Inalum to Establish New Subsidiary for Aluminium Smelter Project

Strategic Move Amidst BUMN Consolidation

PT Indonesia Asahan Aluminium (Inalum), a state-owned enterprise, is proceeding with plans to establish a new subsidiary to manage its aluminium smelter project in Mempawah, West Kalimantan. This decision comes at a time when BUMN is undertaking efforts to reduce its subsidiary count due to financial losses. Inalum's management believes that creating a separate entity for the smelter project is crucial for risk management and financial restructuring.

Rationale Behind the New Subsidiary

According to Melati Sarnita, Inalum's CEO, the new subsidiary is necessary to protect the company's core business from the significant financial risks associated with the smelter project. The project requires substantial investment, and by establishing a separate entity, Inalum aims to refinance existing assets and better control the risks associated with the new business venture.

Implications for BUMN Restructuring Plans

The move by Inalum appears to be at odds with the broader BUMN strategy of consolidating and reducing the number of subsidiaries. Many BUMN subsidiaries are currently operating at a loss, prompting a larger effort to streamline operations. However, Inalum's management justifies the creation of the new subsidiary as an exception due to the project's scale and strategic importance.

Financial and Operational Considerations

The aluminium smelter project in Mempawah represents a significant investment for Inalum, with far-reaching implications for the company's financial and operational structure. By isolating this project within a new subsidiary, Inalum can better manage financial risks while focusing on its core aluminium business. This strategic decision highlights the complexities involved in managing large-scale industrial projects within Indonesia's state-owned sector.