Govt agrees to grant Priok toll road concession to Hutama Karya

March 30, 2017, The Jakarta Post

The government has confirmed that it will aid the financing for a trans-Sumatra transportation megaproject by transferring the concession of the Tanjung Priok toll road to state construction firm Hutama Karya, the project’s contractor.

Public Works and Public Housing Minister Basuki Hadimuljono stated the government would transfer the concession of the 22.8 kilometer road access to Tanjung Priok, where the country’s busiest trade port is located, to the company.

“During the Cabinet meeting, we reported [the plan for the asset operation transfer] and it has been approved by the President  [Joko ‘Jokowi’ Widodo],” he said recently.

“We expect to score that amount, but it will all depend on the results in the field,” Hutama Karya president director I Gusti Ngurah Putra said, adding that several ministries were still working on the legal process for the operational transfer.

The recurring income from the toll road, he said, would be used as an underlying asset for the company to issue debt securities. The proceeds of the securities will be used to finance the construction of the trans-Sumatra project.

The trans-Sumatra toll road is one of the government’s ambitious infrastructure projects meant to spur economic expansion in the country, in spite of its lacking commercial appeal. The cost of the toll road is estimated to be Rp. 331.69 trillion.

So far, Hutama Karya has been tasked to build 11 sections of the trans-Sumatra toll road. Sixty-six percent of the needed land was procured by the end of 2016, almost double the 2015 figure.

This year the ministry is looking to operate three sections of the megaproject, namely Palembang to Indralaya in South Sumatra, Medan to Binjai in North Sumatra and Bakauheni to Terbanggi Besar in Lampung.

Based on the firm’s estimate, the first eight sections alone would need Rp. 52.6 trillion in equity. Until now, the firm has only able to secure about Rp. 25 trillion through a state capital injection of Rp. 5.6 trillion and a bond issuance, among other ways.

Hutama Karya was also previously granted a concession for the Jakarta Outer Ring Road southern sector (JOORS) in late March, which it also used as an underlying asset to issue bonds and boost its equity by Rp. 4 trillion.

Toll Road Regulatory Agency (BPJT) head Herry Trisaputra Zuna said the firm would be able to use the JOOR S consession as an asset to issue the planned Rp. 6.5 trillion in bonds over the next few years, after it issued Rp. 1 trillion in bonds last year.

It would also transfer the construction of the 185 km Terbanggi Besar to Kayu Agung section to fellow state construction firm Waskita Karya for an alternative funding strategy. Waskita Karya will also get Rp. 25 trillion from the concession. The transfer value would be Rp. 7 trillion.

The current administration under Jokowi is seeking to build 1000 km of toll roads by 2019.

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