State-owned PT Pupuk Indonesia Holding Co. (Persero) will invest more than $6 billion over the next five years to boost domestic fertilizer supply in a bid to improve the country’s food security, particularly in the eastern regions, according to Bloomberg, citing an interview with PT Pupuk Indonesia’s President Director Rahmad Pribadi.
The holding company is also actively engaging with potential partners and likely M&A targets to boost its presence in Asia Pacific, Pribadi told Bloomberg. He did not provide details, but the company’s PT Pupuk Kalimantan Timur (Pupuk Kaltim) business unit has reportedly been in negotiations with Australia’s Incitec Pivot Ltd. (IPL) since last summer to buy IPL’s fertilizer business (GM Feb. 16, p. 34).
PT Pupuk Indonesia has not publicly commented on the reports and IPL has not disclosed the identity of the company it is negotiating with. In a business update in February, IPL said the process of the potential sale was “progressing but discussions were incomplete.” The value of the proposed deal has been put at around A$1.5 billion (approximately $981 million at current exchange rates).
Pribadi in an interview with NikkeiAsia last May indicated the company was actively looking at overseas acquisition opportunities, particularly of phosphate and potash assets (GM July 28, 2023).
In terms of domestic expansion, Pribadi said PT Pupuk Indonesia plans to spend 100 trillion rupiah (approximately $6.4 billion at current exchange rates) over the next five years and is considering debt financing or strategic equity partners to fund the expansion.
The company’s expansion program includes a new $1.2 billion ammonia and urea fertilizer plant project in Fakfak in Papua province by Pupuk Kaltim (GM Oct. 20, 2023), as well as $640 million of upgrades to the Palembang complex in South Sumatra operated by the PT Pupuk Sriwidjaja Palembang business unit.
“We need it to improve food security in our eastern regions by providing affordable fertilizer with less logistics cost,” Pribadi said. He highlighted that Indonesia’s rice imports surged sevenfold last year, and the government is issuing more import permits this year as production lags behind demand.
Construction of the Fakfak plant will start next year with production set to start in early 2028, he said. In the interview with NikkeiAsia in May 2023, Pribadi said the planned new facility will have capacity to produce 825,000 mt/y of ammonia and 1.1 million mt/y of urea.
Pupuk Kaltim is already Indonesia’s largest ammonia and urea producer and one of the largest fertilizer producers in Southeast Asia. Current output is put at some 3.4 million mt/y of urea, 2.7 million mt/y of ammonia, and 300,000 mt/y of NPK.
Across all of its business units, PT Pupuk Indonesia has fertilizer production capacity of some 14.5 million mt/y, including 9.36 million mt/y of urea and 3.88 million mt/y of NPK, according to its website. In addition, it has 7.01 million mt/y of ammonia production capacity, as well as 1.6 million mt/y for “asam fosfat.”
The holding company is targeting 8.5 million mt of urea output this year and 4.2 million mt of NPK fertilizers output, up from total fertilizer output of 11.6 million mt last year.
In terms of other new projects, PT Pupuk Indonesia is also looking at building a methanol plant in Aceh that will get its gas supply from the offshore Andaman project, which is expected to start pumping gas in 2028.
According to this week’s report, PT Pupuk Indonesia has selected advisors for a proposed initial public offering (IPO) of Pupuk Kaltim “pending a better market situation and approval from the state-owned Enterprises Ministry.”
Reports emerged early last year that PT Pupuk Indonesia was considering selling primary shares representing a 10-20% stake in Pupuk Kaltim, with the offering to take place in Jakarta (GM Jan. 6, 2023). According to the reports, the IPO could raise between $500 million and $1 billion, with the proceeds used for capacity expansion if the offering proceeds. PT Pupuk Indonesia owns 99.99% of Pupuk Kaltim.