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) – 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), the cabinet secretary office announced on Thursday (10/03). 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.

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

“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.

Tuban Petro is a holding company of Trans-Pacific Petrochemical Indotama, Petro Oxo Nusantara, and Polytama Propindo. The company was formed by the Badan Penyehatan Perbankan Nasional to settle Rp3.2 trillion 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 the company 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 Petro to be restructured and changed its ownership to become the property of Wendratmo state-owned energy producer, PT Pertamina.

On February 27, 2004, Tuban Petro issued bonds to the Ministry of Finance in the form of Multi Years Bond with a principal value of Rp3.26 trillion. However, Tuban Petro was later declared defaulted on September 27, 2012. 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 Petro 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’s owner tried to re-restructure Tuban Petro by involving Pertamina.

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

The Multi Years Bond was later converted by the government into a State Capital Participation through the issuance of new shares owned by the government. The goal is so that the assets under this company can benefit the country’s income and the development of the national petrochemical industry.

US$1=Rp14,100

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