Indonesia’s first private railway project ready for construction

The Jakarta Post, Jakarta | Wed, 12/16/2009 9:21 AM

A group of investors will soon begin building the first ever private railway in Indonesia, worth US$1 billion, as a key part of the planned development of a massive $5 billion integrated industrial facility in East Kalimantan.

The project’s readiness was announced at a meeting Tuesday between Indonesian President Susilo Bambang Yudhoyono and the crown prince and deputy ruler of the Emirate of Ras Al Khaimah, Sheikh Saud Bin Saqr Al Qasimi.

The two were joined by Gita Wirjawan, chairman of Indonesia’s National Investment Coordinating Board (BKPM), Madhu Koneru, group CEO of MEC Holdings, Hari Sankaran, managing director and CEO of Infrastructure Leasing and Financial Services Ltd. (IL&FS), and Allen Alexander, the chairman, president and CEO of SavageCANAC Corporation, a media statement said.

MEC Coal and MEC Infra, two joint ventures of MEC Holdings and Ras Al Khaimah Investment Authority, will develop a 130-kilometer railway line to facilitate the transport of raw materials and finished products in and out of East Kutai regency in East Kalimantan.

Gita said MEC Infra had been able to purchase and clear the land for the entire corridor within just a few months.

“This undertaking will create multiple benefits for the development of the local economy in East Kalimantan,” Yudhoyono said in the statement.

“It sets a positive tone for future investments from the Middle East.”

Sheikh Saud said, “This type of public-private, Middle Eastern-Indonesian initiative is a fantastic example of what can be accomplished when the fundamentals make sense for all parties involved.

“This project will help meet the development needs of East Kalimantan communities, while also serving to meet the energy challenges in Asia.”

Under the project agreement, MEC Infra will invest up to $1 billion in constructing the railway line linking the mine site at Muara Wahau to Bengalon on the coast.

MEC’s mine and railway are central to the development of a complex of integrated industrial facilities.

These will include a power plant fuelled by coal from MEC Coal, an aluminium smelter, a fertilizer plant and a high-capacity port terminal, Gita said.

All these, he added, would require total “investment value of $5 billion”.

MEC Coal has a 12,000 hectare coal concession in East Kutai.

The statement also MEC and Nalco — an Indian government entity — would invest $2 billion for an aluminium smelter capable of producing 500,000 tons of aluminum a year, with another $2 billion for the construction of a 1,250-megawatt captive power plant and other facilities. Both are scheduled for completion by 2013.

“This investment serves as a huge vote of confidence from an investor base with which Indonesia shares long-term strategic interests,” Gita said.

Over the next five years, the project is expected to create 5,000 new jobs in the province.

MEC’s Koneru said the project would help “transform East Kalimantan into a model for the future of Indonesia by providing a strong platform for growth, helping Indonesia to attract further investments”.