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Flush with cash after selling its stake in a major tobacco company, Rajawali Group plans to invest $875 million to expand capacity in its palm oil plantation unit, a company executive said late on Thursday.

Darjoto Setyawan, managing director for business development, said the group planned to expand total landholdings of the group’s plantation unit, PT Rajawali Plantation, from 100,000 hectares currently to as many as 250,000 hectares by the end of 2014. Its land is located in South and East Kalimantan and Papua and West Papua, he said.

“We have calculated that the investment per hectare would be about $3,500,” he said.

Rajawali Plantation plans to focus on crude palm oil, planting as many as 40,000 hectares per year, Darjoto said. The unit now has a total of 40,000 hectares planted.

“The funds will equally come from our internal funds as well as external loans from banks,” he said.

Darjoto said the group planned to list Rajawali Plantation on the Indonesia Stock Exchange (IDX) by 2011.

Rajawali Group is as an investment holding company with interests in numerous sectors, including property, cement, aviation, tobacco, plantations and mining.

Darjoto said the group wanted to focus on expanding the crude palm oil capacity of its plantation unit because it is one of the country’s primary commodities.

“Indonesia is the biggest CPO producer in the world so the product is very strategic and it will be one of our long-term investments,” he said.

He added that the unit would focus on CPO and not its byproducts. It currently owns one CPO factory in South Kalimantan that produces 60 tons per hour.

Pardomuan Sihombing, head of research at Paramitra Alfa Securities, said the outlook for the CPO industry was good. Indonesia was an established player with strong local demand for the product, while global demand, especially from India and China, was expected to be high in the next few years.

“There is still huge room to plant land here,” Pardomuan said. “The market potential is very big considering the price of CPO, which is now improving.”

The price of CPO has increased from lows of less than 1,200 Malaysian ringgit per metric ton last year, to more than 2,100 ringgit per metric ton in the past two months.

Pardomuan said it would be wise for Rajawali Group to list on the market as soon as possible. Otherwise it could face problems raising money for its planned acquisitions.

Meanwhile, Darjoto said the group is also interested in acquiring a stake in BHP Billiton’s coal project in Maruwai, Central Kalimantan.

“We are looking at it. There are currently 25 companies that have already submitted interest to BHP and we’re one of them,” he said.

In June, Rajawali Group sold its stake in PT Bentoel Internasional Investama, the country’s fourth-largest tobacco producer, for $494 million.