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.

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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)