INDONESIA - The Chandra Asri Complex.

This is the biggest single venture to emerge out of the expansions launched in the early 1990s. It is a $1.88 bn olefins complex, the first of its kind in Indonesia, built in Merak, Cilegon, in West Java, as a JV called PT Chandra Asri. It began operations in 1995 with a capacity of 550,000 t/y of ethylene, 300,000 t/y of polyethylene, and 300,000 t/y of propylene. The complex has downstream units producing pyrolysis gasoline and a range of plastics and household products.

It was only in late 2003 and through 2004 that Chandra Asri began to be increasingly profitable. Before it was not competitive and was a losing venture because the petrochemicals business in South-East Asia went into recession soon after the complex started up.

As a result of net losses, by early 2003 it had accumulated a debt of about $1.35 bn - compared to $1.2 bn in early 2001. After a government intervention, ownership of Chandra Asri now is held 76.2% by the state's Indonesian Bank Restructuring Agency (IBRA) and 23.8% by a consortium led by Marubeni. By early 2003 Marubeni had an exposure to the Chandra Asri venture exceeding $1 bn (see background in Vol. 56, DT No. 11).

Marubeni's involvement in Chandra Asri highlights the woes of Japanese trading companies duped by corrupt members and business associates of the Suharto family (see Vol. 52, No. 11). These companies became heavily exposed to large-scale projects in South-East Asia. Many of their projects were frozen in the midst of Asia's financial crisis of 1997-98, which sent the Indonesian rupiah plummeting and left the economy in turmoil. Chandra Asri was forced to freeze an expansion programme, while other ventures, such as the Tuban ethylene plant were frozen at mid-construction. Japanese banks were the largest lenders to the Indonesian private sector and suffered non-payment of loans during the financial crisis.

Chandra Asri's plants were built by Toyo Engineering as the main contractor. Technology was provided by ABB Lummus Crest of the US. Financing included $1.4 bn in loans for the construction of the main plant from a syndication led by the Industrial Bank of Japan, Fuji Bank and Indonesian banks including Bank Bumi Daya. Marubeni also took part in the financing. Construction was started in March 1991.

PT Petrokimia Nusantara Interindo (Petrokimia), a BP-controlled polyethylene producer and big ethylene importer, protested Suharto's tariff increase which forced Petrokimia to buy ethylene from Chandra Asri. A compromise was brokered in June 1996 by Suharto's eldest son Sigit Harjoyudanto as he was a shareholder in this venture, together with Mitsui and Sumitomo.

Chandra Asri and Petrokimia signed a five-year agreement, under which Chandra Asri was to supply half of Petrokimia's ethylene needs. This was enough to keep Chandra Asri operating at 85% of capacity. By then, a 10 km pipeline linking Chandra Asri and Petrokimia's plant had already been built. Petrokimia had an ethylene cracker built within its complex, with the gas feedstock supplied by PGN. This plant's gas needs are one of the reasons for the proposed import of LNG (see above).