East Aceh Palm Oil Project

PROPOSALCP0 MILL 20 TON FFB/HOUR

DEVELOPMENT PROJECTBAYEUN - RANTAU SELAMAT - ACEH

TIMUR

BY

PT. BERKAH SAWIT ACEHA JOINT VENTURE

PT. ACEH SAWIT INDUSTRY & KOPERASI PRIMAJASA

EXECUTIVE SUMMERY

The Province of Aceh in the Republic of Indonesia due to many years of war and instability has not been getting adequate benefits of modern development as compared to the other provinces in the country. Now with peace, political stability, good security and economic growth the Governor of the Province of Aceh, Mr. Irwandi Yusuf and his elected team has been aggressively and actively promoting the overall development of the Province of Aceh.

The Government of Aceh is currently providing free oil palm seedlings to local smallholder farmers. Some 6 million seedlings had been given out and this ambitious program will be expanded shortly to increase the number of participants. The objective is to provide the local rakyat populace with sustainable incomes and alleviate poverty levels.

In the Kabupaten Aceh Timur there are some 55,000 hectares oil palms planted by smallholders and private plantations. A significant portion of the 75,000 tons of oil palm fruits harvested monthly has to be sold outside the Kabupaten Aceh Timur due to insufficient processing facilities within. This inevitably results in unnecessary transport costs for the smallholder farmers amongst other attendant problems such as delays and quality deteriorations.

PT. Aceh Sawit Industry is new member company of Crescent-Alhilal International Group and has the mission objective to develop and assist the smallholder farmer palm oil industry in Aceh. The Crescent-Alhilal Group was instrumental in procurement of monetary donations and aid assistance amounting to USD 100 million to the Government of Aceh which were used to rebuild Aceh and provide rehabilitation of all tsunami victims. Recently the Government of Aceh has appointed Crescent-Alhilal International Group - Kuala Lumpur Office with Dr. Hilmy Bakar to manage investment and redevelopment funds from both Indonesian and foreign Investors and Institutions.

Koperasi Primajasa of Bayeun, Rantau Selamat, Kabupaten Aceh Timur has a crude palm oil mill project which has been abandoned failed for some years due to lack of funding and management expertise. As a result the Koperasi and its members have suffered losses and lack of opportunity to participate and enjoy the economic benefits in the development of the palm oil industry in its own backyard.

PT. Aceh Sawit Industry and Koperasi Primajasa has formed a new joint venture company named PT. Berkah Sawit Aceh to fast track the completion of this particular project and also to develop some other similar mini mill projects in other strategic locations in the Kabupaten Aceh Timur. PT Aceh Sawit Industry has vast expertise in palm oil milling and operational experiences. It is confident that the opportunities given

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through the Koperasi Primajasa will be realized and the smallholders and rakyat should participate in the economic benefits.

1. INTRODUCTION

The Government of Kabupaten Aceh Timur, Indonesia has invited Crescent International Group (Al-Hilal International Group) with Dr. Hilmy Bakar to arrange investments from local and foreign parties. Since 2005 Crescent Group had facilitated financial donations and contributions of more than USD 100 million from foreign and local Institutions, to the Government of Aceh. These monies were used to rebuild houses, mosques, and infrastructure, rehabilitate the lives and livelihood of all tsunami victims. Recently Crescent-Alhilal Group facilitated investments from Middle East countries in palm oil industries and palm oil plantation in Kabupaten Aceh Timur. Crescent Group and Investors has set up the joint venture local company PT. Aceh Sawit Industry to develop crude palm oil mills and related industries in Aceh.

With the support of the Aceh Timur Government, Koperasi Primajasa and PT Aceh Sawit Industry has formed a new joint venture company named PT. Berkah Sawit Aceh to redesign and construct the unfinished mill. The latter company has survey the location and surroundings in relation to feasibility of the project. Preliminary work has been carried out and it is viable to revive the abandoned project.

Kabupaten Aceh Timur has some 55,000 hectares oil palms planted by smallholders and private plantations. A significant portion of the 75,000 ton FFB harvested monthly is sent out to Tamiang and other mills several hours away. Inevitably transport costs for the fruits are higher and delays often occurred.

Given below are the oil palm plantations in Kabupaten Aceh Timur: PT Anugrah – 3,000 ha PT Bumi Flora – 2,000 ha PT Citra Ganda Utama – 3,000 ha. PT. Beurata Maju – 805 ha. PT. Patria Kamaou – 1514 ha. PT. Mulasindo – 5650 ha. PT. Putri Hijau – 1500 ha. Other Smallholders Plantations – 29.466 ha

Total Palm Oil Plantations in Aceh Timur: 54.946,3 ha.

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2. THE OBJECTIVE OF PROPOSAL

Koperasi Primajasa Aceh Timur is the only company appointed by the government of Aceh Timur to develop the ‘RAKYAT’ type of mini mills to serve the local farmers by processing their palm fruits at better prices and with relative more conducive conditions. PT Aceh Sawit Industry with its expertise and management experiences, has form a strategic alliance with the Koperasi to initially complete the Bayeun project and further to develop several more of the ‘Rakyat’ mills at selected locations in Aceh Timur, with new JV company named PT. Berkah Sawit Aceh. The main objective this proposal is to invite potential partner and investor to joint in this project as new share holders.

3. THE DEVELOPMENT OF BAYEUN CPO MILL PROJECT

This comprises of the following components:

a. Licenses and Approvals Koperasi Primajasa has an operation license issued by the office of Bupati

Aceh Timur. Izin Lokasi, Izin Prinsip, IMB, UKL/UPL, HO/Dinas Perindustrian, SIUP/SITU

Other licenses will be given in due course

b. Location An area of 4 hectares was purchased in Desa Bayeun, Kecamatan Rantau

Selamat, Aceh Timur. The site is 1 km off the main road Medan - Banda Aceh, 14 km from

Langsa, Aceh Timur. The land is favorable factors such as free of flooding, soil type, proximity

to water source, topography

c. Development Project Design concept regards milling capacity and machinery shall be amended Milling capacity shall be initial 10 ton FFB/hour Milling capacity to 20 ton FFB/hour soonest possible. Construction shall start by mid - 2011, completed and in operations by

early 2012.

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The mill location is in Desa Bayeun, Kecamatan Rantau Selamat, Kabupaten Aceh Timur, Province of Aceh, Indonesia.

The site is 3.5 hours by road to Medan – Province of North Sumatra and Belawan seaport. Infrastructure and road transport network is good and established.

d. Heavy Equipment and Vehicles Heavy equipment such as Wheel Loader and Dump Trucks shall be

required for the handling of FFB and general milling operations.These shall be purchased by equipment leasing arrangement.

For the Directors and Management staff some general vehicles shall be provided.

e. Housing & Facilities Sufficient houses will be built to accommodate the mill staff and workers’ Facilities such as free electricity and water will be provided. Sports and educational activities shall be available. Basic education shall be provided to the children of the workers

f. Community Services The Company will participate in relevant community development. Mill workers will be benefit from financial services such as provident fund,

cooperative activities Prayer house shall be built and facilities provided.

4. THE EXISTING ASSET VELUE AND COST OF PROJECT

1. Current Status of Mill Project:a. Process Building (estimated 800 m2 area)b. Vertical Sterilizers – 2 x 5 tonc. Screw Press – 1 x 10 ton/hourd. Digester – 1 x 3000 literse. Steam Boiler – 1 used unitf. Other machinery fabrications

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2. The Mill will have to be redesign to suit new processing systems and with larger. Thus most of the machinery fabrications and the incomplete small steam boiler have little salvage value.

3. Estimated valuation of current status: a. Pra Ops, Izin2, etc : 500.000.000 b. Land 40.000 M2 : 1.000.000.000 c. Mill Building : 500.000.000 d. Machineries : 2.500.000.000 e. Other & Goodwill : 500.000.000

Total : Rp. 5.000.000.000 (Lima Milyar Rupiah)

4. Outstanding works to be done: a. Civil Works - earthworks, machinery foundations, flooring, drains, roads,

fencing, retaining walls, others b. Ancillary Buildings – office, guardhouse, others c. Mechanical works

d. Electrical works e. Water Treatment Plant

f. Effluent Treatment Plant g. Proprietary Equipment: Steam Boiler, Weighbridge, Diesel Generators,

Steam Turbine, Geared Motors, Piping, Valves, Fittings, others h. New process systemsi. Housingj. Vehicles.

Total costs : Rp. 25.000.000.000

5. Grand Total Cost (3+4) : Rp. 30.000.000.000

5. SECURITIES

The financial lenders shall have the following ‘first right’ to:a. Floating charge on the Mill and all assetsb. Forward sales of crude palm oilc. Advantage of trading positions long term basisd. Any other terms acceptable by all parties

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6. FFB SUPPLY

The proposed mill shall purchase some 160 – 200 ton FFB per day and these shall be sourced from nearby surrounding smallholder farmers, private individuals and KUDs who are pre-selected partners in the project.

A total of 3,500 hectares of good quality oil palms have been identified and their owners have agreed to support the proposed mill in return for better FFB prices and logistic benefits. FFB shall be sourced not more than 1 hour transportation time to the mill.

With the support of the provincial government program the local farmers are aggressively cultivating new oil palm areas. It is estimated that in the forthcoming 3 – 5 year time the FFB production will be increased at least two fold.

7. PROJECT IMPLEMENTATION & MANAGEMENT

a. Dr. Hilmy Bakar (MBA, Ph.D Economic) Direktur Utama, Indonesian nationality. Responsible to secure all the necessary approvals and governmental

requirements in order to build and operate the palm oil mill Responsible for project funding Supervise the integrity and coordinate all governmental relationship of the

Company. Business consultant to the local government of Aceh

b. Jeffrey Yip Appointed as Project Director, Malaysian nationality. Design and implement the construction of the Mill. Manage milling and business operations Twenty years Indonesian experiences in advisory, consultancy construction

and management of palm oil mills.

c. Another shareholder shall be appointed as Chairman, Commissioner, Director and other to audit the finances and for general operations of the Company,

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from PT. Aceh Sawit Industry and Koperasi Primajasa or other parties, appointed by shareholders.

8. PROFIT/LOSS PROJECTIONS

Based on the following:a. Term loan of RP 15.000.000.000 at 15% interest per annum for mill

construction. With 2 years grace and 5 years repayment periodsb. Revolving credit of RP 5.000.000.000 for purchase of FFB and processing

operationsc. Mill operating at least 16 hours per day and more if necessary.d. Initial milling capacity of 10 ton FFB/year e. Final milling capacity of 20 ton FFB/hour - after 1 year operationsf. Project costs of RP 20.000.000.000 including land, approvals, mill

construction, housing.g. Production of 21.0% CPO extraction and 4.5% PK extraction rates are used.h. Payback on investment shall be within 2 years.

9. JOINT VENTURE COMPANY : PT. BERKAH SAWIT ACEH

1. Joint venture company, named: PT. BERKAH SAWIT ACEH2. Shareholders : Koperasi Primajasa : 20 % PT. Aceh Sawit Industry : 80 %3. Paid Up Capital: RP 15.000.000.000 (Lima Belas Milyar Rupiah)4. Head Office: Bayeun, Rantau Selamat, Aceh Timur5. Management Structure:

President Commissioner : Mr. HanafiahCommissioner : Mr. M. Zaini ST.Commissioner : Mr. Sulaeman AbdullahPresident Director : Dr. Hilmy Bakar, MBAProject Director : Mr. Jeffrey YipDirector Of. Finance & Adm : Mr. Sayed Ardhon Director : Mr. Yanuar AbdullahDirector : Mrs. Emilia Haironesia

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FICTURE OF MILL PT. BERKAH SAWIT ACEH BAYEUN, RANTAU SELAMAT, ACEH TIMUR

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