DBS Bukit Asam: Buy; Rp17,100; TP Rp18,550; PTBA IJ

Signed EPC and O&M contracts with China Railway Group Ltd for railway project

Bukit Asam (PTBA) announced to the IDX yesterday that its JV-company, PT Bukit Asam Transpacific Railway (BATR), has signed the Engineering, Procurement and Construction (EPC) and Operating & Maintenance (O&M) contracts with China Railway Group Ltd on 23 March in Beijing , in regards to its railway project (Muara Enim-Lampung). BATR is a 10:80:10 JV between PTBA, PT Transpacific Railway Infrastructure and China Railway Engineering Corporation.
The EPC contract amounts to US$1.3bn with 4-years work duration after signing (incl. design works) – hence, it expects the railway to start commercial operation in 2014. The railway will have capacity of 27m tons p.a., which is positive to PTBA as it will enhance its coal production volumes. The O&M contract amounts to US$3.5bn for 20-years duration.
The proposed financing scheme is a 30:70 proportion of equity and loan. BATR is now at the early stage of discussion with 4 China banks with interest to finance the project.