Aug. 14 (Bloomberg) -- Indonesian billionaire Putera Sampoerna, who sold his cigarette company for about $2 billion two years ago, plans to build ethanol plants that may account for 19 percent of the nation's output by 2010.
Sampoerna, 59, expects his first ethanol plant to be ready in the next two years, he said in an interview in Jakarta on Aug. 10. He wants to produce 375,000 kiloliters of ethanol a year, out of the country's estimated output of 2 million kiloliters, according to the Ministry of Energy & Mineral Resources.
``We are already far along in designing our first ethanol plant,'' Sampoerna said. ``We are doing ethanol in a big way.''
Sampoerna, who sold his family's stake to Altria Group Inc., wants to tap the rush to meet government regulations worldwide that make it mandatory for part of the fuel used by trucks and cars to come from biofuels. Indonesia needs to boost ethanol production 20-fold to meet demand for 1.7 million kiloliters of the fuel in three years should the government enforce fuel companies to mix 10 percent of the biofuel to gasoline, according to state oil company PT Pertamina.
``It's a good move as the Indonesian government is now promoting biofuel projects seriously,'' said Stefanus Darmagiri, an analyst at PT UOB Kay Hian Securities in Jakarta. ``But we are yet to hear what incentives, including tax breaks, the government may offer to companies producing biofuels.''
Vast Land
The National Bio-diesel Development Team, a taskforce formed by Indonesia last year, has proposed that the government draw up regulations to make the use of biofuel, especially by industries, mandatory, Evita Legowo, secretary of the taskforce, said in an interview on Aug. 10.
``Making it compulsory would further make the sector attractive to investors,'' Legowo said. Bio-diesel is sold at 216 gasoline retail stations in Jakarta and Surabaya, the two biggest cities in Indonesia. Ethanol is sold at 12 gas stations in three Indonesian cities, Legowo said.
Indonesia has more than 6 million hectares of land available for crops that make biofuel, Alhilal Hamdi, chairman of the taskforce, said on July 24 last year, after the group's establishment. About 3 million hectares could be used for oil palm, 1.5 million hectares each for jatropa and cassava, and about half a million hectares for sugar cane, Hamdi said.
``Nobody can compete with Indonesia in agriculture and forestry,'' Sampoerna said. ``So let's develop those. If you want to sit there and develop industrial programs or incentives, it should be related to the agriculture.''
Investments
Sampoerna may set up his ethanol plant in Madiun and Pawonsari on Java island, according to the energy ministry.
Total production capacity of fuel grade bio-ethanol in Indonesia was 82,500 kiloliters a year as of the end of April, according to Indonesia's energy ministry.
Sampoerna, who has so far invested in a 20 percent stake in Israel's Harel Insurance Investments Ltd. and in Mansion (Gibraltar) Ltd., an online gaming company, declined to give detail of his Indonesian bio-ethanol project in the Aug. 10 interview. He also has a unit, PT Sampoerna Agro, which produces palm oil.
In June, Sampoerna Agro, based in Palembang, south Sumatra, raised 1.08 trillion rupiah ($115 million) selling new shares, equivalent to a 24.4 percent stake. The company will use the proceeds for expansion and to reduce debt.
The Sugar Group, owned by Indonesian businessman Gunawan Yusuf plans to build ethanol plants with a total capacity of 500,000 kiloliters a year in Sumatra and Kalimantan islands by 2010, according to the energy ministry.
A venture between a Japanese company and a Brazilian company also plans to build ethanol plants with a similar capacity in Papua and Kalimantan by 2010.
