PT Harum Energy Tbk (HRUM) has entered into a strategic partnership to develop its nickel portfolio as part of its business diversification strategy. The company has signed a memorandum of understanding with a Chinese company, Eternal Tsingshan Group Limited (ET) as a strategic partner. The signing was carried out on April 5, 2024.

Quoting the disclosure of information from the Indonesia Stock Exchange (IDX), most of HRUM's nickel business portfolio is under controlled companies, namely PT Harum Nickel Perkasa (HNP) and PT Tanito Harum Nickel (THN), which include majority ownership in PT Position, PT Infei Metal Industry, PT Westrong Metal Industry, PT Blue Sparking Energy, and minority ownership in PT Sunny Metal Industry.

ET is a company incorporated in Hong Kong SAR and, through its affiliates, has invested extensively in Indonesia, primarily in nickel processing and refining activities (Mitra Group). The Mitra Group is also the operating partner of the company's smelter project and the manager of the Weda Bay Industrial Estate in North Maluku Province, where the projects are located.

To realize the strategic partnership, the company's subsidiaries, HNP and THN, intend to initially issue mandatory convertible debentures (SUWK) which will be subscribed by the strategic partner either directly or through one or more companies to be determined later.

The SUWK will be converted into new shares in HNP and THN representing an effective shareholding of up to 49% in the Company's Nickel Portfolio, whereby the terms including the principal amount, maturity date, and conversion period of the SUWK will be agreed upon by the parties, subject to applicable regulations.

Following the conversion of the SUWK, the Company remains the effective majority shareholder in the Company's Nickel Portfolio.

“The company and its subsidiaries will use the proceeds obtained from taking part in the SUWK to settle some of the obligations relating to some assets acquisition in the Company's Nickel Portfolio," wrote the company management on Thursday (18/4).

Both parties will then prepare the documentation and all requirements to realize the strategic cooperation and the issuance of the SUWK following applicable regulations.

"The Company and Strategic Partner are targeting that the SUWK can be issued in the third quarter of 2024," he said.

The strategic cooperation planned in the memorandum of understanding is expected to bring benefits and create various business opportunities for the company, including obtaining synergies from the combined experience and capabilities of the company and partner groups in the mining and processing of nickel products to maximize the efficiency and operational performance of the company's nickel portfolio going forward.

More benefits for the company would be to ensure the sustainability of the management and operation of projects in the company's nickel portfolio through strategic cooperation between the company and the partner group.

In addition, to improve the capital structure of the company's nickel portfolio through a decrease in the ratio of liabilities to equity after the SUWK conversion implementation. Then, forming an integrated nickel industry portfolio from upstream to downstream with diverse nickel products, to increase the Company's ability to raise funds to finance further business development.

Furthermore, the benefits are to support technology transfer efforts in the nickel refining and processing industry, support knowledge transfer efforts in marketing activities, and access to the supply chain of the stainless steel and battery industry in the global market.

The company believes that the signing of the memorandum of understanding has no material negative impact on the operational, legal, financial, or business continuity.

"There is no affiliation between ET and the company, HNP and THN. Apart from the memorandum of understanding signed by the company and ET, there are no other definitive documents signed in connection with the strategic cooperation, therefore there have been no transactions carried out by the Company or companies controlled by the company as a realization of strategic cooperation," he concluded.

Image source: doc. Harum Energy
Source: https://www.cnbcindonesia.com/market/20240418094043-17-531223/gandeng-raksasa-china-harum-energy--hrum--genjot-bisnis-nikel