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Bukit Asam Gets Green Light for $1 Billion Sumatra Railroad
October 21, 2009

A Bukit Asam employee checks a conveyor belt at a coal mine in Tanjung Enim, South Sumatra. The planned railwy will connect mining operations with a port in Lampung. (File Photo: Weda, EPA) A Bukit Asam employee checks a conveyor belt at a coal mine in Tanjung Enim, South Sumatra. The planned railwy will connect mining operations with a port in Lampung. (File Photo: Weda, EPA)
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Indonesian coal producer PT Tambang Batubara Bukit Asam has won a permit to build a $1.06 billion railway on Sumatra island with a capacity to transport 20 million metric tons of coal a year.

Bukit Asam and its partners may seek loans from Chinese lenders to finance 70 percent of the project and the rest will be from internal cash, Achmad Sudarto, the company’s corporate secretary said.

“We expect to get the loan within a year so that we can complete the project on schedule in 2013,” Sudarto said in a telephone interview on Wednesday.

Inadequate infrastructure has become the main problem for Indonesia, Southeast Asia’s biggest economy, to accelerate development outside Java, the nation’s most populated island. The railway project will enable Bukit Asam to tap the bulk of the company’s coal reserves on Sumatra island, boosting its annual output.

Bukit Asam will form a venture with PT Transpacific Railway Infrastructure and China Railway Engineering Corp. to build the railway, the company said in an e-mailed statement today. Bukit Asam and China Railway will each hold 10 percent of the venture, while Transpacific will own 80 percent.

“We view the permit as positive for Bukit Asam,” Ricardo Silaen, an analyst at PT Kim Eng Securities in Jakarta, said in a note to client today, adding that he maintained a “hold” with a target price of 13,500 rupiah a share.

The railway project will help Bukit Asam increase its annual coal-transport capacity to 40 million tons by 2013 from as much as 12 million tons at present, Sudarto said.

The 307-kilometer (191-mile) railway will connect Bukit Asam’s coal mine in South Sumatra to a port in Lampung province at the southern tip of the island.

Bukit Asam shares rose 0.3 percent to 14,650 rupiah at 1:35 p.m. Jakarta time on the Indonesia Stock Exchange.

Bloomberg