DBS Tambang Batubara Bukit Asam (Rp14,550; Buy; TP Rp18,550; PTBA IJ)

Permit obtained for new railway project

It was reported that Tambang Batubara Bukit Asam (PTBA) has obtained the permit from the Ministry of Transportation to build the new railway that connects PTBA mine in Tanjung Enim to a port in Lampung.

The development of this railway project with a total length of 307km and capacity of 20mn tons p.a. will be performed by a consortium made up of PTBA (10%), Transpacific Railway Infrastructure (80%) and China Railway Engineering Corporation (10%), with total investment of US$1.06bn. China Railway Engineering Corporation also appointed as the Engineering, Procurement and Construction ( EPC ) contractor and as operator and maintenance (O&M) for this project. The project will be funded by debt (70%) and internal cash (30%).

Following the permit, what lies ahead next for the consortium is the signing of the EPC and O&M contracts, expected to be done by end 2009, and to obtain funding for the project in the next one year. The development will take three years, thus the railway project is expected to commence in 2013 as previously targeted.

The permit is a positive development for this project and for PTBA, as the project is strategically important for PTBA in enhancing its sales volume in years ahead.