Inalum talks to start in January: Minister

President Susilo Bambang Yudhoyono has issued a decree to appoint a team to negotiate the

future of PT Indonesia Asahan Aluminium （Inalum） with its majority shareholder, Japanese consortium Nippon Asahan Aluminum （NAA） Co. Ltd.

Negotiations would be led by Industry Ministry MS Hidayat until a deal was reached or Dec. 31, 2013, whichever came first, according to the decree, which was released in early December.

Hidayat said on Sunday that he would invite the Japanese to a preliminary meeting in the first or second week of January.

“The negotiation will be paid for by the state budget allocated by the Industry Ministry and there should be no problem with that,” Hidayat said as quoted by detik.com news portal.

A previous meeting was scheduled for Nov. 5 but was postponed.

Inalum was founded by agreement with the Japanese government on Jan. 6, 1976.

The company operates the only aluminium smelter in Southeast Asia in Asahan, North Sumatra.

The smelter started operation in 1983 and can produce 225,000 tons of aluminium ingots a year. Last year, the smelter produced 254,000 tons of ingots, up 3.4 percent from 245,526 tons in 2008.

Inalum sells 100,000 tons of aluminium ingots a year to the domestic market, while the remaining 60 percent of its output is exported to Japan.

Under the 1976 agreement, Indonesia has the option take over Inalum when the agreement expires in 2013.

The Indonesian government currently holds a 41.12 percent stake in Inalum, while NAA, a consortium of 12 Japanese companies including Sumitomo Chemical Co. Ltd., Sumitomo Shoji Kaisha Ltd., Mitsui Aluminium Co. Ltd. and Mitsubishi Corporation, owns 58.88 percent.

The Japanese consortium recently said it might want to continue to hold a stake in the company.

In a hearing last month at the House of Representatives, representatives of the consortium announced a plan to invest $367 million to boost the factory’s capacity from 250,000 to 317,000 tons of ingots a year if it was allowed to extend its contract.

The consortium also requested a 30-year contract extension after 2013 so it could build a 150-megawatt power plant that would supplement two hydropower plants currently supporting the smelting operation.

Indonesian said last month it would not renew the consortium’s contract and would instead acquire the Japanese stake when the contract ended in 2013.

The government also asked state metal and mineral mining firm PT Aneka Tambang and state steel manufacturer PT Krakatau Steel to prepare for Inalum’s takeover.

With Inalum’s total assets estimated at $1.23 billion, the Japanese consortium’s stake in the joint venture is worth $723 million, according to data provided by the Asahan Authority, an agency established by the Indonesian and Japanese governments to oversee the operation of Inalum.

Asahan Authority chief Effendi Sirait previously said the money needed to buy out the Japanese companies’ stake would be much less than the actual value of the stake because the government could use the company’s own cash to partially finance the takeover.