TOKYO. The Indonesian government has formally rejected Japan’s request to continue to operate aluminum producer PT Indonesia Asahan Aluminium (Inalum) after its existing agreement expires in 2013, a senior Indonesian official has said.

Industry Minister MS Hidayat said on Tuesday that he and Japan’s vice minister of economy, trade and investment and Susumu Kato, the chairman of the Sumitomo Corporation, held an unplanned meeting on the sidelines of the Japan-Indonesia Joint Economic Forum on Tuesday to discuss Inalum’s future.

“The Japanese wanted to continue the cooperation agreement, even with a minority stake. However, the government has decided to end the cooperation and assume 100 percent ownership of Inalum,” Hidayat said.

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According to provisions of the government’s master agreement on Inalum, the Indonesian government has one year to complete the takeover before the agreement expires in November 2013.

“Therefore, we will have all matters cleared up and finalized before the end of this November,” Hidayat said.

Inalum, which was established in 1976, is 41.12 percent owned by the government of Indonesia and 58.88 percent owned by NAA, a consortium of 12 Japanese companies, including Sumitomo Chemical Co. Ltd., Sumitomo Shoji Kaisha Ltd., Mitsui Aluminium Co. Ltd. and Mitsubishi Corporation.

The Japanese consortium reportedly asked for its contract to be extended, committing to increase Inalum’s annual aluminum ingot production capacity to 317,000 tons, up from a current 250,000 tons. The Japanese offered to invest US$367 million in return for the contract extension.

Inalum’s, which started operation in 1983, currently operates the only aluminum smelter in Southeast Asia, in Asahan, North Sumatra, and utilizes hydropower plants Asahan I and Asahan II as its prime energy sources.

The company delivers 40 percent of its product to the domestic market and exports the remainder to Japan.

Although cooperation between Indonesia and Japan on Inalum will end in the near future, the Japanese will still have on opportunity to maintain their business.

“After we take a 100 percent stake in Inalum, the government may offer the company’s shares to other parties,” Hidayat said.

“However, principally, the Indonesian government will have the majority stake in Inalum. I prefer that it be operated by state-owned enterprises,” Hidayat said.

According to the minister, following the meeting on Tuesday, various informal meetings will be held starting next week, both in Indonesia and Japan, to settle technical matters, including day-to-day management, assets valuation and how much the Indonesian government will pay for the Inalum shares held by the Japanese.

Hidayat declined to reveal the government’s valuation of Inalum, saying only that the asset valuation process had already been carried out and involved an audit from an independent team.

Previously, Coordinating Economic Minister Hatta Rajasa said that the government would have to spend between $600 million and $700 million to take over the Japanese consortium’s stake.

Editor: Edy Can