Ennis stood up and smiled as he closed the green leather cover of the Executive Summary. He had completed his examination of the final version of the feasibility study, three kilos of paper with annexes and plans. It had been delivered the previous day by express courier to Papcon from Kalevi Nurminen Consulting in Helsinki.
He walked around his desk; he sensed a deep feeling satisfaction. Lighting a cigarette, he drew deeply and contemplated the view over the Seine. The form of the project was finally fixed; it had become tangible, solid, as if the glue had set. The multiple facets had been described in the smallest detail, the study was impeccable, every foreseeable point had been covered, at least so it seemed.
Brodzski was expected shortly and Ennis would present him with the results of almost eighteen months work and study by Nurminen’s technical, economic and marketing specialists. The latest data and ideas had been assembled and integrated into the documents from sources in Europe, Indonesia and Taiwan. Its contents had examined and re-examined, subjected to a multitude of modifications and reflections, before the final draft had been approved for printing.
The study contained the full description of the Forestry Complex, comprising a saw mill, a panel board plant, a pulp and paper mill, complete with a power generation plant, a port for ocean going ships and a whole new town, complete with housing, a medical centre and a school. Included were the technical specifications, the analysis of the raw material requirements, the complete range of products, and an estimation of all construction and operating costs.
The only document that remained to be added was the financial analysis and cash flow plan over the pay back period of the loans. That was to be finalised by Papcon.
The inputs were simple, on one side of the balance sheet were the costs; the wood and chemicals, the construction cost of the mill, amortised over a predetermined number of years and the cost of labour and maintenance. On the other side were the revenues, the sales of the pulp, paper, panel board, and wood products.
To arrive at figures that would please the bankers and investors was a fine art. It could have been compared to playing a musical instrument, and Axelmann was a virtuoso. The theme was the investment, and the variations that could be played were the cost of the raw materials and the estimated selling price of the end products, set a payback period that met accepted international banking and industrial practice.
Each of the key variables could be varied within limits, without going against the accepted standards. An acceptable result could be arrived at, either by increasing the selling price of the marketable products, or by decreasing the cost of the wood.
Determining the price of the mill products over a twenty-year period was pure crystal ball. Over the ten previous years the curve showing the variations in the market price of wood pulp looked like a roller coaster, it had risen from 350 to 850 dollars a cubic metre, and had then fallen back down to 400.
Ennis had prepared a series of graphs, extrapolated from statistics assembled over the previous thirty years produced by the FAO. In spite of the cyclic rises and falls, the market trend over the last forty years showed that worldwide demand grew at a regularly pace, a little more than two percent each year.
Over the total period, it could also be seen that the average price in constant dollar terms was stable. He chose a bullish estimation, not enough to be openly criticised by the specialists, but enough to give a positive edge to his calculations. The tactic was to catch the market on the rise; each cycle lasted eight or ten years, five rising, two falling and about two in the doldrums. At that moment, they were in the latter two phases, which gave them four years to build the mill, coming on stream just in time to catch the upswing.
The price of the wood was based on ORSFEs estimates, the result of their studies over a terrain that had never been exploited for pulpwood, and which was unverifiable. Ennis had argued for lower estimates during the preparation phase, supported by Sutrawan’s staff led by Bob Riady.
Axelmann produced a brilliant report, with lengthy references to Nurminen’s study, and the ORSFEs forestry inventory and exploitation study. Couched in the high language of finance, talking of equity ratios, interest rates, cash flow and the rate of return on investment; the kind of language that banks and financial institutions appreciated.
In all it was an impressive document bound in real leather, the title printed in gold letters. It consisted of several volumes, covering each of the specific areas of the report, together with architect’s perspectives of the buildings and layout plans of the mill site, engineering plans showing the production lines, process flow diagrams, and maps of the forest areas. There were photographs of similar mills, which would serve as models, photographs of trees, rivers, ships and even the animals of the forest that were to be protected.
They were immensely pleased with the results of their work. In Papcon’s splendid new boardroom at the Tour Adriatic, Brodzski was presented the full set of leather bound volumes entitled Barito Forest Industries Complex Feasibility Report.
‘For your signature Monsieur le President,’ smiled Axelmann.
The effect was all they could have desired. Brodzski beamed with pleasure, he was like a child under the Christmas tree as he fondled the smooth leather covers.
‘Champagne!’ he joyfully shouted to Hardin through the open door. ‘Open the bar!’
Hardin hurried in smiling with relief on seeing Brodzski’s excellent disposition. She opened the bar and took out two chilled bottles of Veuve Cliquot, and set a tray of champagne glasses on the table.
‘Formidable, congratulations,’ he said, his hands raised in benediction. Then seizing a bottle of Champagne, he deftly tore off the wrapping and eased off the retaining wire, then with an accomplished movement of his wrist sent the cork flying across the room.
They all laughed with pleasure, it was a great moment of relief and satisfaction after months of hard work and waiting.
‘They will not refuse us! They cannot refuse us!’
More corks popped and the Champagne was served to the small gathering, which was then joined by the other members of the staff. Their future and prosperity would be assured by the efforts that had been transformed into the report, which was destined to be the principal annexe to the fat contract for the construction of the complex.
‘To our success,’ said Brodzski lifting his glass, they joined him in the toast, confident in their future prosperity.
‘You’re leaving when?’ he asked Ennis, returning to reality.
‘On Monday.’
‘You’re bringing the feasibility report with you for Wihartjo?’
‘Naturally Monsieur Brodzski, plus a copy for Sutrawan and a copy for Gao.’ said Ennis smiling.
‘And Axelmann?’
‘I’m presenting it at the Ministry of Finance here in Paris next week. When Ennis returns we’ll fly together to the International Finance Corporation in Washington to open negotiations.’
‘Excellent, we have to step up the pressure now, enough time has been lost, we have to complete the list of investors.’
It was just one week before Christmas when they boarded the TWA flight at Charles de Gaulle airport, bound for Washington DC. They had fixed their first meeting with the IFC’s director for Asia, Per Dahlqvist, Brodzski’s friend, or at least that was what he had been telling people around the world for the previous eighteen months. Axelmann had told Ennis, Brodzski had met him once in Paris, some years before, when Dahlqvist had been on a trip to Europe to talk about IFC financing at an international conference.
The IFC was a subsidiary branch of the World Bank, which had been created after World War II to aid war ruined countries reconstruct their economies with the help of low interest loans.
The Bank provided loans and aid, whilst the role of the IFC was to actively participate in the capital of newly created industries, as well as providing linked loans at an interest rate that was much more favourable than that offered by commercial banks.
Brodzski had naively explained to the consortium that the IFC would be willing to participate in the equity to the extent of ten percent, which was unfortunately completely erroneous. What Ennis had found extraordinary, was that they accepted his word, without the slightest visible doubt.
Any one of them could have received in the post, on request, an IFC annual report, which would have clearly shown them, that the IFC had never participated, since its creation, in more than five million dollars in capital, and with linked loans to a total of about fifteen million.
Ten percent of the equity in Barito represented thirty million dollars. The equity represented the investment, which was to be paid in by the various investors, would serve as the down payment on the construction contract for the pulp mill, and the working capital needed to operate the mill.
The remainder of the costs, or seven hundred million dollars, was to be raised as loans, a very considerable challenge to the promoters.
Ennis regretfully realised that it was a remarkable demonstration of how people, even supposedly highly responsible professionals who represented the consortium members, could be duped into believing almost anything. He suspected that Kalevi Nurminen knew, but was not going to tell a good customer, that he was wrong.
Both Axelmann and Ennis were aware of the IFC position, but they were not about to openly contradict Brodzski. They had decided to wait and see, perhaps there would be some fortuitous for change of policy. In the meantime, another solution would have to be found to solve the problems of raising the equity and loans.
What they were sure of, was that if, the IFC did not participate to the degree that Brodzski had imagined, then it was not unrealistic to hope they could accept to invest a token 2%, five or six million dollars, which would provide Barito with a seal of approval, from an important internationally recognised financial institution.
That would be especially important in the eyes of the conventional bankers, and the respective governments of the consortium member’s countries. They would respect the integrity of the IFC’s judgement, based on their specialist’s analysis of the viability of the project.
That was to be the main object of their visit to Washington. They had to convince the IFC, that the Indonesian government fully backed the project, with money, and had strongly desired the IFC participation.
Dahlqvist’s office was situated in one of the World Bank buildings on the famous H Street. A modern, but bland, red brick building, just a block away from the Banks headquarters. As to be expected the Bank was a bureaucratic organisation on a world scale. It counted amongst its staff, citizens from the multitude of nations that constituted the banks shareholders. Each person, having reached the Mecca of bureaucracy and secure employment, with all the fringe benefits that went with a job in Washington, respected the unwritten rule of the universal civil servant, to defend their status quo shoulder to shoulder, against all those who threatened their precious sinecures.
Dahlqvist was a Norwegian, a mild friendly man in his early fifties. His team was composed of ubiquitous Indians from the sub-continent, as well as Americans, Brits and representatives of the third world. His main functions were in broad terms public relations, they could not have been seriously called marketing or promotional activities, little effort was required, since there were many more customers than was money available.
Papcon’s meetings commenced with the IFC team that morning in December; the atmosphere was friendly as they ran up to the Christmas holidays. After preliminary discussions, they took a sparse World Bank lunch. Axelmann declaring with a smirk as they washed their hands in the men’s room, ‘anything designed to be eaten by so many nationalities, could only be inedible, especially prepared in Washington.’
That afternoon they presented their report on the feasibility of the project. The IFC emphasised the importance of accurate price estimates for the raw materials, the quality of the products, but to their general surprise declared that the project, could not be the child of greedy promoters.
Axelmann vigorously proclaimed that Barito represented the needs of a vast developing country, and that Papcon’s interests were Indonesia’s interests. They were in Washington at the request of their government partners, the Ministry of Forests through the state owned Hutan Industri, to whom they were acting as consultants for the development and the diversification of the forest industries.
The World Bank, as a Washington based organisation with the USA as the major shareholder, was very susceptible to public opinion and scientific advice. They had begun to take serious note of the rainforest conservationist movements and their warnings. They would as a result require additional guarantees on selective cutting in the forest using non-destructive techniques and reforestation.
They informed the IFC that forestry inventory that had been carried out by aerial, survey by flying strips and noting the types of forest, and especially dacrydium when it grew in groves. The survey was scheduled to be completed by an on the ground check, strip by strip by ORSFE foresters, over the next four or five months and Papcon would naturally submit it to them.
They left Washington sure that the IFC had given them a fair hearing and were open to participation, providing, that the consortium could meet their conditions. It was obvious that they had to project the consortium as acting on behalf of the Indonesians, at their demand.
Axelmann understood that they would have to provide suitable window dressing, asking the Indonesians to make the official approach. It was indispensable, that the consortium avoid an open call for international tenders, which would which would be totally against their own interests and those all the other parties concerned who had financed the development from their own resources.
They stopped over in New York on the way back to Paris for their shopping; it was only three days before Christmas. They were booked into the old fashioned Biltmore above Grand Central Station. They shopped and relaxed in the unique Christmas atmosphere of New York. However, their main subject was to figure out how they were going to present the strategy that was unfolding in an acceptable way to Brodzski.
They had observed in recent weeks that Brodzski’s behaviour was becoming a cause for concern. Their plans risked going badly awry, if they could not control his erratic actions. His growing tendency to exaggerate, in an businesslike manner, almost any aspect of the project simply to impress his listeners was beginning to raise eyebrows
Brodzski was riding high and was not going to be told how to develop his project. They would have to proceed with the greatest caution, they needed him, though whether Brodzski realised he needed them was another question.