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PT Pupuk Kalimantan Timur, the country’s biggest state-owned producer of urea fertilizer, plans to sell Rp 1.3 trillion ($132 million) of bonds in October to build two key plants and to bolster its finances, up from Rp 1 trillion announced previously, its president director said on Wednesday.

“We plan to use the proceeds to strengthen our financial position,” said Hidayat Nyakman. “The money will also be used to finance construction of our new NPK fertiliser plant, which will cost about Rp 300 billion, as well as a new coal-fired power plant worth $100 million.”

NPK is a fertilizer made from nitrogen, phosphorus and potassium. Hidayat said the new power plant would save the company $100,000 a day on natural gas costs.

The bond offering will be divided into two packages consisting of conventional bonds and sukuk , or Islamic bonds.

“About Rp 1 trillion of conventional bonds and about Rp 300 billion of Shariah bonds will be sold. The [conventional] bond will have a term of around five years and carry a coupon of 150 basis points above the fixed-rate FR51,” said Eko Sunarko, Pupuk Kaltim’s finance director.

Based on Wednesday’s data, the yield on the government’s 5-year FR51 bond stands at 8.86 percent, meaning the Pupuk Kaltim bond would carry a coupon of more than 10 percent.

When asked about likely investor interest in the bonds, Eko said, “With around Rp 4.5 trillion of local bonds maturing last month, we should be able to arouse interest among investors.”

He said the company had selected PT Danareksa Sekuritas as the bond underwriter and PT Bahana Sekuritas as its financial adviser for the issue.

Aside from the NPK plant, Hidayat also said the company needed another $935 million to construct its fifth urea fertilizer factory.

Some 30 percent of the project’s cost was to come from internal cash reserves, Hidayat said, with the remainder to be borrowed. He added that the company was in talks PT Bank Mandiri for the loan. Pupuk Kaltim has had a difficult year to date, and has cut its forecast for 2009 net profit by almost half — to Rp 320 billion from Rp 627.8 billion last year.

The company also recorded a 26 percent decline in revenue in the first half of this year, to Rp 3.2 trillion from Rp 5 trillion during the same period last year.

The company blamed the decline on a significant fall in the price of urea — from $600 per ton at its peak last year to about $200 this month. It also said the government was refusing to let it export excess fertili z er supplies to help it boost revenue.

The company is now sitting on more than 595,000 tons of unsold fertilizer.