Indonesia’s Inalum Plans to Build Hydropower Plant for US$2.25B

Grasberg Mine - Photo by: Freeport Indonesia
JAKARTA (TheInsiderStories) – State-owned company PT Indonesia Asahan Aluminium (Inalum) is planning to build a 900 MW  hydropower plant in Kayan River, North Kalimantan province. The project will cost up to the company around US$2.25 billion in investment.
Spokesman of Inalum Rendi Witular told theInsiderStories that the company is looking to raise a project financing loan to finance the project. The company also invite partners in the project.
So far, the company has not started any talk the banks and the investors. He assured, Inalum still hold the majority stake in the project.
He said, the project will be start to build in 2019 and will be commercially operated in 2024. The electricity produced by the power plant will be used for Inalum’s aluminium smelter in Mangkupadi-Tanah Kuning Industrial Estate and International Port in North Kalimantan.
As reported, Inalum is also planning to build a 1 million ton per annum aluminium’s smelter in Bulungan, North Kalimantan that will produce not only aluminium but also billet and alloy. The early investment of the smelter is $2.5 billion with capacity 500.000 million per annum.
The smelter is expected to be built in 2022 and will be operated in 2024. The power plant and the smelter will be connected with 125 km transmission line.
No progress 
Indonesia government has selected Inalum to acquire 51 per cent of shares in gold and copper miner PT Freeport Indonesia (PTFI) in exchange for a contract extension for its mining site in Papua to 2041. The detail obligation is to acquire 40 percent of Australian’s Rio Tinto participating interest in Freeport Indonesia.
The chief executive Budi Gunadi Sadikin has said the company is in talks with Rio Tinto on the fair value of the acquisition. The deal, he admitted is not easy. For the acquisition purpose, Sadikin confirmed that Inalum has secured a commitment of loans from a consortium of foreign and local banks.
Currently, the Grasberg mine has 1.187 tons of gold reserves and 19.4 millions of copper. The first gold and copper mine Eastberg was found in 1967 and then Freeport signed the first generation of Freeport contract of work.
In 1988, Freeport Indonesia found bigger reserves in Grasberg mine. With the huge reserves, the company would suffer losses if the contract ended in 1991.
But, before the first contract of work ended in 1991 , the company signed a new contract of work for 1991 to 2021 to manage the huge reserves in Grasberg. The excessive reserves made the company has no fund to manage the Grasberg mine.
Meanwhile, Inalum was established in 1976 which was 14.12 per cent the government of Indonesia and 58.88 per cent by NAA , a consortium of 12 Japanese companies, including Sumitomo Chemical Co. Lted , Sumitomo Shoji Kaisha Ltd, Mitsui Aluminium Co. Ltd . and Mitsubishi Corporation.
Inalum, which was established in 1976, is 41.12 per cent owned b the Indonesian government and 58.88 per cent by NAA, a consortium of 12 Japanese companies, including Sumitomo Chemical Co. Ltd., Sumitomo Shoji Kaisha Ltd., Mitsui Aluminium Co. Ltd., and Mitsubishi Corporation. The contract to manage and operate the company expires on Oct. 31.
The government has rejected the Japanese shareholder’s request to extend its contract to retain ownership in Inalum. Despite the Japanese firm’??s threat to take the case to international arbitrage, the government is standing firm in its intention to take over Inalum and make it a state-owned enterprise.