Toll project hangs in the balance

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.