APP likely get more loans from China’s banks to fund new Sumatra pulp mill

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APP likely get more loans from China’s banks to fund new Sumatra pulp mill

April 06, 2015 - 02:31

Asia Pulp & Paper (APP) is expected to obtain more loans from Chinese banks to fund expansion projects in Indonesia.

The company's parent group, Sinar Mas, has secured a $1.5 billion loan from the China Development Bank (CDB) and ICBC Financial Leasing to fund the conglomerate's expansion in the power, pulp and telecommunication industries in Indonesia.

The loan agreement was signed in Beijing on March 27, witnessed by Indonesian president Joko Widodo and China's prime minister Li Keqiang, according to media reports.

Joko met Chinese president Xi Jinping during the four-day visit in China, which aimed to foster business ties between the two countries.

Under the deal, $700 million out of the $1.5 billion loan will be used in pulp and paper development.

The money is likely to be channeled into the construction of APP's massive bleached hardwood kraft (BHK) pulp mill in South Sumatra.

APP already obtained a loan of $1.8 billion from the CBD for the pulp mill project in October 2013, with business agreements signed between Indonesia and China in the presence of former Indonesian president Susilo Bambang Yudhoyono and Xi during Xi's two-day visit to Indonesia.

Shifting plans: The first CBD loan was to fund the greenfield mill, which in the blueprint APP laid out at the time would cost $2.6 billion and contain a 2 million tonne/yr BHK pulp line.

The scheme has apparently changed since then.

Key equipment APP ordered for the pulp facility has come in pairs, including two biogas gasifiers, two biomass boilers, two kilns and two pulp dryers from Valmet.

In early 2014, the firm signed up Andritz to supply what will be the world's largest recovery boiler for the plant, at a black liquor firing capacity of 11,600 tonnes of dry solids per day.

Such a huge recovery boiler is capable of handling 3.2 million tonnes/yr of pulp production.

Moreover, APP has decided to build the cooking plant for the pulp facility by itself.

This includes a big digester with a cooking process capable of churning out at least 6,000 tonnes/day, according to APP.

All these factors point to an even larger pulp plant than previously announced being erected.

Various sources have confirmed that, indicating that the facility will house two BHK lines, with each having a capacity of 1.4 million tonnes/yr.

With the mill's large recovery boiler and digester, the individual capacity of the two pulp lines could potentially be upgraded to 1.6 million tonnes/yr.

The startup of the pulp facility has also been pushed back from the originally planned mid-2016 to late 2016 or early 2017.

APP has declined to comment on the details of the expansion scheme.