Adhi Karya targets 2.7 triliun rupiah from EPC contracts next year

JAKARTA: State-controlled construction firm PT Adhi Karya Tbk is eyeing IDR2.7 trillion from new contract from engineering service, procurement and construction (EPC) projects in 2012.

The company will be more focused on EPC projects for power plant and oil and gas exploration, said Operational Director Sumadiono.

“We will be more selective next year, thus 2012 EPC projects’ target is lower than this year,” he said yesterday.

Contract for EPC projects in 2011 are expected to reach IDR4.6 trillion. Up to November, the company has netted IDR3.8 trillion.

Some of Adhi’s major EPC projects this year include the residual fluid catalytic cracker project from PT Pertamina (Persero) in Cilacap worth US$847 million and central processing plant in Blora.

President Director Kiswodarmawan said that total contract for next year is expected to hit at IDR13.3 trillion, 6.4% higher than this year target at IDR12.5 trillion.

Contracts being carried over to 2012 are estimated to reach IDR11.5 trillion, of which IDR6.44 trillion will come from construction, IDR5.92 trillion from EPC, IDR35 billion from property and IDR5 billion from real estate.

Revenue is projected to reach IDR9.42 trillion in 2012, 34.5% higher than this year target of IDR7 trillion.

“Net profit is projected at IDR204.65 billion, higher than IDR183.37 billion targeted for this year,” he added.

Adhi Karya is planning to construct a 100-storeys tower as the new symbol of Jakarta starting in mid-2012, estimated to cost around IDR2 trillion.

To finance the project, the company is planning to conduct rights issue in the second half of 2012 and proposing a share subscription option to the government.

Adhi Karya targets 2.7 triliun rupiah from EPC contracts next year – Bisnis.com.

Bukit Asam and Huadian to Build Coal-fired Power Plant

State-controlled coal miner Tambang Batubara Bukit Asam and a Chinese partner have won a tender to build a pair of coal-fired power plants with a total capacity of 1,240 megawatts in South Sumatra.

The two new plants, each with 620 MW capacity, will be built in Tanjung Enim near the Banko Tengah coal mine and will cost $1.59 billion.

Bukit Asam (PTBA) is working with Huadian, a Chinese state-owned power company, to complete the project.

Construction is expected to start by the end of next year. Operations at the first unit are expected to commence in June 2016, and three months later for the second unit.

Electricity output from the plants will be sold to state utility company Perusahaan Listrik Negara. The project is considered vital for the nation’s development because it is intended to meet increasing electrical demand in Java and Sumatra.

“In the financing of the project, worth $1.59 billion, will solely be the responsibility of China Huadian and does not need guarantees from the government of Indonesia,” PTBA said in a statement on Tuesday.

In terms of financing, 75 percent of the total will come from debt and the remainder equity.

PTBA said it is committed to suppling the plants with a total of 5.4 million tons of coal annually from its Banko Tengah coal mine. The low-grade coal will have about 4,200 kilocalories.

“The company has been eying this project for a while to construct and to distribute its coal,” said Reza Priyambada, an analyst with Indo Surya Asset Management.

“This would be a positive support for the company’s business, because besides getting income from the construction services PTBA is also securing a market here.”

Project negotiations had been ongoing since March 2005, and a memorandum of understanding was signed a month later.

Reza added: “If the company will be responsible for the power source supply, then it will also create income for it and it will have a clear buyer for a certain amount of its coal production for as long as the contract lasts, even when it only has the minority stake in the construction.”

He did not know the magnitude of this contract compared to others owned by PTBA or other coal miners.

PTBA will have a 45 percent stake in the project and Huadian the remaining 55 percent.

PTBA’s Banko Tengah coal mine will also develop a 307 kilometer railway, called Transpacific Railway, which is expected to be operational in 2014.

The new rail line will be able to transport up to 27 million tons of coal per year. It will move coal from the South Sumatra mine to the neighboring province of Lampung.

Shares in PTBA closed steady at Rp 16,500 on Wednesday.

Bukit Asam and China Partner to Build Coal Plants | The Jakarta Globe.

Indonesia’s rating upgraded one notch to investment grade

JAKARTA: Indonesia successfully has its sovereign debt rating upgraded one notch to investment grade. Fitch Ratings raised Indonesia’s sovereign debt rating from BB+ to BBB- after 14 years of waiting.

Director of Fitch Rating for Asia Pacific Philip McNicholas said that the international rating agency upgraded Long-Term Foreign- and Local-Currency Issuer Default Ratings with stable outlook. Wheres, the short-term Long-Term Foreign- and Local-Currency Issuer Default Ratings were upgraded to F3.

“The rating upgrade reflects the strong economic growth, and lower debt to GDP ratio. Besides strengthening liquidity, Indonesia has run prudent macroeconomic framework,” he said in a press statement.

Following the rating upgrade, Fitch projects the gross domestic product (GDP) will grow at average of more than 6% annually until 2013although global economy is less conducive.

The ratings agency perceives Indonesia’s strong growth is sustained by domestic economy and less depending on external loans. Yet, the growth prospect still needs to be tested against external shocks.

On the other hand, Fitch highlighted the weak structural issues, such as low income per capita, that is US$3,600. This figure is still far below BBB rating standards that require average income US$9,800 per capita. Yet, the relatively strong fundamentals of Indonesian structure in some categories have raised the rating to BBB-.

“Problems realted to climate change, bad infrastructure and corruption must be settled.”

Coordinating Minister for Economic Affairs Hatta Rajasa saw the rating upgrade has reflected the prudent fiscal management and macroeconomic policy of the government. He in fact did not show any worries on possible massive capital inflow after the rating upgrade as there are abundant investment opportunities to keep the investors to stay.

Ryan Kiryanto, Head of Economist of PT Bank Negara Indonesia Tbk, said that the upgrade to investment grade will build stronger confidence at the market to invest in Indonesia. Still, more capital is expected to flow into real and infrastructure sectors.

Ryan said the upgrade will benefit the financial sector as the country will be the target of foreign capital in terms of portfolio and foreign direct investment (FDI).

“Yields of Indonesian soreveign and corporate debts will come down as risks are becoming lower. This is the time for the government and corporations to issue bonds,” he added.

Similarly, I Made Adi Saputra, Analyst at PT Nusantara Capital Securities, also sees the benefit of the rating upgrade to sovereign debts. Foreign investors, according to him, become more interested in Indonesia’s bond market.

High demand will lead to good bargaining power for the government to determine lower yields.

Rahmat Waluyanto, Director General of Debt Management at Ministry of Finance, said that Indonesia is eligible for investment grade with its low debt to GDP ratio, moderate inflation rate and low budget deficit. Adding to these, Indonesia’s yields and credit default swap of sovereign bonds confirm the eligibility. “Global sukuk of Indonesia offers 4% yield, and 5-year CDS is at 150 basis points.”

Governor of Bank Indonesia Darmin Nasution agrees if the rating upgrade relates to success of Indonesia’s fiscal and monetery regulators to maintain macroeconomic stability and high growth.

President Director of PT Bank Mandiri Tbk Zulkifli Zaini welcomed the rating upgrade as a driver for more foreign capital to flow into national financial system, thus helping banks cut the cost of fund. (NOM)

Indonesia wins back investment grade – Bisnis.com.