Indonesia's government has officially converted petrochemical company PT Tuban Petrochemical Industries (Tuban Petro) debt through additional state capital investments of Rp2.61 trillion (US$185.67 million) - Photo: The Company

JAKARTA (TheInsiderStories) – The government plans to convert the petrochemical company PT Trans-Pacific Petrochemical Indotama (TPPI) into a state-owned enterprise, officials said today (11/05). The new status of PT Tuban Petrochemical Industries’ subsidiary will be determined within the next two weeks.

Currently, the government through state oil company PT Pertamina holds a majority stake in TPPI 95.9 percent – from 70 percent previously – after last month injecting into the company located in Tuban, East Java, the additional state capital investments of Rp2.61 trillion (US$185.67 million) to resolve the company’s debt.

The economic coordinating minister Airlangga Hartarto explained the option was very possible due to technically TPPI had become a part of state company with the largest share being held by PT Pertamina.

“We will see the structure first, so we discuss it further. It has already become part of the state company because its biggest shares belong to PT Pertamina. The options will be like what we see,” he told reporters in Jakarta today (11/05), after holding a coordination meeting with a number of ministers in the economic field, including state-owned enterprise minister Erick Thohir.

Thohir revealed that the government would immediately resume the TPPI restructuring process, adding that decisions related to the restructuring process would be announced within the next two weeks.

“The re-structure process will continue. But, we will wait for Mr. Airlangga Hartato as Coordinating Minister to announce it in the next two weeks,” he said.

The first propose idea to turn TPPI as a state company was put forward by the coordinating minister for maritime affairs and investment Luhut Binsar Panjaitan to President Joko Widodo days ago. The reason, said the minister, is that the area has great potential to develop the petrochemical industry.

Previously, the government has controlled TPPI shares through the conversion of receivables in the form of a multi-year bond amounting to Rp2.6 trillion last month. The value is equivalent to 157,906 company shares.

The decision was contained in Government Regulation Number 66 the Year 2019 regarding the addition of capital to the shares of Tuban Petro which was signed by President Joko Widodo on September 19. The regulation was officially promulgated by the Ministry of Law and Human Rights on September 23.

“The addition of state capital investment comes from the conversion of government receivables in the form of PT Tuban Petrochemical Industries’ Multi Years Bond principal,” as stated in paragraph 2 of article 2 of the regulation.

With the addition of this capital, the amount of state capital in Tuban Petro will be valued at Rp2.91 trillion or equal to 175,406 shares. Thus, the portion of government-owned shares in the company rose to 95.9 percent, from previously only 70 percent.

In consideration, President Widodo through the regulation said, the conversion of government receivables in the form of Multi Years Bond in Tuban Petro was carried out in order to support the development of the national petrochemical industry.

Then, the capital increase is also expected to improve the capital structure of Tuban Petro. The capital increase will be followed up with an increase in Tuban Petro’s capital through the issuance of new shares.

US$1=Rp14,100

Written by Lexy Nantu, Email: lexy@theinsiderstories.com