Construction on the Greater Jakarta LRT track near Kampung Makassar in Jakarta on Nov. 1, 2017. (Antara Photo/Aprillio Akbar)

Hyundai Expresses Interest in Jakarta LRT Project After Gov't Sorts Out Financing Mess


DECEMBER 21, 2017

Jakarta. Hyundai Rotem, a rolling stock manufacturer and unit of South Korean conglomerate Hyundai Motor Group, has expressed interest in supplying train wagons for the upcoming Greater Jakarta Light Rail Transit project, Luhut Binsar Panjaitan, the coordinating minister for maritime affairs, said on Thursday (21/12).

"They say they are ready to transfer the technology in this project because they have done it in many countries, such as Turkey," Luhut said in a statement. The minister made the comments on a  visit to Hyundai Rotem's railway manufacturing plant in Busan, South Korea.

Hyundai has supplied and built railway facilities in 36 countries, including Canada, the United States and Turkey.

Kim Seung-tack, Hyundai Rotem's chief executive, said the company is able to comply with a government requirement to set up a local factory and use 51 percent local content in the wagon's production.

Kim said that Hyundai Rotem is prepared to complete the LRT development in 15-16 months provided that 30 percent of the first development process takes place in Busan, while the remaining 70 percent would be completed in Indonesia.

"In terms of price, we are very competitive," Kim said in the same statement.

Financing Concluded

Kim's statement comes after the government concluded on Tuesday a deal with two state-owned companies, train operator Kereta Api Indonesia and constructor Adhi Karya, that fixed the financing scheme for the project.

Kereta Api Indonesia signed a 50-year concession with the government to operate the LRT and bear Rp 25.7 trillion ($1.9 billion) for constructing elevated tracks out of the total project infrastructure cost of Rp 29.9 trillion.

The train operator will receive a total Rp 7.6 trillion in capital injection for the LRT project and will get Rp 14 trillion in subsidies from the government over the next 12 years to cover the project cost. Several local banks have also expressed readiness to provide syndicated loans to Kereta Api Indonesia to cover immediate spending costs.

Adhi Karya will shoulder the remaining Rp 4.2 trillion for constructing stations and train depots. Luhut did not say how much additional cost Kereta Api Indonesia would have to spend on the LRT's rolling stock.

The project, which spans 44 kilometers from the industrial area of East Bekasi in West Java to Cawang in East Jakarta, has been marred by financial uncertainties since it began construction in 2015. The government planned to use part of the state budget to finance the project, which initially was estimated to cost Rp 23.3 trillion.

However, the government later backed out of that plan, unable to squeeze funds from its already tight budget. Last month, the government said the project's cost could swell to Rp 31 trillion with additional stations and depots, but it was later able to scale down some expenses.

Boon for Adhi Karya

For Adhi Karya, the deal provides certainty to its financial performance this year and next year, an analyst said.

Previously, the company piled up Rp 4.3 trillion in receivables as of the end of September for track construction.

"The first payment for the construction of the project is expected to be at mid-January 2018. This condition will boost revenues and net profit of the company in 2018," said Maria Renata, an equity analyst at Danareksa Sekuritas, in a report to clients.

Adhi Karya would also potentially receive a further Rp 10 trillion from the LRT project in 2018, Maria said.

Danareksa maintains purchase recommendations for Adhi Karya, which it hopes to attain share prices of Rp 2,800 over the next 12 months, a 47 percent upside from today's closing price.