reuters.com/places/indonesia>, the world's fourth
largest country by population, is trying to become self-sufficient in
production of its staple grain. But it surprised regional markets last
year with hefty imports from Thailand and Vietnam. Expanding paddies
could help its aim not to import again this year.

"I expect Indonesia could produce an additional 280,000-300,000 tonnes
of paddy from the newly planted areas of 100,000 hectares," said
Chookiat Ophaswongse, the honorary president of the Thai Rice Exporters
Association.

Plantation firms have been restricted this year from expanding in
forested areas such as Borneo by Indonesia's two-year moratorium on new
forest clearance and land acquisition is in any case seen as a hurdle in
a country known for red tape.

Indonesia in December passed a land bill designed to speed up land
acquisition for state projects deemed in the public interest and the law
could enable the new firm to get access to land for rice.

TOP LANDBANK

Iskan said the combined profits of the firms to be amalgamated were
around 3.6 trillion rupiah. The government plans to first list one of
the firms, PT Perkebunan Nusantara VII, as a unit of the holding firm
this year on Jakarta's stock exchange.

" After PTPN VII, we're open for other units to list on the stock
exchange but eventually we will list the parent company and I don't
think we should retain a majority stake once it is listed," Iskan said.

The combined palm oil and rubber landbank of the holding company
Perkebunan Nusantara III will be bigger than that of the main existing
listed regional planters. Sime Darby currently tops the list with
525,795 hectares for palm oil and has a market value of $18.2 billion.

Analysts said the new Indonesian merger's hefty landbank would pull in
investors.

"It is massive. They are talking about a million hectares. That would be
massive. I'm sure the stock market will be very excited," said John
Rachmat, a palm oil analyst at the Royal Bank of Scotland in Singapore.
source: http://www.reuters.com/article/2012/02/02/us-indonesia-plantation-idUSTRE8110QC20120202