Cemex set to run new venture

Cemex is expected to take control of a new joint venture in Indonesia as part of the resolution to a long-running dispute with Jakarta that could be announced as early as today.   The new government of President Susilo Bambang Yudhoyono has said it wants to solve high-profile disputes with foreign investors as soon as possible as part of its plans to woo foreign direct investment.  Cemex owns a 25 per cent stake in state-owned Semen Gresik, Indonesia’s largest cement producer, and has long been seeking to act on what it calls its right under its original contract to take a majority stake. In frustration, last year it sought international arbitration.  Since the new government took office in October it has been involved in talks over a possible out-of-court settlement. 

But Indonesia’s minister of state-owned enterprises, Sugiharto, said yesterday that Jakarta and Cemex were now looking to sign a memorandum of understanding tying both parties to such a settlement.  People close to the negotiations said last night that the deal would see the creation of a new joint venture controlled by Cemex that would take control of Gresik’s production facilities in Tuban, East Java. Proceeds from the transaction would fund the building of a new cement plant by Gresik, which would also have an ownership stake in the new entity. 

However, people close to the negotiations said if the deal was announced this week it would not address key details such as how much Cemex would pay for the new facilities and valuations had yet to begin.  Those details, they said, would be worked out during further negotiations with the hope being that such talks would wrap up by the end of February.  Other people close to the deal said Indonesia was seeking an injection of capital upwards of US$400m by Cemex, although others questioned that number.  The deal could also be complicated by opposition from nationalist politicians, labour unions, and even the management of the Tuban facilities, people close to the deal said.