Holding Company for Indonesia's State-Owned Miners Ready in Q1-2017
The government of Indonesia is nearing completion of the forming of holding companies for state-owned enterprises that are active in the oil & gas and mining sectors. It now only requires signing by Indonesian President Joko Widodo. Last year Widodo approved plans to create five state holding companies in energy, mining, construction, housing, and financial services. Fully state-owned aluminium producer Inalum and energy company Pertamina will be the holding companies for activities in the mining and oil & gas sectors, respectively.
The development of these five state holding companies in separate sectors are the first phase of a recently unveiled government program. In the second phase, expected by 2019, the government of Indonesia plans to set up a "super holding company" that is to control all Indonesian state-owned enterprises (including those that are listed on the Indonesia Stock Exchange but are majority-owned by the government). It is estimated that there currently are 199 large state-controlled companies active in Indonesia, together controlling about USD $320 billion in assets. After the restructuring the number of state-owned companies in Indonesia could fall to 118.
Last year Widodo said "we want to strengthen our state-owned companies through the establishment of holding companies so they can expand outside the country and become world-class companies". Moreover, these holding entities will create greater synergies and are more cost-efficient. At the same time these companies' equity will be expanded, increasing access to credit hence facilitating larger investments (when working individually, the state-owned companies have difficulty to obtain bank loans). Another advantage is that the holding company structure will allow state-owned miners to team up together to finance the purchase of mineral reserves. Currently, it are mostly private parties that have the financial resources to acquire large mineral reserves.
Gatot Trihargo, official at Indonesia's Ministry of State-Owned Enterprises, said the forming of the holding company for mining should be completed in the first quarter of 2017. Aluminium manufacturer Inalum, which is fully owned by the Indonesian government, will be appointed as the parent holding company for the mining sector. Trihargo said Freeport Indonesia will also become part of this holding. This would imply that the government's stake in Freeport Indonesia needs to be transferred to Inalum.
