Singapore Changi airport was overcrowded. The weather had been bad and as always with long distance flights, there was an interminable delay. Passengers reported to the airport too early and the flights were delayed longer than foreseen. Air France seemed to Ennis to be particularly affected by delays, especially when the flight originated from New Caledonia, but even when it originated from Singapore, it was late.
He was idling in the duty free shopping area, passing the time shopping for presents, looking for the latest gadgets or popular fashion accessories, which often seemed to in Singapore well before Paris.
‘Ow are you Monsieur Ennis!’
He turned around and was surprised to see a smiling Paul Branet; sun tanned as usual, in a green Lacoste polo shirt, white slacks and white patent leather Gucci shoes.
‘Ca va,’ he replied, ‘and you?’
‘I see we are on the same flight,’ he said glancing at Ennis’ boarding pass that protruded from his shirt pocket.
‘Yes,’ Ennis replied trying to look enthusiastic.
Air France flight 312 took off and headed up the straights of Malacca and out over the Indian Ocean. They switched seats to be together, they were in Galaxy Class, in the hump of the 747, not especially comfortable, but that evening there were not too many passengers.
They made small talk but Branet soon switched to business. He was anxious to become involved in Barito, but at that moment he was not making much progress.
Through his well established representation office in Jakarta, he had over the years naturally developed excellent business and political relations in the country. Brodzski whilst not exactly a close friend of Branet, was always ready to listen to his rumours or any other information that could be gleaned.
It was a curious coincident Brodzski and Branet had been to the same school together, though it was not the illustrious Polytechnique of Brodzski. They had been together in junior school at the age of ten years, in the city of Toulon on the Mediterranean coast of France, over fifty years earlier.
Ennis, from his own point of view did not want Branet poking his nose into Papcon’s business and more specifically interfering with his own approach. However, he would have to humour him, because it was not excluded that he would have a role to play in the future.
It was no secret that Branet was a confidential advisor to the French Embassy in Jakarta. He regularly reported all the latest titbits of information, business and rumours, to the Ambassador and his staff especially the Commercial Counsellor of the embassy. He also provided information to the French Bank for Overseas Commerce, a state owned organisation, which financed and approved credits for French exports. He even carried the banks business card, where his name was followed by the title of Conseiller, or adviser, to the bank, an honorary title designed to impress certain people.
Ennis knew that people like Branet, with their background and contacts would diffuse positive information concerning Papcon’s project, if, they thought that they would get something out of it.
‘I would like to see Antoine as soon as possible, as I have some important things to discuss with him on Barito,’ announced Branet.
That’s strictly a lot of shit, thought Ennis. Branet always used that ploy to worm his way into finding out more on what was going on for himself.
He had good friends in the Indonesian Ministry of Industry and he personally knew the Minister very well, who a very Europeanised Indonesian, who had studied and worked in Germany. The Minister, Sudarman, had risen from Director General and had become an important man, a powerful and influential government minister.
The Ministry of Industry oversaw the development of all industrial projects. However, paradoxically the Ministry of Forests, which controlled all forestry resources, sponsored Barito, and would through the state owned companies that they operated, gather the Indonesian share of the capital required for its development.
Consequently, the project required close collaboration between the two ministries. It was easier said than done, since Sudarman’s ministry was sponsoring its own pulp mill project. A large project, estimated at more than a quarter of a million dollars. As a result, they were both competing for government funds. The potential conflict of interests was only too evident to Ennis.
World public opinion had always been well informed through the media on almost every aspect or development in the oil industry. People filled their cars with gas every day, used heating oil in the winter, observed the fluctuation of oil prices at the gas pumps and on the world markets, and watched with concern the evolution of each crisis in the Middle East.
Whilst aware of vast oil riches and the power game played around that essential energy resource, they were totally oblivious to the economics of the forestry products industry and one of its main derivatives, paper. It was only in recent times that ecologist movements agitated against the cutting down of trees and promoted the recycling of paper.
Without paper modern society could not function. From education to the press and from packaging to hygiene, all of its variations were omnipresent in daily life.
Recycling of paper was however to a large degree an ecologist’s myth, as far as saving forestry resources were concerned. Recycling only served to slow down the process. Paper fibres could only be recycled a few times and after each cycle they were downgraded from use in high quality papers to newsprint and finally to low grade packaging paper and board. Needless to say, hygienic papers were flushed down the drain after a single usage.
A steady supply of new fibre was needed, from trees, which were essentially planted by man in the northern hemisphere countries.
Ennis was concerned Branet would attract too much undesirable publicity to Papcon’s project. Papcon already had good sponsors through the Minister Wihartjo, not to mention the Vice President Idris Hendra. In reality, they had little need of Branet’s services.
He saw little use in becoming involved too deeply with Sudarman’s system; it would provide the competition with more information than was necessary about the progress of the Barito project and its sources of funding.
It was never very clear what precisely interested parties such as Branet were seeking. Ennis was reasonably certain that they did not know themselves. Such people were opportunists, birds of prey, or even worse vultures, watching and waiting for the chance, either to make a kill, or get in on someone else’s feast.
Nevertheless, Ennis felt that Papcon could not afford to upset Branet. He agreed that he would inform Brodzski, telling him there was an urgent matter that Branet wished to see him about.
They arrived in Paris on a fine Saturday morning. Ennis collected his baggage and slunk past the customs. They were loaded with gifts and purchases, which his friends never ceased to cajole him into bringing back. He had also acquired some fine oriental antique porcelain to add to his growing collection.
He took a cab into town to his apartment. It was the holiday season. He first thought was a couple of days rest to recover from the overdose of cognac and lack of sleep. But before he called Brodzski to let him know that he was back, who promptly asked him over to his apartment as soon as he had the time to shower and change.
Brodzski’s apartment was situated about half a kilometre from the Arc de Triomphe, on the avenue Foch. A magnificent residence of eight or nine rooms, he had bought it for a song at the end of the war. Its price had risen over the years to such a point that Brodzski had confided to Ennis, that it would make even a rich man cry with envy.
‘Well what’s new?’ he asked Ennis. It was almost as if to say, have you signed the contract, Ennis thought.
‘I’ve got a letter from the Minister of Forests.’
‘You’ve got a letter!’ he said with a slightly mocking smiling.
‘Yes, from Wihartjo, saying that they are prepared to participate up to forty percent in the project equity, through one of their forestry organisations, Hutan Industri III.’
‘Excellent!’ Brodzski exclaimed. Ennis was not sure whether he
was being sarcastic or not.
‘There’s more, they will give us the logging rights...to the pulpwood in a forest zone near to the Barito River, about four million hectares. That’s for the life of the project-the payback period for the loans-about twenty years.
‘That’s what we had expected!’ he said a little sourly. ‘Where’s the rest coming from?’
‘The rest?’
‘The rest of the equity!’ he scowled.
‘Oh! The remaining part of the Indonesian equity will come from the logging concessionaires who have operations in that area, they pay a special tax on commercial timber extracted for the plywood, furniture and veneer industries. The tax will go into a development fund for setting up new forestry based industries, controlled by the Ministry of Forests.’
‘Good!’
Brodzski began to relax, he looked less suspicious. He always doubted the worse news, imagining in his paranoid fashion that Ennis was working some Byzantine game, on behalf of Finntech, against him. Ennis supposing that Brodzski had reason to suspect those kinds of tricks gave him the benefit of the doubt, brushing aside any kind of momentary irritation.
‘Strecker has agreed to formalise the consortium and has agreed to a budget of eight million dollars,’ Brodzski announced obviously very satisfied with his success.
‘Excellent news, when do we meet with him to go over the contents of the preliminary feasibility report.’
Brodzski replied that it would take place a week later, once people had returned from their spring holidays.
The first formal consortium meeting was held in mid- March, attended by Finntech, TPS, Bayonne Industries and Construction Lyonnaise. After the initial opening by Brodzski, Ennis addressed the meeting and gave them a glowing report on the project, and the imminent possibility of starting discussions with potential Indonesian private partners.
He went to explain that the Indonesian authorities were in full agreement with the plans for the development of the joint-venture project. All that was required to set the business in motion was the preparation of a preliminary feasibility report for presentation to the banks and the French authorities, who were to provide export credits. The finalised report would require a full-scale survey of the forest region, which was to supply the mill with pulpwood. After this had been undertaken, the final feasibility report together with a full description of the mill, its construction and operating costs, and manpower requirements would be completed by an independent consultant.
Papcon would then complete the report with the financial chapter, describing the financial structure of the project, working capital, repayment of loans, cash flow and profitability projections.
Brodzski estimated that the first phase would require eight months. They could then, through the banks and financial institutions, start to mobilise the capital and enter into contract negotiations with the future mill owners.
‘Who will be the future mill owner?’ asked Strecker.
That was a good question, Ennis thought to himself. He continued smoothly with his act, painting a glowing picture of the future owner - non-existent at that point in time. He hopefully described a financially powerful Indonesian-Chinese industrial group-whom he avoided naming-bluffing that Papcon had commenced very confidential discussions with them. None of those present realised, that Brodzski had not really given much thought to that question, having being too occupied putting together his European consortium.
Brodzski followed on by adroitly bluffing his way around naming the group, and by talking of ministers and planning authorities, he concluded by saying that he would be leaving for Jakarta the following week and would discuss the subject with the Indonesian Vice President, Idris Hendra.
That appeared to satisfy those present. Ennis was relieved but could not help marvelling at the gullibility of people. He wondered why they had not asked more penetrating questions...maybe that was not cricket, or whatever game the French played.
The consortium members respected the position of Strecker, the CEO of a multibillion-dollar firm; he surely must know what he was talking about. Ennis on the other hand imagined that it was quite the opposite, and that it was Strecker who believed that Papcon were the experts. He finally rationalised that it was a case of natural professional respect and mutual confidence.
As long as the consortium were prepared to pay the costs and as long as Brodzski’s plans unfolded as promised the industrialists and backers would be satisfied. As Axelmann cynically commented to Ennis, ‘What have we to lose? Their money and their shareholders money, they can afford it!’
Ennis was beginning to learn the rules of Brodzski’s game, which were to follow him without question, under all circumstances and never, never, put into the slightest doubt any of his decisions, above all publicly; any transgression of the rules would be instantly and severely sanctioned. He could see that if he respected those rules and if all went according to Brodzski’s plans, he would be happy with Papcon and Barito for a long time to come.
Brodzski was very pleased with himself. Following the meeting, he invited his two executives to lunch at Jarasse, a well-known seafood restaurant on the corner of avenue Charles de Gaulle and avenue Madrid. It would cost the consortium five hundred dollars to start, but who cared things were beginning to look very promising.
Over the following ten days, Axelmann hammered out the draft of a consortium agreement and the shares of the respective partners leaving a part open to future members.
The initial consortium budget for the external project development costs was five million dollars, with provisions for additional expenses up to a total of eight million dollars. The members own internal costs were excluded, each one supporting their own respective expenses.
The budget, managed by TPS as the consortium leader, was to be paid in by the consortium members, including Papcon, who would contribute like the big boys, their share of the costs was to be 7,5% of the budget. It was agreed that Papcon would execute most of the external work and could bill the consortium for of all the project development costs, in advance for each quarter, including its own expenses; in other terms, Axelmann saw to it that Papcon’s total costs were fully covered.
That was only the beginning. They had worked well to prepare a good agreement. Axelmann’s background was business law and economics. He liked to brag that he had studied under a renowned Finance Minister, before he had entered into politics, where he had been particularly successful in managing the French economy during his term of office.
The agreement was signed at the end of March, then two days later they flew to Helsinki, where they had arranged meetings with the paper machinery builders and the engineering consultants, Kalevi Nurminen.
Finnish engineering firms were industrial giants, diversified into fields as different as shipbuilding, oil rigs, heavy engineering and even aircraft and electronics. They owned and operated huge pulp and paper mills in the frozen interior of their forest covered country.
Ennis knew Finland well, having been engaged in the forest industries over many years whilst working for Finntech. He had many occasions to visit the country over the previous years on company business.
However, Finland was too cold and though he liked the Finns they were a little too serious for his liking. He preferred a warmer climate and the closer it was to the tropics the better. When relationships with them became tense, he could not help thinking of an enraged French customer, who had maliciously described them as fucking penguins!
It was just after five in the afternoon when they arrived at the Helsinki Inter-Continental Hotel, about ten minutes from the down town area by taxi.
Jorgen Eriksson, a Swede, met Brodzski and his group on their arrival at the hotel. Eriksson was a senior vice president of Nurminen, who had lived in France for several years and was a Francophile; he would be on Brodzski’s side. He was more open than the typical serious and less communicative Finns.
It was very cold but dry, the remains of the last
snow in the downtown area had all but disappeared apart from a few ice-hardened patches on the dust and grit covered pavements. The trees and bushes in the parks looked black, as though they would never come back to life again.
‘Christ it’s cold,’ said Axelmann looking at his watch for some reason, as though it would tell him the temperature.
‘Minus fifteen! Christ! I suppose it could be worse, at least it’s not snowing. Do you really want to walk?’ Ennis replied, looking at the neon light that alternated the time with the temperature on the roof of what appeared to be the Post Office building.
‘I need some fresh air, it’s stifling. Brodzski never stopped smoking on the flight or talking for that matter!’
They walked past the Sibelius Concert Hall and the Parliament building towards Mannerheimsgatan. The streets were practically empty, the traffic was thin it was only six o’clock. The trams passed by with a metallic whirr. The shops were already closed.
The next morning they skidded out over the last of the dirty and patchy winter snow to Nurminen’s headquarters, about twenty-five kilometres outside of Helsinki. They were greeted in the plain austere modern offices that the Finns appreciate, copiously decorated with plain pine panelling. Though Spartan and functional, it was well heated against their severe winters.
Kalevi Nurminen greeted them personally joined by Jorgen Eriksson. Jorgen was a pleasant individual compared to most of the others in that consulting firm. Ennis saw them as arrogant trolls, deeply engaged in the obscure art of their business.
He would not like to have been on the receiving end of their professional criticism. He felt they were not unlike high priests. He was later to discover that their reputation was a mere facade, their knowledge was collective; individually they were no more intelligent or incompetent than their less reputed competitors. At that moment however, things were a little different, the situation was reversed, and it was Papcon the customer representing the Barito consortium.
Nurminen was not a beginner in the business of designing pulp mills in distant lands. They had built mills in some outlandish places such as in Siberia, but never so big and never so exotic as Kalimantan, and never in a jungle location.
The common language was English and the common subject engineering. Ennis was at an advantage compared to Axelmann, who was neither an engineer nor a perfect English speaker; at least he did not come up to Scandinavian standards, which were high when it came to the English language.
Brodzski was a professional engineer and had certainly been good in his younger day. At almost sixty-five he was developing a tendency to ramble on and at moments was unclear in his ideas, he did not have a good grasp of the more sophisticated technology of the day. His English had been learnt in India many years before and was highly coloured with the usages of the sub-continent, which led to a certain amount of confusion.
What Papcon wanted was a report that would give the project unquestionable credibility and was highly positive on its economic feasibility.
Nurminen was considered in engineering circles as one of the worlds leading and most dynamic international consultants in its field. They had built their reputation over a period of more than thirty years and had spread their activity to all continents. They were recognised by governments, international institutions and industrial corporations as being the leader in their field.
Brodzski’s question was whether he could convince Nurminen that the Barito project was really good, or whether Papcon could get the Finns’ endorsement by other means. After several years of boom, industry around the world had begun to cut back on its investments, especially the pulp and paper industry, which was in a situation of over-capacity in the industrialised countries. As a consequence, Nurminen’s business had also been seriously affected by the lack of new projects.
They were short of work. Papcon arrived just at the right time with the right kind of project for Indonesia, a country rich in raw materials with its immense rainforests and other wealth in the form of vast reserves of oil and gas. Brodzski’s arrival with a ready-made project was welcomed with enthusiasm. With a consortium made up of TPS and Finntech, Jorgen Eriksson half jokingly confided to Ennis that it was almost too good to be true.
As professionals, they could only work with Papcon as independent consultants, on a fee-paying basis. He discreetly informed Brodzski that he would get a very good price, if, Brodzski agreed to guarantee Nurminen the contract for the detail engineering and project management.
Axelmann together with Ennis spent the following three days negotiating with Nurminen’s team, whilst Brodzski left to meet potential suppliers for the paper making machines, which represented a major part of the production equipment for the mill.
Ennis swiftly saw that Nurminen’s people were excited by the business prospects with Papcon-they were hungry. The principal question was the exact price that they would ask for the feasibility report. Ennis was obliged to listen to laborious exposes conceived by the consultant’s specialists to demonstrate their firms experience and competence, to show Papcon that they would get value for money. Ennis could only think during the endless exposes, that it would have been so much simpler to be direct-by asking how much would it cost to get a favourable report.
After long tractations, they finally agreed to a price. Nurminen convinced Brodzski it was a bargain, a special price, based on the condition that Brodzski guaranteed them the contract for the detail engineering, once the main contract had been signed. Papcon had estimated the detail engineering and project management at one hundred million dollars.
Papcon spent a further day putting up a show of resistance on the pre-conditions linked to the guaranteed contract for the detailed engineering and how to assure Nurminen he would not be cheated. They finally agreed to include a secret addendum, whereby Nurminen would be appointed the main engineering designer and coordinator for the entire project, after the contract for the mill construction had been signed with the future owners.
‘At what price?’ Axelmann whispered to Ennis. ‘That’ll be interesting, Brodzski’s a lousy negotiator.’
It was true like many good salesmen Brodzski had no sense for buying. To him a little over three million dollars for a favourable report from Nurminen would be mere bagatelle compared to what was to be got in the final count.
Brodzski dreamt of honours, he had already been decorated with the Legion d’Honour, created by Napoleon as a reward for his loyal supporters. Brodzski coveted the glory and the wealth that he knew were necessary to live out the role he had predetermined for himself, avoiding the fall into the obscurity of old age - that awaited failure.
‘I agree with your proposal,’ he said to without more ado to Nurminen’s surprised negotiator, then turning to Axelmann, he gave him the instruction, ‘Get it down on paper and I’ll sign it before we leave.’
Axelmann together with Ennis and Jorgen Eriksson spent the rest of the remaining time putting together the final terms of an agreement, and its secret addendum, binding both parties together for the feasibility study and the main contract. Axelmann paid special attention to a grand legalistic style and the length of the document, which he felt necessary for the credibility and effect that it would have on the other members of the consortium.
Eriksson and his specialist colleagues emphasised that the critical element in convincing the financial institutions, would be the demonstration that the raw materials were available at the right prices and in the quantities necessary for the life of the project. Brodzski had not forgotten that element and had already fixed in his mind that ORSFE in Paris would look after that question.
There was a method in Brodzski’s speed; the chain reaction continued. By presenting his agreement with Nurminen to Strecker, Strecker was further convinced, in spite of the fact that it was a commercial contract for services against payment with vague promises, which could only favour Nurminen.
That evening it was celebrations, they were invited to the Kalastajatorppa, a rea
l tongue twister for the visitors, or simply translated it was the Fishermans Rest, a renowned restaurant and nightclub on the outskirts of Helsinki, in the company of Kalevi Nurminen and his team. They dinned on large quantities of gravlax and vodka followed by elk and cloudberries. After dinner, they drank Koskenkorva and danced until the early hours of the morning.
Brodzski had been less successful with the paper machine builders, who had already lost a lot of money in Asia five years earlier, when they had signed contracts in the Philippines with a company controlled by one of the Marcos cronies. There had been so much graft that finally the International Finance Corporation, a subsidiary of the World Bank in Washington, who was financing the project, withdrew. The price was estimated to be more than twice the market value for such a contract.
They had not only lost a considerable amount of money, but above all the scandal over bribes and crooked deals, which was widely publicised in the media, gave them such a bad image in Finland, that they were not ready to embark on another Asian adventure at that moment time.
But there was another aspect to their decision. Brodzski was associated with a close business friend, George Schmitz, whose family owned a paper machine construction company in Bordeaux. Schmitz held a license from the same Finnish Group that Brodzski had met and who had declined his proposal.
Axelmann knew that Schmitz did not wish to help Brodzski. He had only had only gone through the motions of introducing Brodzski to his Finnish partners. It had been a facade so that he could not have been accused of obstructing his friends business.
In fact, he had gone as far as deliberately undermining Brodzski’s credibility with the Finns. He had not wanted to jeopardise his own business relations with them by recommending Papcon. If the project fell through, he would look bad, but on the other hand, if Brodzski was successful, he wanted the business to come to his own company in France, without the marketing or consortium costs.
The final stop in Finland was to Brodzski’s key partner, Tapani Hakkala of Finntech. Hakkala was experiencing business difficulties following the total collapse of Finntech’s Russian markets and the more general business downturn, which was having a very serious impact on the Finnish economy.
Tapani Hakkala was pleased with Papcon’s progress and the consortium agreement with TPS; he now had the assurance of Nurminen’s participation. Together they examined the next phase of the project and the financing arrangements.
Brodzski was a master at name-dropping. At lunch with Hakkala, he casually dropped the name of a certain Dahlqvist of the International Finance Corporation in Washington. He referred to him as my close friend. Axelmann was astonished, his mouth fell open and the piece of steak he was about eat dropped onto his napkin; as far as he knew that Brodzski had only met Dahlqvist once in his life.
‘My friend Dahlqvist has accepted our project and will participate in the capital and loans,’ Brodzski said with a nonchalant wave of his hand.
What he omitted to say was there had been absolutely no official contacts whatsoever with the IFC. No applications had been made. Further, the IFC would require a detailed analysis on profitability, raw materials and their prices, quantities, quality, and availability, but above all, the capital structure, which at that point in time was more than vague.
Hakkala, in spite of the Finns extremely cautious nature, took him at his word. Brodzski was flying high. Ennis thought that he probably believed his own words.
They left that evening for the Rovaniemi in the north of Finland where they had planned to mix business with pleasure; Brodzski had declined politely with the excuse of pressing business in Paris.
‘A Bridge tournament,’ Axelmann had whispered to Ennis.
They had been invited by Jorgen Eriksson to spend a couple of days skiing in Lapland, he had told them its our tradition to do business and get to know our partners in an informal relaxed atmosphere. They were only too pleased to get away from Brodzski and decompress a little.
A LESSON IN PAPER
Borneo Pulp Page 10