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) – Indonesian government through state-owned energy producer, PT Pertamina has controls 95.9 percent – from 70 percent earlier – of PT Tuban Petrochemical Industries (Tuban Industries) in Tuban, East Java, said the official today (08/22). The government also ensured that the refinery to be operate in this year.

“The government is resolving all issues so that the Tuban Industries refinery can run immediately. We try to run this year and the government has controlled 95.9 percent of the shares,” said finance ministry’ director-general of state assets Isa Rachmatarwata after a coordination meeting with economic coordinating minister Darmin Nasution in Jakarta.

According to him, the refinery reactivation issue is now more related to administrative settlement, especially with its creditors. He said Pertamina as the party that would operate the refinery was also a creditor from Tuban Industries. In recent times, oil and gas production at the refinery is owned by Pertamina.

Bank Indonesia’ former governor emphasized that the Tuban Industries refinery is now fully in the control of the government. This means that the fate of the refinery is the responsibility of the government. So far the refinery has been operating but not routinely, he adds.

Finance Minister Sri Mulyani Indrawati previously also revealed the government wants the assets to be more productive.

“So far there are still things called past inheritance problems, debts from other parties are converted. So we want to make the company healthy and then be able to work optimally by making a number of decisions on the status of the accounts,” the minister said.

Meanwhile, Nasution stressed that there must be certainty from debt calculations adding that many parties were involved and all the problems holding back the operation of the refinery would soon be decomposed clearly.

Tuban Industries was formed by the Badan Penyehatan Perbankan Nasional to settle Rp3.2 trillion (US$225.35 million) in debt from the Tirtamas Majutama Group to a number of banks. Tirtamas is a business group that is jointly owned by Honggo Wendratno, Hashim Djojohadikusumo, and Njoo Kok Kiong. In the process of debt restructuring, Djojohadikusumo and Kiong pulled out, leaving Wendratno.

After the restructuring is complete, the government controls 70 percent of Tuban Industries shares, with the remaining 30 percent held by Tirtamas. The company experienced financial difficulties in Indonesia’s first monetary crisis. The debt crisis then caused Tuban Industries to be restructured and changed its ownership to become the property of Wendratmo and Pertamina.

Since the last 3 years, Tuban Industries had difficulty returning. This is thought to be due to misuse in the management of refinery, especially in the purchase of raw materials and the sale of products refinery abroad.

Since early 2012, Tuban Industries has defaulted on its debt to Pertamina, so the state oil and gas firm issued companies debt default notification letters. Then in the same year, the company’ owner tried to re-restructure Tuban Industries by involving Pertamina.

However, the company’ restructuring scheme is too detrimental to Pertamina, so it is necessary for the finance ministry’ intervene to accept the requirements put forward by Tuban Industries. Pertamina is listed as the largest creditor, with Tuban Industries owing Rp4.13 trillion in separatist debt and Rp2.44 trillion for concurrent debt.

US$1=Rp14.200

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