How will AKR's business change with your tender to import fuel for the coming five years?
AKR's business in petroleum today is primarily selling high-speed diesel, which is used in industrial applications. Growth has been great in that segment over the last decade. We now see great potential growth areas, with coal prices increasing as well as the metal industry picking up. There is also the bigger part of petroleum downstream, more specifically retail, where there is now an opportunity to grow. Our government contract is mostly for diesel, with a small part comprising gasoline. Since 2010, AKR has been the only private company receiving the allocation of subsidized fuel, along with Pertamina. In 2018, Energy and Mineral Resources Minister Ignasius Jonan made the move to provide a longer-term contract for the next five years. AKR was selected, along with Pertamina, to develop this business. The extension of subsidized fuel contracts to five years is a welcomed move. Now, AKR can grow its current figure of 135 petrol stations. Going forward, with the JV with BP, we will move on to non-subsidized gasoline. Over the next 10 years, we want to open 337 outlets under the BP brand. That will also bring in the superior quality fuels, lubricants, and retail stores. This is a 50.1% AKR-49.9% BP Global split, whereby AKR will support the joint venture in terms of equity and logistics. We will also jointly develop the outlets, taking care of land and construction.
Can you elaborate on the Java Integrated Industrial and Port Estate (JIIPE) project?
JIIPE is a large industrial estate with an attached seaport that seeks to attract industrial clients. We are developing 3,000ha of land in total, of which 400ha will be the seaport, 1,760ha will be the industrial estate, and 800ha will be residential. We have been developing JIIPE since 2012, and it will have port access, toll roads, and railway access, which will improve the ease of bringing in goods as well as exporting. Here, the emphasis is on developing utilities, such as power plants, wastewater management, logistics, office utilities, railway depots, and so on. The development is massive, and we have divided it into three phases. The first will be from 2014 to 2019 and will encompass 800ha of industrial land and road access from highways to our location, as well as interior roads. We are developing three power plants to service customers. The first will be a 23MW multi-fueled plant, which was commissioned in 2017. The second is a 500MW gas-fired plant, while the third will be a 660MW coal-fired plant. Heavy industry requires a huge amount of power. We will develop power here to supply directly to the fertilizers, the smelters, and other heavy industry clients.
What are the benefits of such a project?
We currently have more than seven clients, including Swiss Clariant, a specialty chemical manufacturer, Unichem, and Hextar from Malaysia. We also have Djarum Group, which will develop a castor oil refinery. This becomes an efficient proposition if companies seek to import and export, as well as distribute inland. The government supports this project because our partner is state-owned enterprise Pelindo III, which owns 40% of the industrial estate and 60% of the port. Pelindo III will dredge the channel so the port can accommodate Post-Panamax vessels up to 150,000 tons, making the port one of the largest and deepest in the country. The government and others are extremely supportive because they see the need for such an industrial estate to bring in foreign and domestic investors and improve efficiencies.
What are your immediate plans and ambitions?
We expect to grow in the double digits in 2018 in terms of profit. There is new growth in retail, aviation, and utilities that will see the company growing much bigger and more balanced over the next few years.