PROJECT PROFILE FOR THE PURUK CAHU - BA GKUA G COAL RAILWAY PPP PROJECT

No. 1 1.1 1.2 1.3 1.4 1.5 General

Item

Status

Name of the Project Administrative Ministry/Department Name of Sponsoring Authority Name of the Implementing Agency Location (National/Province/District/Town) Sector Activities covered

The Puruk Cahu - Bangkuang Coal Railway Transportation Project Central Kalimantan Provincial Government Central Kalimantan Provincial Government Regional Development Planning Agency / Bappeda of Central Kalimantan Province Central Kalimantan Province, passing through Kabupaten Murung Raya, Kabupaten Barito Utara and Kabupaten Barito Selatan to the east of the Barito River. Rail Transportation Development of Coal Railway on a link between Puruk Cahu and Bangkuang east of the Barito river (incl. provision of land, railway infrastructure, signalling, telecommunication and electricity system/sintelis, rolling stocks, stations, depot, workshop, loading on/off track facilities, stock pile, and O&M system) The selected approach to be determined.

1.6 1.7

1.8 2 2.1

Type of PPP Proposed (O&M, BOT, BOOT, etc) Profile Scope of the Project

Background Coal has always played an important role in the development of the overall economy in Indonesia. The Country has extensive deposits, possibly sufficient for more than 150 years based on recent calculations. Coal is seen as a stable priced alternative to the dwindling oil resources of Indonesia. Indonesia increased coal production in the early 1990s and now has the seventh largest annual coal production world-wide (approx. 200 million tons per year). Indonesia is now also the second largest coal exporting country (150 million tons per year) after Australia. Approx. 70% of Indonesian coal is exported to Asian countries, of which Japan is the largest importer (approx. 30 million tons). Kalimantan has some of the most extensive coal resources and the coal extracted is known for its high caloric content, low ash content and low sulphur content. The volume of coal resources in the Central Kalimantan area is currently estimated to be about 4.8 billion tons. Transportation Constraints At present most of the coal mined in Central Kalimantan is transported by special coal roads to the Barito River and then barged from the river to intermediate and final stockpiles downstream on the Barito River. Below Bangkuang, the river remains navigable by large barges throughout the year

No.

Item

Status which transport the coal to the port of Lupak Dalam on the Java Sea. There are significant problems associated with transporting coal on the Barito River due to the low water levels during the dry season which can make the river impassable even to the smaller coal barges, for more than three months of the year. The problem is obviously more acute in the upper reaches of the river and during longer dry seasons. The river constraints have the effect of limiting total coal production in Central Kalimantan to 1.5 million tons per year. Without these constraints it has been estimated that coal production could be increased in the province to 20 million tons per year. The areas soon to be mined are mainly in the upper and northern parts of the Barito river valley where barging of the coal can become even more difficult. Long Term Plan As a result of the present transportation constraints the province of Central Kalimantan is now examining the development of a complete railway network for the following reasons; To secure a reliable all weather form of transport for the extraction of various resources such as coal, plantations, forests, etc. to overcome the very limited capacity of the road network and constraints in river transport, especially during the dry season; To facilitate a high volume, more reliable, safer mode transport. It is also environmental friendly, when compared to other transport modes. To ensure a more cost effective transportation system. The development of a railway network for Central Kalimantan has the following phases: Phase 1A Phase 1B Phase 2 Phase 3 Phase 4A Phase 4B : : : : : : Puruk Cahu - Bangkuang (185km) Bangkuang - Lupak Dalam (175km) Kudangan - Kumai (95km) Puruk Cahu - Kuala Kurun - Kuala Pembuang (466km) Tumbang Samba - Nangabulik (418km) Kuala Kurun - Lupak Dalam (390km)

Phase 1 will be a railway from Puruk Cahu (close to the new mine areas) southwards to Bangkuang on the Barito River. At that point, river transport will be utilized from Bangkuang to Lupak Dalam offshore terminal. A reliable coal transport system by railway would increase coal production. The proposed project is in the Regional Medium Term Development Plan (RPJMD) 2006-2010 and Spatial Plans (RTRW) Central Kalimantan Province 2007. In addition, the project has been approved by the regional parliament (DPRD) (letter No. 162/1866/DPRD/2008).

No.

Item

Status

Tumbang Samba
KUDANGAN

Various line ministries have issued policies and regulations to promote PSP, including Law 23/2007 on Railways and Scheme for Investment Process on Railway Development in Indonesia on the MOT Ministerial letter No. PR.004/1/9 Phb-2008 which has been sent to all Governors and Head of KADIN. Both define the basis for PPP development in the railway sector.

2.2

Alternatives considered (status quo, refurbishment, green-field development, etc) Estimated scope and capital cost of the Project.

Construction of new roads and rehabilitation of existing roads and dredging of the river. Construction of new coal haul road routes are expensive and cause significant environmental damage. The Project Scope is as follows: a) Land acquisition b) Construction of single track between Puruk Cahu - Bangkuang (185km) including civil, bridge, signalling & facilities works; c) Others station, workshop and depot, coal loading/unloading facilities; d) Procurement and maintenance of rolling stocks and e) Operation and management. Capital cost is US$ 1.5 billion

2.3

2.4

Economic internal rate of return (EIRR) for the Project

The economic analysis was conducted based on the following assumptions: The amount of coal transported is 10 million ton/year and 20 million ton/year from the tenth year onward. Net Present Value = 2,909.07 (million US$) and the Economic Internal Rate of Return = 27.9%. Proposed period about 30 years. This would make the project more attractive.

2.5

Proposed Concession Period

No. 3 3.1 3.2

Item Construction and O&M Construction period Status of land acquisition and cost. 3 years

Status

About 16 million m land is to be acquired by the Central Kalimantan Provincial Government, but cost of land will be included in the investment cost. The government of Central Kalimantan will be responsible for land acquisition and cost. About 70% of required land is stated-owned. Resettlement of buildings and houses along the alignment is not likely to be significant. Population density in the area is low, thus project affected persons (PAPs) would be few. Full resettlement plan would be necessary later in the process.

3.3

Resettlement

3.4

Potential Environmental impacts

There will be some adverse environmental impacts during construction phase: noise, dust and air pollution are likely to be significant. With proper management, impacts of the rail line during operation are unlikely to be significant, and less than the impact of privately built coal roads. An AMDAL will be required for this development. The AMDAL will be prepared by the concessionaire. This will be monitored and approved by Bapedalda (or BPLHD) Central Kalimantan Province. See Information Memorandum. The off takers for this project could be the coal mining companies located in Central Kalimantan. ROE to investor is 13.8%, based on a tariff of US $22 per ton. NPV US$ 125 million.

3.5

Environmental Requirements

4 4.1 4.2 5 5.1

Economic and Financial Off-taker ROE (Financial analysis based on US$ terms) Stakeholders Potential road traffic restrictions

There could be local government restrictions for heavy vehicles transporting coal using the existing public roads and for the construction of any new coal roads except roads from the mining areas to the rail transhipment areas. This could include no new coal roads to the Barito River. A Public Consultation was conducted on 23 May 2009 in Palangka Raya. There was good response at this event (most of them supporting the Project). Some (especially from Ministry of Forestry and WALHI) pointed out certain environmental matters one be considered. There are 3 districts and 8 sub-districts that will be impacted by the Project (as shown in topographic map with 1:100,000 scale). Note: project alignment has been approved by MOT in April 2009 (Ref Number: HK.501/B.34/DJKA/04/09). There will need to be significant further community consultations throughout the planning, design and construction phases.

5.2

Public Consultations

No. 6 6.1

Item Legal and Regulatory Framework Railway Law 23/2007 Presidential Regulation 67/2005

Status

New Government Regulations are to be issued by MOT with respect to Law No. 23/2007 on Railways. Meanwhile the MOT Minister issued Letter No. PR.004/1/9 Phb-2008 (22 September 2008) on Investment for Railway Development in Indonesia to all Governors and Chairman of KADIN permitting a Provincial Government to be the Contracting Authority for Provincial Railways. The tendering process shall be carried out competitively, transparently and fairly in accordance with the principles of Perpres 67/2005.

7 7.1

Risk Allocation Risk Allocation Risk allocation is shown in the Information Memorandum.

8 8.1

Project Schedule Project timetable and key milestones and approvals Proposed Project implementation schedule is shown below. It is expected that Pre-Market Sounding will be conducted in September 2009 to obtain private investor and lender responses, before undertaking further project assessment and/or project transaction.

Proposed Project Implementation Schedule

ID Task Name 1 A. Pre-FS Preparation 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 21 22 23 24 25 26 Survey & Analysis Report & Recommendation Corridor/Alignment Approval (from MOT) Completion of the Study (Extended) Project Assessment Preparation of Public Consultation Document Public Consultation Preparation and Finalization of Info Memo Pre-Market Sounding PQ Documentation Issuance of Request for Expression of Interest (EOI) RFQ Announcement and Distribution of PQ Document Submission of PQ Proposal Evaluation of PQ Proposals Announcement of PQ Result Bid Documentation (incl. Draft Concession Agreement) Environmental Analysis (IEE, Draft Scoping, Draft TOR Amdal & Draft Resettlement Plan) RFP Issuance Extended Bid Conference Due Diligence and Submission of Bids Evaluation of Bids and Announcement of the Preferred Bidder Announcement of Concessionaire Signing of Concession Agreement 2009 2010 Oct NovDec Jan FebMar Apr MayJun Jul AugSep Oct NovDec Jan FebMar Apr MayJun

6 B. Pre-Market Sounding, Pre-Qualification, and Tender Document

20 C. Bid Process