Nalco in talks to buy Indonesian firm Inalum

Aluminum producer Nalco is in talks to buy Indonesia’s Ashan Aluninum (Inalum) for up to Rs 8,000 crore, in what could be the largest overseas acquisition by state-owned metal firm.

A Japanese consortium holds 59 per cent stake in Inalum, which owns a 2.1 lakh tonne capacity aluminium plant in North Sumatra province while the rest is with the Indonesian government.

Sources privy to the development said the licence of the Japanese consortium to run the firm is coming to an end next year and the Indonesian government has invited the Indian flagship firm for discussions.

Nalco has made a detailed presentation to a committee of the Indonesian Cabinet elaborating its plans to take Inalum further. It expressed intention of both running Inalum and acquiring any stake or both.

Inalum was set up in 1976 as a joint venture between the Indonesia Government and Nippon Asahan Aluminium, a consortium between 12 Japanese companies and government. Initially, the shareholding ratio between the Indonesian Government and NAA was 10 per cent and 90 per cent respectively.

In October 1978, the ratio changed to 25 per cent and 75 per cent and since June 1987 it has been 41.13 per cent and 58.87 per cent. The share composition then changed to 41.12 per cent for the Indonesia Government and 58.12 per cent for NAA in February, 1998.

Indonesia’s contract with NAA was to run the company for 20 years, which is ending next year prompting Jakarta to scout for firms which can take care of its future.

Sources said this does not mean that doors have been shut on NAA. The Indonesian government is in touch with Nalco as well as with the Japanese firm.

No decision has been taken yet, they said.

In fact, sources said there is a strong pressure from the Japanese Government to renew the contract, but invitation from the Indonesian government to Nalco was an indication that it is open to rope in a new partner.

“If it 100 per cent acquisition, together with ownership of all captive power plants, it will roughly cost Nalco between Rs 7,000-8,000 crore,” a source said.

When contacted the Nalco Chairman, Mr B.L. Bagra, said, “We have expressed our interest also to take over Inalum. We have shown interest to get associated with it. Once the contract with the Japanese ends, whether the Indonesian Government will offer us a part of equity or full equity or it will give to Japanese only, we don’t know. We are yet to hear from them.”

“We are open to picking up part of the equity. We are open to fully acquiring the company. We are open to just running the company and for both running the company with some stake,” he added.

Inalum, which is currently run by a Japanese consortium, is the first Indonesian firm to produce aluminium and has 2.1 lakh tonne per annum capacity at its Kuala Tanjung plant in Sei Suka District, about 110 km from Medan, capital of North Sumatra Province.

But to keep control of Inalum, Japan is even open to changing the exiting terms and conditions which the Indonesian government finds favourable.

Inalum has both hydel and thermal power plants to fire its alumina refinery facility and gets other raw material from state-owned companies only.

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