SINGAPORE, July 16, 2014 (RISI) - Asia Pulp & Paper's (APP) subsidiary Tjiwi Kimia has kicked off a rights issue on the Jakarta stock exchange, where the firm is listed, aiming to raise Rupiah 1.3 trillion ($117 million) to fund a 2 million tonne/yr pulp mill that is to be built in South Sumatra, Indonesia.
The company's financial director Suhendra Wiriadinata said that all the proceeds raised from the issue of 1.3 billion new shares, which will be offered to its existing shareholders from July 10 - 17, will be injected into the massive new bleached hardwood kraft (BHK) mill, owned by OKI Pulp & Paper Mills.
The rights issue is part of OKI's financial plan to build the greenfield pulp plant, which demands a whopping total investment of $2.6 billion.
The APP group acquired a total 70.58% stake in OKI in July last year for $60 million.
Tjiwi Kimia and another APP subsidiary, Pindo Deli Pulp and Paper Mills, each hold 35.29%.
The remaining 29.42% was held by OKI's pre-existing owner, Muba Green Indonesia.
OKI's ownership structure has since changed, following injections of capital from its shareholders.
Tjiwi Kimia and Pindo Deli now each hold a 48.55% stake, while Muba Green owns the remaining 2.9%.
The BHK mill scheme gained a solid footing after it was backed up with a $1.8 billion loan from China's policy bank, China Development Bank, in October.
The business agreement was sealed on October 3, witnessed by Indonesian and Chinese presidents Susilo Bambang Yudhoyono and Xi Jingping during Xi's two-day visit to Indonesia.
Since then, the project has made significant progress.
A number of suppliers, including Valmet, Andritz and Jacobs Engineering Group, have been signed up for the design, supply and commissioning of core components for the BHK line.
Suhendra pointed out that construction work at the mill site has begun and is expected to be completed by the second quarter of 2016, as previously planned, despite a tight schedule.