http://thejakartaglobe.com/business/chinese-bank-may-pull-out-of-sumatra-coal-railway/333940
October 06, 2009 Janeman Latul Chinese Bank May Pull Out Of Sumatra Coal Railway The Export-Import Bank of China may pull out of a $1.28 billion South Sumatra coal-railway project with state-owned coal miner PT Tambang Batubara Bukit Asam because the scheme has yet to receive the necessary permit from the Transportation Ministry, Bukit Asam's top executive said on Tuesday. "China Exim is unwilling at present to sign a definitive loan deal with us despite the fact that it had offered to provide 70 percent of the financing for the project," said Sukrisno, Bukit Asam's president director. "China Exim said they can't sign the loan deal as we are unable to secure the permit and the project keeps being delayed." Sukrisno said Bukit Asam was now pushing the Transportation Ministry to issue the necessary permit by the end of the month. "However, if China Exim refuses to work with us any more, I'm confident we'll be able to find other investors," he said. "This is a very promising project. There will be no shortage of investors interested in working with us." A representative from China Eximbank was unavailable for comment. The bank is one of three Chinese state-owned policy banks. Its lending strategies are designed to ensure the achievement of government policy objectives. The project involves construction of a 300-kilometer railway from Bukit Asam's Banko coal concession in South Sumatra to Srengsem Port in Lampung. It has been stalled since 2007, when Bukit Asam, Transpacific Railways and China Railway Engineering formed a consortium to build and operate it. Although the 2007 Railways Law had theoretically rolled back the monopoly of state rail operator PT Kereta Api, no implementing regulations allowing the legislation to take effect were issued until Sept. 8, leading to hope that the project could soon be restarted. Sukrisno predicted then that a permit would be issued by the end of September and that work on the project would start this month. "God willing, the project will start sometime in November or December," he said on Tuesday, adding that the consortium would use about Rp 4 trillion ($424 million) of its own equity to buy land. If it proceeds, the scheme will mark the first time private investors have held a controlling stake in a railway project since Kereta Api took over the nation's railways in 1963. Tunjung Inderawan, the Transportation Ministry's director general of railways, said the permits would only be issued after Bukit Asam had satisfied all of the technical requirements. "It could be quick or it could be slow. It depends entirely on Bukit Asam," he said. If the project were completed in 2013, Sukrisno said, it would allow Bukit Asam to boost coal output by 5 million tons the first year, 10 million tons the second year and 22 million tons by 2016. Bukit Asam will only control 10 percent of the joint venture. Transpacific will own 80 percent and China Railway Engineering 10 percent. [Non-text portions of this message have been removed]
