Tue, 25 May 2010

From: The Jakarta Globe

By Irvan Tisnabudi
A $1.5 billion coal rail and port project planned for Central Kalimantan may be delayed by a year after a review of the integrated project uncovered an estimated $700 million in additional costs, a senior national planning official said on Monday.

Lukas Hutagalung, a program management specialist at the National Development Planning Board (Bappenas), said the total cost of the project was now estimated to be $2.2 billion after a government review last month determined improvements were needed to a port that is part of the project and other water transportation-facilities. He did not elaborate on what prompted the review, or the precise nature of the improvements that are needed.

The Puruk Cahu-Bangkuang railway line is the first of four proposed sections of rail line stretching approximately 1,829 kilometers across the province to connect coal mines and ports.

It is hoped that construction of the rail line will help maximize coal production in the province, which is estimated to hold 4.8 million tons of coal, representing more than half of the country’s total estimated deposits of about seven million tons.

The project will be offered to investors under a public-private partnership scheme, with the line being constructed by private investors who will be given a concession to operate it for 30 years, with guarantees that all coal transported from the area will be carried by rail.

The government said last month that 10 investors had demonstrated “great interest” in the rail project, including Japan’s Itochu, China Harbor Engineering and PT Jasa Power Indonesia, a subsidiary of coal miner PT Adaro Energy.

Because of the soaring cost of the project, the government now expects a delay in the project’s completion.

“Previously, the coal railway project was scheduled to be finished by the end of 2012, but now we presume that it will be finished by the end of 2013 at the earliest,” Lukas said.

Due to the change in costs, Lukas said investors had asked the government to extend pre-qualification registration prior to the tender as they try to adjust their financing proposals. The government extended registration until June 4.

Bastary Panji Indra, a director in charge of public-private partnerships at Bappenas, said 15 companies had now received the pre-qualification documents.

Among the companies are Singapore’s Vestindo Primaland and IL&FS Transportation Network Limited of India.

The Central Kalimantan coal railway project is one of the 100 public-private projects the government plans to get off the ground in the 2010-14 period.

The government has said it hopes to attract Rp 50 trillion ($5.4 billion) of private investment in public-private partnerships this year.