S Korea’s Daelim, SK Innovations enter Indonesia, plan investments in energy sector

Two South Korean companies Daelim Industrial Co. and SK Innovations, are entering the Indonesian market. While Daelim will invest in building a hydroelectric power plant, SK Innovation is ramping up its efforts to tap into the Indonesian petrochemical market.

Daelim Industrial, South Korea’s fourth-largest builder, said a consortium in which the company leads, has won a deal valued at 269.3 billion won ($231.9 million) to build the Upper Cisokan Pumped Storage Power Project in West Java, funded by the World Bank. Daelim Industrial joined hands with Italian construction firm Astaldi SpA and Indonesian state-run construction firm PT Wijaya Karya Tbk (WIKA).

The South Korean firm holds a 1,077 billion-won stake in the project, according to Daelim Industrial. The hydroelectric power station will be built in an upper tributary of the Cisokan River, some 126 kilometers southeast of Jakarta. It is expected to take 50 months to complete construction.

The 1,040 mega-watt power plant will produce electricity from a dam that has two reservoirs: the upper one 75.5 meters high and the lower one 98 meters high.

This Indonesia contract is Daelim Industrial’s sixth project in the Southeast Asian region this year, including one to build a port facility in Singapore in February.

Meanwhile, SK Innovation Co., South Korea’s top refiner, said on Sunday it is stepping up efforts to tap into the Indonesian market in a bid to diversify its export markets. SK Innovation said it has recently won a series of orders from PT Pertamina, Indonesia’s state-owned oil and natural gas corporation, to provide petroleum products, beating global competitors.

Currently, SK Innovation and PT Pertamina operate a joint lubricant plant in Indonesia.

The winning of the contracts is part of SK Innovation’s efforts to make inroads into Indonesia, which has emerged as a new export market for South Korean refiners amid a slump in shipments to China.

Indonesia, the largest economic power in Southeast Asia, relies on imports for 40 per cent of its needs for gasoline and other oil products due to dilapidated refining facilities and a lack of refining capacity.

In the first half of the year, South Korean exports of petroleum products to Indonesia came to 16.18 million barrels, up 34 per cent from six months earlier, with SK Innovation taking up 90 per cent of the total.

“SK Innovation is making concerted efforts to increase sales in Indonesia in the wake of a sharp drop in exports to China, which has sharply increased its refining capacity amid weak demand,” a company official said.

Chairman of Indonesia’s Investment Coordinating Board (BKPM) Franky Sibarani said recently, after visiting South Korea, said that South Korean investors had an outlay of around $9.7 billion investment across industries, including petrochemical and electricity generation – in Indonesia.

Of these investment commitments ( $9.7 billion), $4 billion was for the petrochemical industry in Banten, $2.8 billion for coal gasification in South Sumatra and $2.79 billion for North Kalimantan, he said.

Additionally, the investors also planned to invest $70 million in the sweetener industry in East Java, $30 million for a power plant in East Java, $37 million for the cattle food industry in East Java and $20 million on the pharmaceutical industry in West Java.

South Korea is the fourth-largest foreign direct investor in Indonesia by source after Singapore, Japan and the US. From 2010 through March 2015 period, South Korea made $7.46 billion in investments in the country, according to the latest available data from the BKPM.

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