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Padang Quake Causes Semen Gresik To Rethink Plans for Sumatra Plant
Janeman Latul | October 16, 2009

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In the wake of last month’s devastating earthquake in West Sumatra, Indonesia's largest cement maker is reviewing plans to build a factory there. Meanwhile, one of the province’s biggest insurance companies is warning prospective investors that they will now need to spend more for quake-resistant buildings.

PT Semen Gresik, which owns two factories in West Sumatra, is reviewing a plan to build a third factory, with an estimated cost of Rp 3.5 trillion ($375 million).

“We are reconsidering plans to build our third factory in Padang,” Semen Gresik president director Dwi Soetjipto said.

“It’s because there are new earthquake risks that need to be studied. We need to review civil construction plans to make the factory safe and quake-proof.”

In September, Semen Gresik said it was finalizing plans for a third plant in Padang with a capacity of 2.5 million tons of cement a year. It was to start construction in 2011.

“We may delay the development as we’re still studying it,” Dwi said. “If we start construction in 2011, we expect to have it built by 2014.”

Dwi said the company’s two factories in Indarung, West Sumatra, halted production for a week after the quake. “They are now running at about 75 percent capacity,” he said.

He added that the quake would result in a production decline of only 120,000 tons out of the 18.8 million tons forecast for this year.

Speaking separately, the owner of a major West Sumatra insurance company PT Wahana Tata, which has processed many claims from the Padang quake and the 2004 Aceh earthquake and tsunami, warned prospective investors in Sumatra that they would need to spend more on their buildings.

Sofyan Wanandi said on Tuesday that the company was now requiring developers in the area to ensure that their buildings were quake-resistant before it would insure them.

“They should invest more in their construction projects as the risk is becoming greater,” Sofyan said.

He added that his company had already paid out about Rp 300 billion in claims resulting from last month’s quake.

“Business people will need to be more prudent when investing in Sumatra, but I think they will still be interested in investing in the area.

“The tourism industry in this area will still grow despite the earthquake risk,” he said.