Sat, 13 Mar 2010

From: The Jakarta Globe

By Yessar Rosendar
The Indonesian government has urged state-owned miner PT Tambang Batubara Bukit Asam to look for new partners to help it build the proposed $1.06 billion coal-transportation railway in Sumatra unless its existing joint venture starts work by April.

Bukit Asam formed a joint venture with privately owned PT Transpacific Group and China Railway Engineering Corp. to build the railway but little progress has been made over the past two years.

“They [Bukit Asam] reported that the deadline to start the project is April. If they miss the target then they have to search for another partner because the current [joint-venture] contract will end in April,” Mustafa Abubakar, the minister for state-owned enterprises, told reporters on Friday.

Transpacific owns 80 percent of the shares in the joint venture, PT Bukit Asam Transpacific Railway, with Bukit Asam and China Railway Engineering both holding 10 percent.

A source close to the joint venture claimed that Transpacific had been unable to find financing and that Bukit Asam had been forced to secure financing alone, holding up progress.

It has been widely reported that tycoon Prajogo Pangestu acquired Transpacific late last year. No-one from Transpacific was available to comment.

Mustafa hinted that there is an investor from China waiting on the sidelines if the deal with Transpacific falls apart. However, he declined to disclose the name of the investor.

The Sumatra railway project is the key to increasing Bukit Asam’s coal production.

“It will double Bukit Asam’s production of because of the enhanced transportation of the coal,” Mustafa said.

Mustafa said the lengthy delay in starting the project has caused costs to escalate but he declined to disclose figures.

Last month, a source close to the project told the Jakarta Globe that further delays would see the cost of the project rise by more than 10 percent. Bukit Asam president director Sukrisno confirmed on Sunday that the project faced more delays and that costs would rise but he declined to confirm the 10 percent figure.

“We are currently finalizing the EPC [engineering, procurement and construction] contract with China Railway Engineering. If it’s not finalized then we can’t start,” Sukrisno said.

“There has been an increase in the project value and therefore we have to evaluate and negotiate first.”

He added that he hoped to resolve the negotiations with China Railway Engineering and begin construction this quarter.

The project involves the construction of a 300-kilometer railway from Bukit Asam’s Banko coal mine in South Sumatra to the port of Srengsem in Lampung. Plans for the railway were originally unveiled in 2006.

The project initially faced delays because the government did not issue implementing regulations for the 2007 Railway Law until October. Completion of the project would mark the first time private investors have held a controlling stake in a railway since state-owned railway operator PT Kereta Api took over the nation’s railways in 1963.