City sewerage project might not be realized

City sewerage project might not be realized

Bambang Nurbianto, The Jakarta Post, Jakarta

The planned construction of a sewage system in the city is in
jeopardy because the administration and an investor have failed
to reach agreement on the letter of intent (LoI), an official
said.

"The memorandum of endorsement (MoE) expired in May but we
have not reached an agreement with the investor because of very
significant differences," the city secretary's assistant for
development affairs, Irzal Jamal, told The Jakarta Post.

The city administration announced in April it would construct
a sewage system, with the Australian firm Global Grid as the
investor.

The project is meant to improve sanitation in the capital,
particularly the contamination of the city's groundwater by E.
coli bacteria. The groundwater is used by over half of the city's
eight million people.

The planned project, which includes constructing a system of
deep tunnels and pipes connecting all the houses in the capital,
is estimated to cost about Rp 50 trillion (about US$5.3 billion).
It is to be developed under a 25-year build, operate and transfer
(BOT) scheme.

Irzal said the city administration could not accept several
conditions contained in the draft LoI submitted by Global Grid to
the city administration.

According to Irzal, Global Grid was unable to convince the
city when the BOT scheme would effectively begin. He said this
point was vital, as work on the project would go on for some 25
years.

"If this is not specified in the LoI, they can claim that the
BOT begins only after the entire project has been completed," he
said.

Irzal said the city administration also found unacceptable the
condition that Global Grid would take over all of the assets and
employees of PT PAL, which manages the city's sewage system.

He also said that during earlier negotiations, Global Grid
demanded the authority to charge all houses for pumping out their
human waste before the piping project was implemented.

Another request rejected by the administration was that the
city and Global Grid open an escrow account, into which the funds
from the waste pumping services would be placed.

"We cannot accept that the city administration should put
additional funds into the escrow account should the funds derived
from the pumping services be inadequate to cover the operational
costs," said Irzal.

Irzal also said the Australian company was unable to name
other companies that would provide financial support for the
project.

"I heard that Thames Waters from Britain withdrew its
commitment from the project," he added.

The president of Global Grid Pty. Ltd., Peter A.F. Risk,
refused to comment, saying the project was part of a government-
to-government cooperation between the province of Jakarta and the
state of New South Wales.