IPO Alert: Sustainability concerns for Golden Plantations could impact Bunge, TPS, KKR

Palm oil company PT Golden Plantation has announced that it will conduct an initial public offering this December on the Indonesia Stock Exchange. We have identified several potential sustainability risks for Golden Plantations that could affect share buyers and other companies.

In particular, our initial research shows that nearly 40% of Golden Plantation’s unplanted land bank in Sumatra is comprised of peatland.

Golden Plantation is the palm oil unit of Indonesia-based Tiga Pilar Sejahtera (AISA:IJ). TPS is reportedly planning to merge its other palm oil unit, Bumiraya Investindo, into Golden Plantations before the coming IPO. Bumiraya Investindo is a joint venture between majority shareholder and manager TPS and minority shareholder Bunge (BG:US), which currently holds a 35 percent stake. Bunge and private equity giant KKR are reported to be potential major buyers of the Golden Plantations share issuance. KKR has previously come under scrutiny for environmental performance in other areas, potentially drawing additional attention to this issue.

Development of the peatland area could present several sustainability related risks:

  • Companies representing more than 60 percent of global palm oil supply have implemented No Deforestation, No Peat, No Exploitation policies, potentially limiting global market access for the company’s palm oil.
  • Development of this area could present issues for potential share buyer and Bumiraya joint venture partner Bunge, which recently adopted a forest conservation policy; development on the peat area would seem to violate at least the spirit of Bunge’s policy, and customer expectations.

We will continue to research these and other issues. See below for more detail.


Golden Plantation IPO – Potential Sustainability Risks

  • Golden Plantation has a land bank of 93,000 ha in Kalimantan and Sumatra, mostly acquired late 2010. Only 17,000 ha is planted with oil palm.[1] Additionally, the company has one palm oil mill to turn harvested Fresh Fruit Bunches into Crude Palm Oil.
  • The Indonesian company Tiga Pilar Sejahterah (TPS) presently has a share of 65% in Golden Plantation, while the US-based agribusiness giant Bunge bought the remaining 35% for USD 43 million in 2011.[2, 3] Through the Initial Public Offering (IPO), the share of TPS would be diluted to far below 50%.[4] The IPO is expected to occur in December 2014.
  • Golden Plantation has a target of planting about 7,000 hectares per year.[5] The company has a long-term goal of operating around 200,000 hectares of plantations.[6]
  • For the years 2012 and 2013 the company had a target to plant a total of 20,000 ha with oil palm.[7] However, the company managed to plant only 5,000 in the three years ending at 31 December 2013.[8, 9]
  • The unplanted land bank presently comprises 76,000 ha. Part of this undeveloped land is a 29,000 ha area (PT Tugu Palma Sumatra) on peatland.[10, 11] Developing this area would seem to violate Bunge’s recently adopted forest conservation policy. In September 2014, there was a fire on this plantation, contributing to the haze in Sumatra.[12, 13]
  • In addition to PT Tugu Palma Sumatra, Golden Plantation’s other undeveloped land bank includes other sustainability risks. Chain Reaction Research is in the process of mapping valuable forests, peatlands and conflicting land rights within these areas. CRR is hoping to publish the results of this assessment in the near future.
  • The revenue of the oil palm division was IDR 80 billion in 2013 (~ USD 6.6 million).[14]



Initial Risk Analysis: Golden Plantation Tbk.
December 11, 2014
From 15 to 17 December 2014, plantation company Golden Plantation Tbk. is making an Initial Public Offering (IPO) on the Indonesian Stock Exchange (IDX), with the aim of raising around IDR 230 billion (USD 15.2 million). The company is currently a full subsidiary of the Indonesian-listed food company PT Tiga Pilar Sejahtera Food Tbk (TPSF), which will still own 78% of the shares after the IPO. This Initial Risk Analysis provides an initial analysis of potential financial, sustainability and governance risks associated with PT Golden Plantation. It is meant to inform investors participating in the IPO, as well as shareholders of the American commodity trader Bunge and investors who have committed funds to the American private equity group KKR – which currently have a stake in PT Golden Plantations.

Read the Summary | Download as PDF