President Joko ‘Jokowi’ Widodo is scheduled to inaugurate the Palapa Ring, the largest publlic-private partnership Internet connectivity project in the country, this afternoon. Palapa Ring develops fiber optic network covering 34 provinces and 440 regencies/mayoralties through 35,280 KM of undersea cable and 21,807 KM of land cables.
Completion of the project is key to boosting Indonesia’s digital economy. This project is one of National Strategic Infrastructure Projects as stated in Presidential Decree No. 3 of 2013, which also categorized as National Priority Project. The procurement were divided into 3 (three) main packages; the Western, Central, and Eastern. The project is targeted to distribute broadband services to end users with a transfer speed of at least 10 Mbps in rural areas and 20 MBps in urban areas.
According to PT Penjaminan Infrastruktur Indonesia (PII), a state-owned infrastructure financing company, Palapa Ring has become the first project in telecommunication sector using Availability Payment/AP offered by the government through Public-Private Partnership (PPP) scheme. Based on the AP scheme, the government through Ministry of Communication and Informatics will pay winning bidder after the infrastructure is completed and is ready for operation. The AP scheme differed from other PPP scheme using the Viability Gap Fund (VGF). The VGF scheme use direct funding in the beginning of the project as a payment method while the payment method for AP scheme will be done based on the performance of winning bidder. Therefore, the project development fund is fully borne by the private sector with the estimate value at USD452 million (initial capex EPC).
Toll Roads: In the meantime, section II of the Cinere-Jagorawi toll road, which is part of the Jakarta Outer Ring Road-2 (JORR-2) has entered commercial trial last week. President Jokowi is scheduled to inaugurate the long-delayed toll road soon. The other section of JORR-2, Serpong-Kunciran, is also scheduled for trial in the coming weeks, lifting prospect of connectivity in the Greater Jakarta area.
After three years of construction, which cost heavy traffic in the main Jakarta-Cikampek turnpike, the elevated toll road (built with Rp16 trillion of investment) is set to enter trial operation next month. The toll road, main access to Bandung and trans-Java toll road, is expected to start full commercial operation in the first quarter of 2020, lifting financial prospects of Jasa Marga. Jasa Marga’s financials should improve next year with completion of two other major projects: Manado-Bitung and Balikpapan-Samarinda. Jasa Marga is optimistic that the Manado-Bitung toll road will be completed in the second quarter of 2020.
State-owned EPC firm PT Pembangunan Perumahan Tbk (PTPP), in the meantime, plans to divest its minority shareholding in two toll roads. First, its 15% interest in the Medan-Kualanamu-Tebing Tinggi (61.7 KM) toll road, which is majority owned and operated by Jasa Marga. Second is the company’s 30% interest in Pandaan-Malang (30.6 KM) toll road, which is also majority owned and operated by Jasa Marga. Both have partially been operational, while full operation is expected in the coming months.
Airports: Two major projects at Soekarno-Hatta international airport are also closing to completion. They are the east connecting taxiway (ECT) and Runway 3. Both will significantly boost movement of aircrafts between runways and overall takeoffs/landing (from 75/hour to 100/hour). Both are expected to be fully operational in the first quarter of 2020.
Changi Airport International Pte Ltd, meanwhile, is almost certain the winner of a tender to upgrade and operate Komodo airport in Labuan Bajo, East Nusa Tenggara. Changi is partner of Indonesian compant PT Cardig Aero Services Tbk (CASS) in the competitive tender to upgrade Komodo as an international airport. Expansion of the airport needs Rp3 trillion of investment, consisted of Rp1.17 trillion of capital expenditures and Rp1.83 trillion of operational expenses (opex).
DISCLAIMER: NO POSITION IN STOCKS MENTIONED IN THIS ARTICLE
