"Based on a cooperation agreement signed in 1997 between PKT, Mitsui & Co Ltd and Tomen, the ammonia factory of PT Kaltim Pasifik Amoniak (KPA) would be handed over to PKT after the factory reached profit target," PKT president Aas Asikin Idat said here on Monday.
KPA is a joint venture between Mitsui & Co Ltd and Tomen with a share composition of 75 percent and 25 percent respectively.
KPA with factory in the PKT complex in Bontang, East Kalimantan, produces ammonia with a production capacity of 2,000 tons per day or 660,000 tons per year.
"The take over of the factory by PKS was made official with a head of agreement (HoA) signed on Nov 11 here this year," Aas said.
Anas said earlier the take over could be made only in 2018, "but we decided that it would be better to do it now when ammonia business is good."
The process of take over is on going including take over of license and other contracts, he said.
PIHC President Arifin Tasrif estimated the take over compensation is around US$110 million.
"After the take over we will make the ammonia factory a separate business entity as a new subsidiary to be named PT Pupuk Indonesia Kimia (PIK)," Arifin said.
The ammonia factory will support PIHCs plan to develop nitrogen-based petrochemical industry with products such as ammonium nitrate and it will guarantee supply of ammonia for fertilizer mainly NPK, he said.
"The factory will better guarantee the availability of ammonia to feed fertilizer industry and support development of petrochemical industry," he said.
Since it came into line in 2000, the ammonia production of KPA has been exported to various countries mainly Taiwan, India, Vietnam, South Korea, Japan and other countries the Asia Pacific region.
"After the take over, the production would be used mainly for domestic consumption," he said.
Under the agreement in 1997, an off take is arranged of 60 percent of the production for the shareholders until 2014.