Toll project hangs in the balance
Rendi A. Witular, Jakarta
A giant toll road project stretching from the western tip of Java to the easternmost city on the island might not be completed as scheduled, as the Ministry of Finance seems reluctant to approve a pivotal loan facility for the project.
The project started early this year and is scheduled to be completed in 2009, while the loan guarantee facility for the project was approved by the Office of the Coordinating Minister for the Economy in January this year.
However, Syarifuddin Alamabai, president of state-owned toll road operator PT Jasa Marga, said the Ministry of Finance had yet to approve the loan guarantee facility.
"The government (the Ministry of Finance) seems reluctant to support this strategic project," said Syarifuddin after a meeting with House of Representatives Commission IX for financial affairs.
Under a plan approved by the Cabinet, the toll road will stretch 1,486 kilometers from Merak, Banten, to Banyuwangi, East Java. The project is estimated to cost some Rp 77.3 trillion (about US$8.22 billion).
Several toll road operators, including Jasa Marga, doubted their ability to raise the necessary finance for the project because the total financing requirement was significantly greater than the value of their accumulated assets.
For instance, in view of its asset value, Syarifuddin said, Jasa Marga could borrow only up to Rp 2 trillion from banks, sufficient to finance the construction of around 100 kilometers of toll road.
The loan guarantee facility would enable toll road operators to obtain loans higher than their asset value.
However, if the finance ministry continued to refuse to approve the facility, construction of the project would progress at a very slow pace, at around 100 kilometers per year, meaning the project would take 10 years to be completed, he said.
Regarding the company's plan to sell a 30 percent shareholding to the public via an initial public offering (IPO), Syarifuddin said the plan had been approved by the Office of the State Minister of State Enterprises and the firm was now seeking approval from the Office of the Coordinating Minister for the Economy.
"I expect the IPO will be made in October this year, with proceeds estimated at Rp 2 trillion to Rp 3 trillion. The proceeds will be allocated mostly to finance our projects," he said.
Aside from the IPO proceeds, Jasa Marga expects to finance its project using a Rp 1.5 trillion loan from a local bank consortium comprising Bank Mandiri, Bank Central Asia, Bank Negara Indonesia and Bank Bukopin.
Jasa Marga finance director Djojo Subagdja said the loan would have a six-year maturity period with an interest rate of 11 percent to 12 percent. The loan would be used this year to construct 40 kilometers of toll road to connect Jakarta and Bandung, and to complete the remaining 8 kilometers of the Jakarta Outer Ring Road.
"We are seeking bank loans this year to finance our projects, as we have canceled our plan to issue bonds due to currently unfavorable market conditions," said Djojo.
In a bid to finance part of the project, the company is also planning to put to tender construction of 20 kilometers of toll road that will connect Medan and Binjai, North Sumatra.