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Major Australian investment in Aceh proposed: project feasibility to be determined in early 2008

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Media release

26 June, 2007

Major Australian Investment in Aceh Proposed - Project feasibility to be determined in early 2008

Australia’s Minister for Trade, Warren Truss, said he was delighted to preside over today’s signing in Jakarta of a Statement of Mutual Intent that may pave the way for a major new Australian investment in Indonesia.

On 26 June, leading Australian fertiliser manufacturer, Incitec Pivot Limited (IPL), agreed with two Indonesian partners to investigate jointly the feasibility of a project to boost the output of three fertiliser plants in Aceh. All three government-owned plants are currently producing well below capacity because of lack of gas feedstock.

The agreement was signed with PT Pupuk Sriwijaya (PUSRI), holding company of the state-owned fertiliser company, PT Pupuk Iskandar Muda (PIM), which owns ammonia and urea plants in Aceh, and the state-owned engineering company, PT Rekayasa Industri.

Mr Truss and Indonesia’s Minister for State-Owned Enterprises, H.E. Sofyan Djalil, who is himself from Aceh, presided over the signing following a meeting in Jakarta.

The project, if it proves feasible, would involve IPL investing between US$700 million and US$800 million to build a new gasification plant to convert Indonesian coal into synthesised gas. The plant would provide the three fertiliser plants with feedstock, electricity and steam.

The three ammonia/urea plants have a production capacity of more than 1.7 million tonnes annually. They are, however, currently producing only 300,000 tonnes because of limited supplies of natural gas.

Mr Truss said that, should the project proceed, it would represent a “significant and very welcome strategic partnership” between Australian and Indonesian corporates which would benefit both countries and the region.

“I understand that under this proposed arrangement, PIM’s fertiliser plants will remain Indonesian owned and operated,” Mr Truss said. “In return for its substantial investment in these plants, IPL would secure a supply of ammonia and urea to sell on the Australian agricultural market and to trade on world markets.”

The feasibility study is expected to be completed by the first quarter of 2008.

IPL Managing Director & CEO, Mr Julian Segal, said that although the company had been discussing the project with Indonesian parties for some months, it was “still early days” in what would be an “exhaustive” examination of the opportunity in the months ahead.

“Most of all, we need to be completely satisfied that any project would meet our strict investment criteria,” Mr Segal said.

Mr Truss said he had no doubts that IPL would be an excellent partner for PIM and Rekayasa. “IPL is a leading manufacturer of fertiliser to farmers in Australia's eastern and southern States, supplying more than 50 per cent of Australia's agricultural plant nutrient needs. It operates five manufacturing plants in Australia and maintains an extensive distribution network across eastern and southern Australia. IPL supplies about three million tonnes of fertiliser a year, generating sales revenue in excess of A$1 billion annually,” the Minister said.

Mr Truss said IPL’s interest in the project represented a continuation of Australia’s strong engagement with Aceh in recent years, most notably the significant commitment of private and government assistance for the victims of the December

2004 tsunami and earthquake.

“We recognise that the long-term development of a viable, sustainable economy in Aceh, once this post-tsunami reconstruction has been completed, will require substantive new investment. If this project proves viable, it will have a significant impact in creating jobs and generating business in the province,” he said.

Media Inquiries: Minister Truss' office 02 6277 7420 - Departmental Media Liaison 02 6261 1555