Wika Plans to Enter Asphalt Business

The Jakarta Globe, Yohanes Obor, January 28, 2009 

State-owned construction company PT Wijaya Karya Tbk, or Wika, said it plans to expand by entering the asphalt business this year and by buying a mining contracting firm. The move would make Wika the first state-owned company to enter the mining contracting sector. 

“We plan to acquire a mining contractor because right now there are no state-owned mining contractor companies,” Bintang Perbowo, Wika’s president director, said on Tuesday. 

“Private companies, most of them foreign, dominate the mining contractor business. They are involved in this business because its prospects are good.” 

He said the company would use between Rp 30 billion ($2.67 million) and Rp 40 billion from its 2009 capital expenditure budget of Rp 250 billion to finance the acquisition, but did not disclose which contractor Wika planned to acquire. 

Slamet Maryono, Wika’s operating director, said the company was also planning to become an asphalt producer this year. 

“We will cooperate with Jakarta administration-owned construction company PT Pembangunan Sarana Jaya to set up an asphalt extraction plant with our deposits of bitumen located in Buton, Southeast Sulawesi,” he said, adding that the company’s has an annual extraction capacity of 200,000 tons. 

Slamet said proven bitumen deposits in Button amounted to between 50 million and 80 million tons and could replace imports of liquid bitumen, which amount to some 600,000 tons a year. 

He added the company may also invite local mining company PT Timah Tbk to invest in the asphalt plant, which is expected to cost at least Rp 40 billion. 

Ganda Kesuma, Wika’s finance director, said that of the firm’s 2009 capital expenditure budget, some 30 percent was drawn from internal funds or equity, with the rest coming from bank loans. 

He said the company was also buying a stake in road contractor PT Marga Nujyasumo Agung, or MNA, which is involved in building the Rp 3.22 trillion Surabaya-Mojokerto toll road project. 

“Wika, together with state-owned toll road operator PT Jasa Marga, is the contractor for MNA.” Bintang said. 

“However, PT Jasa Marga and Wika are in the process of becoming the majority shareholders of MNA with a total 75 percent stake,” he added, noting that after the deal was completed Wika would have a 20 percent stake in company and Jasa Marga 55 percent. 

MNA’s work on 36 kilometers of highway linking the towns of Surabaya and Mojokerto in East Java Province was scheduled to begin in 2011. However, the company was unable to carry out the project because its investors pulled out. 

Bintang said the toll road project could become Wika’s strength in the future as it would provide stable earnings for the company over the long-term. 

He also said that PT Bank Rakyat Indonesia Tbk, PT Bank Negara Indonesia Tbk and PT Bank Bukopin are set to provide Wika with syndicated loans to facilitate its acquisition of a 20 percent stake in MNA. 

Wika earlier said it expects a net profit of Rp 175 billion in 2009, up 21.5 percent from an estimated Rp 144 billion this year, largely due to expected government contracts for infrastructure work. 

The company also expects revenue to grow by 15.6 percent to Rp 7.4 trillion next year, compared with an estimated Rp 6.4 trillion this year.