APP's bottom line takes a hit from Indonesia plantation fires

Satellite imagery of concessions belonging to Bumi Andalas Permai and Sebangun Bumi Andalas Wood Industries in South Sumatra shows the progression of fires. The firms and Bumi Mekar Hijau have received "Preventative Measures Notices" from Singapore's
Burnt acacia trees inside a concession belonging to Bumi Mekar Hijau in South Sumatra. The company, which is being sued by the Indonesian government over fires last year, has been named by Indonesia's police as a suspect for the recent fires.PHOTO: WALHI SOUTH SUMATRA

Facing consumer boycotts and prosecution over fires, Indonesian pulpwood giant Asia Pulp & Paper (APP) is also suffering economic losses from the fires damaging its plantations, say the company and a report by a green group.

The fires in Indonesia have burned more than two million hectares, the government says, destroying forests, farmland as well as damaging oil palm and pulpwood plantations. The haze and drought will also likely reduce yields for oil palm and rubber crops, the Wall Street Journal reported last week.

For APP, the fires could prove costly and affect supplies of pulpwood to its mills, particularly a US$2.6 billion (S$3.7 billion) pulp mill under construction in South Sumatra.

 

Eyes on the Forest (EoF), a coalition of Indonesian non-governmental organisations (NGOs), released a report last Thursday showing satellite imagery of recent fires in three large APP supplier concessions in South Sumatra, one of the areas worst affected by fires. The time series imagery shows the before and after shots of fires, some of which appear to have burned both forest and acacia plantations on a large scale.

The concessions, belonging to Bumi Andalas Permai, Bumi Mekar Hijau and Sebangun Bumi Andalas Wood Industries, cover about 530,000ha, EoF says - or more than seven times the size of Singapore.

All three firms received "Preventative Measures Notices" from Singapore's National Environment Agency (NEA) for possible transgressions of the Transboundary Haze Pollution Act.

"Some of the areas burned were originally acacia plantations, visible as light to dark green with grids of peat canals. Intense fire flames and many high-confidence fire hot spots in the area up to now seem to suggest that some of the acacia trees were burned," said EoF, which specialises in monitoring oil palm and pulpwood companies in Sumatra.

Satellite imagery of concessions belonging to Bumi Andalas Permai and Sebangun Bumi Andalas Wood Industries in South Sumatra shows the progression of fires. The firms and Bumi Mekar Hijau have received "Preventative Measures Notices" from Singapore's
Satellite imagery of concessions belonging to Bumi Andalas Permai and Sebangun Bumi Andalas Wood Industries in South Sumatra shows the progression of fires. The firms and Bumi Mekar Hijau have received "Preventative Measures Notices" from Singapore's NEA for possible transgressions of the Transboundary Haze Pollution Act. PHOTO: EYES ON THE FOREST

The NGO alliance said it was not yet possible to determine the size of the areas burned but said the damage could be significant.

In a response to e-mailed questions, Ms Aniela Maria, APP's deputy director for Sustainability and Stakeholder Engagement, confirmed the fires had affected its plantations. "However, we have not yet completed verifications and do not want to speculate. The verifications of areas affected will be done together with the government of Indonesia," she said.

"As for business impact, availability of pulpwood plantation will directly impact our pulp production. How much of this will be impacted will need to be reviewed once verifications are completed."

She said APP would restore natural forest areas affected by fire.

The company, Indonesia's largest pulp and paper firm and which controls 2.6 million hectares of concessions, has come under pressure because of the large number of fires on land both it and its supplier companies own. EoF says 39 per cent of all high-confidence hot spots in Sumatra and 53 per cent of all high-confidence hot spots on Sumatra's peatlands were on APP concessions. Bumi Mekar Hijau is being sued by the Ministry of Environment and Forestry for 7.8 trillion rupiah (S$780 million) for fires on its concessions last year and has been named again by the Indonesian police as a suspect for the recent fires.

Last Thursday, APP announced it was stepping up fire-fighting and prevention efforts and boosting its preparedness for next year.

A version of this article appeared in the print edition of The Straits Times on November 09, 2015, with the headline 'APP's bottom line takes a hit from Indonesia plantation fires'. Print Edition | Subscribe