21/09/2011 (Jakarta Globe) - Following similar recent moves by other firms, Barito Pacific, a holding company with petrochemical, wood and property development businesses, has set aside $50 million to expand into crude palm oil and coal mining.

Barito is controlled by Prajogo Pangestu, an Indonesian tycoon who owns two large petrochemical companies that account for 90 percent of the holding company’s total revenue.

“We need to diversify because we don’t want to depend solely on petrochemical business,” Agustino Sudjono, senior vice president at Barito, said on Tuesday.

Agustino said some of the $50 million investment would come from internal cash reserves and the planned sale of a 7.1 percent stake in Chandra Asri Petrochemical to Thailand-based SCG Chemicals. The sale is expected to fetch around Rp 893 billion ($101 million).

With its new palm oil business in mind, Barito has already established a subsidiary named Grand Utama Mandiri.

Reza Andriansyah, president director at Grand Utama Mandiri, said the new plantation unit had spent Rp 700 billion on construction of a palm oil factory, which is scheduled to be completed by the end of 2012.

Half of the plant project was funded with a loan from Bank Negara Indonesia, Reza said.

However, the Rp 700 billion investment is not part of the $50 billion planned investment, the president director added.

The company has started planting 13 hectares in West Kalimantan, and it has a target of 50 hectares by 2015.

Reza said he was positive that the palm oil market was still big enough for a new player like Grand Utama Mandiri.

“Globally, demand always exceeds supply in the palm oil business. The sector still offers a lot of potential,” he said.

As far as new investment in coal was concerned, Agustino said no details were available, but the sector was certainly part of Barito’s plans.

Other companies and individuals have been getting into the coal-mining business on expectations that prices will continue to rise. The idea is that nations will rely more on fossil fuels such as coal for use in power plants as demand for electricity likely continues to increase.

State-owned cement maker Semen Gresik earlier this month announced that it was expanding outside its core business and had set aside Rp 1 trillion to acquire a majority stake in a local coal mining company.

Other companies keen to get into the coal-mining sector include state utility company Perusahaan Listrik Negara.

Barito also controls major logging and timber operations through Mangole Timber Producers and Tunggal Agathis Indah Wood Industries.

In property, the holding company operates through Griya Idola, which manages, among other projects, the prominent high-rise Wisma Barito Pacific building in Jakarta.