Japanese consortium wants $626 million for Inalum stake

Japanese consortium Nippon Asahan Aluminium (NAA) on Monday countered the Indonesian government’s offer for its stake in aluminum producer Inalum, which is set to expire on Oct. 31, and demanded $626 million.

The government, which has in the past said that it will make Inalum a state-owned enterprise, has offered $424 million for the stake.

“This Monday, I will meet with Coordinating Minister for the Economy Hata Rajasa and the president [Susilo Bambang Yudhoyono] to make a decision on whether to go for an arbitrage or not,” Industry Minister M.S. Hidayat on Sunday. “The likeliness is not.”

International arbitrage is a costly process. The government will consider raising its offer, Hidayat said, though he did not elaborate further. He said the Finance Ministry was already preparing to formally reclassify the company as a state-owned enterprise after the proposed takeover at the end of the month.

Under an agreement signed in 1978, the government reserved the right to buy the company once the deal had expired.

After the takeover, Hidayat said, no immediate changes would occur other than the inherent differences in shareholder structure.

Agsu Tjahajana, the director-general for international industrial cooperation at the Industry Ministry, said he was optimistic that the issue would be resolved before Oct 30.

The talks over Inalum, which produced 246,000 metric tons of aluminum in the year that ended in March 2012, are part of Indonesia’s efforts to generate increasing revenues from its natural resources and curb foreign ownership in that sector.

NAA has asked Indonesia to renew the contract or to allow the consortium to retain a minority stake in the venture after the current agreement expires, but the government has indicated that an extension is unlikely.