Sydney (Platts)--22Nov2012/444 am EST/944 GMT

The government of Indonesia plans to restructure the country's only aluminum smelting company PT Indonesia Asahan Aluminium, or Inalum, by putting ownership wholly in Indonesian hands, a company source said Thursday, confirming local media reports.

Jakarta has a 41.12% share in Inalum, with the balance held by Nihon Asahan Aluminium, a consortium of Japanese investors. The joint venture is due to expire in October 2013.

Platts reported in August that NAA was keen to renew the contract and maintain a share in the alliance, although Jakarta made clear it was considering other options.

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On Thursday, the Inalum source said the company's ownership change may unfold in phases. A yet-to-be-identified state entity was likely to initially acquire the Japanese share, before possibly divesting it, he said.

Inalum can produce about 250,000 mt/year of primary aluminum in Kuala Tanjung, Sumatra, typically using alumina sourced from Australia. The current JV contract requires a large portion of the output to be exported to Japan. NAA's shareholders comprise the Japanese government and 12 Japanese companies -- Sumitomo Chemical company Ltd., Sumitomo Shoji Kaisha Ltd., Nippon Light Metal Company Ltd., C Itoh & Co., Ltd., Sojitz Corp., Nichimen Co., Ltd., Showa Denko K.K., Marubeni Corporation, Mitsubishi Chemical Industries Ltd., Mitsubishi Corporation, Mitsui Aluminium Co. Ltd. and Mitsui & Co. Ltd.

Inalum recently inked alumina term contract purchase agreements with Glencore and Alakasa. The deals call for eighteen 22,000 mt parcels to be delivered each year to Kuala Tanjung port in Sumatra, priced as a percentage of LME aluminum. The contracts run from from April 2013 to March 2015.

Indonesia's state enterprises minister Dahlan Iskan was quoted by Antara on Thursday as saying that local firm PT Timah had bought a bauxite mine in Myanmar with plans to produce alumina for Inalum's consumption.

PT Timah (Persero) Tbk is a state-owned enterprise engaged primarily in tin mining and is listed on the Indonesia Stock Exchange. INTEREST FROM INDIA'S NALCO

In July, India's Hindu Business Line reported that national aluminum company Nalco was in talks to buy Inalum for up to Rupees 80 billion ($1.44 billion), including its captive power plants.

On July 15, Nalco chairman and managing director BL Bagra was quoted by Hindu Business Line as saying: "We have expressed our interest.. to take over Inalum. We have shown interest to get associated with it. Once the contract with the Japanese ends, whether the Indonesian government will offer us a part of the equity or full equity or it will give [it] to [the] Japanese only, we don't know. We are yet to hear from them.

"We are open to picking up part of the equity. We are open to fully acquiring the company. We are open to just running the company, and for ...running the company with some stake." Nalco and Inalum did not respond to Platts requests for comment at the time.

Nalco had previous plans for an aluminum smelter project in Indonesia, but they have been withdrawn due to the hold-ups with the intended coal supplier, Bagra said at the company's August AGM in India.

Nalco signed a memorandum of understanding with Indonesia's regional government of East Kalimantan in October 2011 for a 500,000 mt/year smelter. Construction was tentatively expected to start in late 2012, with completion estimated for 2016, another Nalco executive told Platts at the time.

In addition to the smelter, Nalco and Dubai-based Mineral, Energy, Commodities Coal were to set up a 1,400 MW coal-based thermal power plant and 142 km of railway track linking the smelter to the port of Lubuk Tutung.

--Joanna Lim, joanna_lim@platts.com --Edited by Wendy Wells, wendy_wells@platts.com

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