After several efforts to develop the potential of Asahan River which flows from Lake Toba in North Sumatra Province for power generation resulted in failures in Dutch occupation, the Government of Indonesia strongly desired to realize the construction of the hydroelectric power station on the river.

This determination grew stronger when in 1972 the Government received a report on the feasibility study for Asahan Hydroelectric and Aluminium Project from Nippon Koei, a Japanese Consultant. The report said that it would be feasible to construct hydroelectric plants with an Aluminium Smelter as the main consumer of the electricity produced.

On July 7, 1975 in Tokyo, after lengthy negotiations and with economic cooperation from the Japanese Government for the project, the Government of the Republic of Indonesia and 12 Japanese Investors signed a Master Agreement for Asahan Hydroelectric and Aluminium Project, well known as Asahan Project. The Investors were Sumitomo Chemical company Ltd., Sumitomo Shoji Kaisha Ltd., Nippon Light Metal Company Ltd., C Itoh & Co., Ltd., Nissho Iwai Co., Ltd., Nichimen Co., Ltd., Showa Denko K.K., Marubeni Corporation, Mitsubishi Chemical Industries Ltd., Mitsubishi Corporation, Mitsui Aluminium Co., Ltd., Mitsui & Co., Ltd.

Further, for equity participation in a company to be founded in Jakarta, the 12 investors and the Japanese Government established an investment company called Nippon Asahan Aluminium Co., Ltd (NAA) in Tokyo on November 25, 1975.

On January 6, 1976, PT. Indonesia Asahan Aluminium (INALUM), a joint venture company between the Government of Indonesia and Nippon Asahan Aluminium Co., Ltd. was established in Jakarta. INALUM is to construct and operate the Asahan Project, in accordance with Master Agreement. The shareholding ratio between the Indonesian Government and Nippon Asahan Aluminium Co., Ltd. on the establishment of the company was 10% to 90%. In October 1978 the ratio changed to 25% to 75% and since June 1987 it has been 41.13% to 58.87%. The share composition then changed to 41.12% for the Government of Indonesia and 58.12% for NAA Co., Ltd. on February 10, 1998.

To implement the provisions of Master Agreement, the Government of the Republic of Indonesia issued a Presidential Decree No. 5 of 1976 for the establishment of Asahan Development Authority as a representative of the Government responsible for the smooth construction and development of the Asahan Project.

INALUM can be recorded as a pioneer and the first company in Indonesia dealing with an aluminium smelting industry with a huge investment of 411 billion Yen .