Adhi Karya pro­ceeds with LRT amid doubt

The Jakarta Post - - BUSINESS - Farida Su­santy

State con­struc­tion firm Adhi Karya is adamant that the de­vel­op­ment of the light rail tran­sit (LRT) will con­tinue de­spite un­cer­tainty over fi­nanc­ing.

Doubts have risen over talks to form a joint ven­ture (JV) com­pany be­tween state rail­way firm Kereta Api In­done­sia (KAI), the project’s in­vestor, and both Adhi Karya — the project’s con­trac­tor — and state in­fra­struc­ture fi­nanc­ing firm Sarana Multi In­fras­truk­tur (SMI) to ease KAI’s fi­nan­cial burden in the project.

The cost of the project has re­port­edly bal­looned from around Rp 27.5 tril­lion (US$2 bil­lion) to ap­prox­i­mately Rp 31.8 tril­lion due to tech­ni­cal is­sues.

The idea to es­tab­lish a JV com­pany was sparked by State-Owned En­ter­prises Min­is­ter Rini Soe­marno’s re­quest for KAI to re­treat from be­ing the project’s in­vestor, as stip­u­lated by a pres­i­den­tial reg­u­la­tion, be­cause of con­cerns over the high costs. Un­der the JV plan, Adhi Karya would also act as an in­vestor in the project.

Adhi Karya fi­nance di­rec­tor Haris Gu­nawan said that the firm did not have any is­sues with the JV pro­posal.

“Any ad­di­tional funds will still be shoul­dered by KAI. Adhi Karya will con­tinue con­struct­ing the LRT,” he said.

Adhi Karya’s ini­tial es­ti­mates con­clude that KAI is ex­pected to con­trib­ute Rp 4 tril­lion to the JV’s cap­i­tal, while SMI will con­trib­ute Rp 3.6 tril­lion. Mean­while, Adhi Karya is ex­pected to con­trib­ute Rp 1.4 tril­lion from a state cap­i­tal in­jec­tion (PMN) en­dowed to the firm from the gov­ern­ment back in 2015. The JV’s ac­cu­mu­lated cap­i­tal will be used to se­cure fund­ing by loan from state and pri­vate lenders.

So far, Haris ex­plained, Adhi Karya had spent Rp 5 tril­lion on the project’s de­vel­op­ment, which is 26 per­cent com­plete. The firm ex­pects the project to reach 30 per­cent com­ple­tion by the end of the year, with a to­tal spend­ing of Rp 6.5 tril­lion.

The LRT con­struc­tion will be di­vided into two phases: the first phase will span from Bogor in West Java to Jakarta along a 43.3 kilo­me­ter-long track in­clud­ing the sec­tions Cibubur-Cawang, Bekasi Timur-Cawang and Cawang-Dukuh Atas. It is ex­pected to be fin­ished by 2019. The sec­ond phase will be a 38.5 km-long track in­clud­ing the sec­tions Cibubur-Bogor, Dukuh Atas-Palmerah-Se­nayan and Palmerah-Gro­gol.

Even so, Haris re­it­er­ated that Adhi Karya still ex­pected the fi­nanc­ing scheme to be con­cluded soon by both the Trans­porta­tion Min­istry and in­vestor.

“LRT con­struc­tion will con­tinue us­ing the work­ing cap­i­tal we have al­lo­cated. How­ever, we still hope the gov­ern­ment will pro­vide cer­tainty on the re­al­iza­tion of the LRT [cost] pay­ment, re­mem­ber­ing that Adhi [Karya] is a pub­licly listed com­pany,” Haris said.

Adhi Karya’s share price in­creased slightly to Rp 1,770 at mar­ket close on Thurs­day, from Rp 1,750 at open. How­ever, the price is down from Rp 2,200 recorded on Nov. 23, be­fore the hub­bub over KAI’s fi­nanc­ing ca­pac­ity arose.

The gov­ern­ment ini­tially planned to use the state bud­get to fi­nance the project, but later as­signed KAI to in­vest through a pres­i­den­tial reg­u­la­tion. It was orig­i­nally only des­ig­nated as the LRT’s fu­ture operator.

The gov­ern­ment plans to equip KAI with Rp 7.6 tril­lion in PMN, with Rp 4 tril­lion se­cured this year. Funds out­side of the PMN are to be sourced from syn­di­cated loans from banks, po­ten­tially from state lender Bank Mandiri, Bank Rakyat In­done­sia (BRI), Bank Ne­gara In­done­sia (BNI) and pri­vate lenders like CIMB Ni­aga and Bank Cen­tral Asia (BCA).

De­spite Rini’s re­quest for a JV com­pany, Trans­porta­tion Min­is­ter Budi Karya Su­madi was firm that KAI would re­main an in­vestor in the project.

“[The JV] will be dis­cussed this week and be fi­nal­ized through a shared agree­ment among all min­istries. So far it is still the three, KAI, Adhi [Karya] and SMI,” he said, adding that the ex­ist­ing pres­i­den­tial reg­u­la­tion will not be amended.

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