Mandala to build US$339 million water projest

Mandala to build US$339 million water projest

JAKARTA (JP): PT Mandala Citra Umbulan (MCU) has won the
contract to construct and operate a water project worth over Rp
800 billion (US$339 million) in Pasuruan, East Java.

Governor Basofi Soedirman of East Java province confirmed over
the weekend in Surabaya that he had appointed the company to
develop the water project.

"I have signed a decree stating that PT MCU would develop the
Umbulan project," he said, adding that the company should
commence its development in March this year.

The governor did not disclose the contract arrangement with
the company, but sources said PT MCU would develop the massive
water project under a 25-year operate and transfer contract.

PT Mandala Citra Umbulan is jointly owned by President
Soeharto's youngest son Hutomo Mandala Putra, Ciputra Development
owned by Indonesian property magnate Ciputra and Bechtel
Corporation of the United States.

The water project is said to have a debit of 5,500 cubic
meters of water. So far, only 1,500 cubic meters have been
exploited by the public.

The project is expected to supply around 4,000 cubic meters of
water to industrial estates and housing in the greater Surabaya
area.

The project's water source is located in Pandaan, Pasuruan,
around 55 kilometers south of Surabaya, the capital city of East
Java province.

Comments

Harun Hajadi, the director of Ciputra Development, warmly
welcomes the governor's decision.

"It means the East Java administration has approved our
proposal," he told the Jakarta Post.

Harun, who is also the son-in-law of property baron Ciputra,
said MCU began the feasibility study in April 1996 and completed
it in November. It included the pipeline and land clearance
project and the technical works for the project.

He said Bechtel Corporation would provide technical expertise
on the project, but declined to provide further details. Hutomo,
better-known as Tommy, and Ciputra Development would seek the
financing for the project.

Harun also said Tommy would personally be involved in the
project, but not his Humpuss Group.

According to Harun, the contract is based on a Ministry of
Home Affairs decree which states that 25 percent of the funding
for the project should be financed by the company's equity.

This means, he said, the other 75 percent should be funded by
loans.

He also mentioned the consortium's plans to finance the
project through offshore loans. "We are still working on it. But
we will probably seek offshore loans to finance the project," he
said. He said the consortium was also looking for funds from
domestic financing sources as well.

However, Harun declined to disclose the share composition
among the members of the consortium. "I cannot tell you now. But
Tommy will be the leader and we (Ciputra Development) are tailing
him," he said.

Ciputra Development has a huge interest in the project because
it has a 2,000 hectare project, the Citra Raya Satellite Town, in
west Surabaya. Asked about how much water Citra Raya Satellite
Town requires, Harun declined to answer, saying: "It will depend
on the East Java administration's distribution and allocation for
our property."

The governor's statement regarding the appointment of PT MCU
to develop the project apparently ended a high profile
competition also involving PT Citra Lamtorogung Persada (CLP),
owned by Soeharto's eldest daughter Siti Hardijanti Rukmana.

The two companies (MCU and CLP) were known to have vied for
the projects since early 1996. Senior officials of the province
had asked them to join together instead of competing against each
other.

The story behind the bidding on the project dates back to as
early as 1984. The project was first offered for tender in 1988.

There were once 14 investors expressing interest, including PT
Bimantara Sitiwisesa, which had won the contract but later pulled
out.

With the resignation of PT Bimantara Sitiwisesa, Bromo
Consortium -- which grouped Northwest Water, Matt McDonald & Co
and Custin & Co of UK -- began bidding for the project.

But Custin & Mollent also pulled out of the bidding and was
replaced by Trans Bakrie, a joint venture between Bakrie &
Brothers Group and Transfield from Australia.

The Bromo Consortium offered a price of Rp 904 per cubic meter
at the time. The provincial administration imposed a price of Rp
628 per cubic meter. The two parties, however, were unable to
reach an agreement on the price.

Minister of Public Works Radinal Moochtar once said the
developer of the water project should give priority to public
interest by minimizing water prices.

"I understand that private companies want to make big profits,
but they should also take into account the social aspect of the
project," he said.

It is not known what price MCU will offer to the public. Harun
refused to disclose any information, but said: "This is a huge
project and the risks are big as well." (09)