China, Indonesia sign US$5.5b high-speed rail deal

China Railway Construction holds 40% in JV with Indonesia state firms for $5.5b high speed train project

 

 

October 16, 2015:  

 

Indonesia’s state own enterprises consortium PT Pilar Sinergi BUMN Indonesia and China Railway Construction Co. Ltd. (CRCC) have signed joint venture for a High Speed Railway (HST) in the Jakarta–Bandung route, in which the Chinese firm will hold 40% stake.

The HST, with top speeds of 250-300 km per hour, is a first of its kind in the south-east Asian region.

Pilar Sinergi CEO Dwi Windarto told DEALSTREETASIA, the ground-breaking of the project will take place early 2016.

Pilar Sinergi consortium comprises construction operator PT Wijaya Karya Tbk (WIKA), toll operator PT Jasa Marga Tbk (JSMR), train operator PT Kereta Api Indonesia and plantation company PT Perkebunan Nusantara VIII.

Wijaya Karya chief executive Bintang Perbowo told DEALSTREETASIA, the project is estimated to require investment of around $5.5 billion over a three-years development phase.

State lenders China Development Bank has give a commitment to finance 75 per cent of the project cost with a tenure of 40 years—extendable by 10 years—at a fixed coupon rate 2 per cent.

The JV agreement was signed between Windarto and Chairman of CRCC Yang Zhongmin in Jakarta, in the presence of China’s Ambassador Xie Pieng and Pilar Sinergi chairman Sahala Lumbangaol.

This is China’s first overseas railway joint venture with Indonesian firms, the Chinese ambassador said, in his speech.

During the construction phase, the JV will use local equipment, machinery and create employment opportunities in the region. China may look at taking up other HST projects in Java Island.

State Own Enterprises (SOEs) Minister Rini Soemarno previously said, China had agreed to carry out the high-speed train project under a business-to-business scheme without government back up.

Rini added that the Chinese government had agreed to jointly produce train cars not only for high-speed, but also electric and light trains, which would be developed in Indonesia. Apart from local use, the train cars could also be exported to other Asian countries so that they could generate foreign exchange for Indonesia, she said.

To support the programme, China has agreed to build an aluminium plant in Indonesia, which could provide raw material for the production of the train cars.

 

JAKARTA: Chinese and Indonesian state-owned companies on Friday signed a US$5.5 billion deal to build the first high-speed railway in Southeast Asia's top economy, after Beijing beat Tokyo to win the construction project.

 

The line will connect the Indonesian capital Jakarta with the mountain-fringed city of Bandung, some 160 kilometres away, and is a key part of President Joko Widodo's plans to overhaul the archipelago's infrastructure and attract investors.

 

Japan was long expected to build the railway but China entered the contest earlier this year, and Tokyo's bid was rejected last month after a chaotic bidding process that infuriated the Japanese.

 

On Friday, the chairman of state-owned China Railway International, Yang Zhongmin, signed a deal with a consortium of Indonesian state companies to form a joint venture to build the railway, with construction set to start next year and the line to begin operating in 2019.

 

"This high-speed train will make it easier for the public to travel," he told reporters in Jakarta, where the deal was inked. "This major project will also provide major employment opportunities and boost the economy."

 

State-owned China Development Bank will provide 75 percent of the funding, with the rest coming from the Chinese railway company and Indonesian consortium.

 

The railway line will not need any financing from the Indonesian government, nor a government guarantee. one reason that Indonesian officials gave for rejecting the Japanese bid was that it would require government funding.

 

The high-speed train route will cover eight stations from Jakarta to Bandung, and the train will travel at around 250 kilometres (150 miles) an hour.

 

The Indonesian government repeatedly changed its mind about the railway project, before eventually agreeing to accept China's bid for a high-speed line.

 

The chaotic bidding process and final decision angered Tokyo, which is increasingly competing with Beijing for influence in Asia, with chief government spokesman Yoshihide Suga slamming it as "extremely regrettable".

 

Japan's loss came despite its reputation as a world-class train maker, famed for its "shinkansen" bullet trains.

 

China has built thousands of kilometres of high-speed railway in recent years, but its safety standards have come under scrutiny - a 2011 crash killed at least 40 people and injured about 200.