PGN hopeful of soft loan from Japan

JAKARTA (JP): State gas distribution company PT Perusahaan Gas Negara (PGN) expects Japan to rule next month on its application for a US$722.5 million soft loan to finance the construction of a pipeline from Sumatra to West Java.

PGN president Abdul Qoyum Tjandranegara said on Monday representatives from the Japanese government would arrive in Jakarta this week to conduct final checks.

The Japanese loan would account for 85 percent of the $850 million initial investment for the project, with PGN coming up with the remaining 15 percent, Qoyum said after a ceremony during which the company received an International Standard Organization (ISO) 9002 certificate.

The certificate, from Lloyd's Register Quality Assurance of Britain, was given in recognition of PGN's control management at its head office in Jakarta and at its four branch offices in Medan, Bogor, Cirebon and Surabaya.

The Japanese loan would come from a consortium that likely would include Sumitomo and Mitsubishi, Qoyum said.

The loan, if approved, would be part of a special package offered by Japan's Overseas Economic Cooperation Fund (OECF) for Southeast Asian countries. It would have a 40 year-maturity period and carry an interest rate of 1 percent per annum.

Indonesia also is seeking OECF loans for the construction of a mass-rapid transportation project in Jakarta and a double-track railway project connecting Jakarta and Surabaya, according to reports.

PGN also would involve local companies PT Citra Panjimas Loka and PT Krakatau Steel in funding the pipeline project, Qoyum said.

"The project is very important for PGN because the pipeline will accelerate the distribution of 600 million cubic feet of gas per day from its sources in Sumatra to its market, mostly industries in West Java," he said.

PGN's next major project will be to build a pipeline connecting gas fields in East Kalimantan with East Java, he said.

Funding for the project, expected to cost $1 billion, will come from a European consortium, including companies from France, the Netherlands and Italy, he said. (02)