State-owned Bank Rakyat Indonesia (BRI) has signed an agreement with state-owned fertilizer maker Petrokimia Gresik on loan and hedging facilities to support the manufacturer's expansion.
Under the agreement, BRI will provide Petrokimia Gresik loans and foreign exchange (forex) lines — a non-cash loan facility used for hedging — worth Rp 1.3 trillion (US$90.2 million) and $135 million, respectively, as part of the lender's drive to support national food self-sufficiency.
"BRI has built a long-term partnership with Petrokimia Gresik since 1981 and will continue to provide various products and services in the future," Mohammad Irfan, BRI director of institutional business and state-owned enterprise, said in a press conference on Friday.
Petrokimia Gresik president director Hidayat Nyakman said that Rp 1 trillion of the total Rp 1.3 trillion would be used for building an ammonia and urea fertilizer plant with a tenure of 10 years.
The loan, Hidayat said, would help the company complete construction of the plant, with initial production expected to begin in 2018 with a capacity of 660,000 tons of ammonia fertilizer.
According to Hidayat, 440,000 of the 660,000 tons of ammonia will fulfill the needs of the company's existing plant, which produces nitrogen, phosphorus and potassium fertilizers, while the remaining 220,000 tons will be added to increase total urea capacity of 570,000 tons.
He went on that the new plant's capacity would negate the need to import 440,000 tons of ammonia worth $165 million per year, which is also used to help supply its sister companies in East Kalimantan (Pupuk Kaltim) and Palembang (Pupuk Sriwijaya).
"This is part of the country's revitalization program for the fertilizer industry and a bid to support its food self-sufficiency program," Hidayat said.
The interest rate charged on the loan is based on the three-month Jakarta interbank offered rate (Jibor) plus 2.7 percent, according to the agreement.
Meanwhile, Hidayat said the remaining Rp 300 billion would be used for the renovation of the company's water installation at its plant in Gunung Sari, East Java, with a four-and-a-half-year tenure.
BRI, he added, had also provided a hedging facility worth $135 million in forex lines for a two-year term, useable for forex transactions.
Petrokimia Gresik is one of five subsidiaries of the state-owned fertilizer and basic chemical manufacturer Pupuk Indonesia Holding Company (PIHC) group, alongside Pupuk Iskandar Muda in Aceh, Pupuk Kaltim in East Kalimantan, Pupuk Kujang in West Java and Pupuk Sriwijaya in Palembang.
BRI corporate secretary Budi Satria said the lender had booked Rp 13.4 trillion in total loans to PIHC as of September, with Rp 4.3 trillion of that amount going to Petrokimia Gresik and its subsidiaries.
As Indonesia sees rising demand for food, Budi said BRI was committed to supporting the country's fertilizer industry, including by providing loans worth a total Rp 203 billion to fertilizer distributors through a real-time and host-to-host cash management system.
"If we also count our loans to the wider food and agricultural industries, including in the micro segment, BRI has probably disbursed at least Rp 100 trillion by now," added Kuswiyoto, BRI's director for small and medium enterprise business.