Kalimantan Coal Railway Project

CONTENTS

List of Contents

1 Introduction ......................................................................................................................... 1

1.1 Background ............................................................................................................ 1

1.2 Transportation Constraints .................................................................................... 1

1.3 Long Term Plan ...................................................................................................... 1

1.4 Central Kalimantan Overview ................................................................................ 2

2 Demand for Coal and Likely Supply from the Project Area .................................................. 4

2.1 Global Demand for Coal ......................................................................................... 4

2.2 Domestic Coal Consumption and Supply ............................................................... 5

2.3 Coal Resources, Reserves and Production in Central Kalimantan.......................... 6

3 The Project ......................................................................................................................... 11

3.1 Project Scope ....................................................................................................... 11

3.2 Project Cost Estimate ........................................................................................... 11

3.3 Implementation Schedule .................................................................................... 11

4 Economic and Financial Evaluations................................................................................... 12

4.1 Economic Evaluation ............................................................................................ 12

4.2 Financial Evaluation ............................................................................................. 12

5 Railway Alignment and Train Operations ........................................................................... 13

5.1 Selection of Location for Coal Loading or Unloading ........................................... 13

5.2 Provisional Train Operations Plan ........................................................................ 14

6 Outline of Key Laws and Regulations Applicable to the Project ......................................... 15

6.1 Railway Sector Law .............................................................................................. 15

6.2 PPP Cross Sector Regulatory Framework ............................................................. 15

6.3 Relevant Ministerial Regulations ......................................................................... 15

6.4 Environmental and Social Resettlement Laws and Regulations .......................... 15

6.5 Other Laws ........................................................................................................... 15

7 Environmental and Land .................................................................................................... 16

7.1 Environmental and Social Characteristic of the Area........................................... 16

7.2 Land Acquisition and Resettlement Characteristics of the Area .......................... 16

7.3 Outline of Environmental and Land Issues Connected with the Coal Rail Project

16

7.4 Environmental Requirements .............................................................................. 17

7.5 Land Acquisition-Resettlement Requirements .................................................... 17

Tables Table 1.1: Condition of Main Rivers in Central Kalimantan ....................................................... 2

Table 2.1: Current Coal Demand by Industries in Indonesia ..................................................... 5

Table 2.2: Indonesian Coal Resources/Reserves ....................................................................... 6

Table 2.3: Coal Resources in Central Kalimantan Province ....................................................... 6

Table 2.4: Coal Reserves by Mining Concessionaires (PKP2B)................................................... 7

Table 2.5: List of Mining Companies and Plans for Coal Production ......................................... 9

Table 3.1: Project Cost for Puruk Cahu – Bangkuang Coal Railway (Financial) ........................ 11

Table 4.1: Base Case: Results of Economic Analysis ................................................................ 12

Table 5.1: Estimated Numbers of Trains per Day .................................................................... 14

Table 5.2: Train Formation and Rolling Stock .......................................................................... 14

Figures Figure 1.1: Phased Railway Development Program in Central Kalimantan ............................... 2

Figure 2.1: World Coal Consumption by Country Grouping, 1980-2030 ................................... 4

Figure 2.2: Non-OECD Coal Consumption by Region, 1980, 2006, 2015 and 2030 ................... 4

Figure 2.3: Estimation of Production, Export and Domestic Demand of Coal in Indonesia ...... 5

Figure 2.4: Coal Concessions and Resources in Central Kalimantan ......................................... 8

Figure 2.5: Coal Mining Concessions and Proposed Railway in Central Kalimantan ............... 10

Figure 5.1: Rail Alignment ....................................................................................................... 13

Appendices Appendix 1: Risk Allocation ........................................................................................................ i

Appendix 2: Implementation Schedule ..................................................................................... ii

Executive Summary: Central Kalimantan Coal Railway

Puruk Cahu - Bangkuang

Central Kalimantan is a major source of high grade coal that is in demand

nationally and internationally. The Government has already issued permits

for the extraction of coal in large areas of the Barito River valley and actual

extraction is now starting. However, there are significant constraints to the

transportation of coal to the seaports on the Kalimantan coast caused by

distance, remoteness of the area, and the lack of reliable transportation.

Transportation by road is only feasible for comparatively short distances,

and the Barito River suffers from seasonal variations which make

transportation during the dry season unreliable except in the lower reaches

of the river.

The construction of a coal railway will ensure a cost effective, reliable, and

all season transportation of coal in this region. The construction of the

railway is an integral part of the Central Kalimantan Province railway

development program. The proposed project has already received the

approval of the Provincial assembly. A Public Consultation meeting for this

project was conducted on 23rd May 2009 and there was general support for

the Project. The Provincial Government will be responsible for land

acquisition and cost. The railway line is 185 km long and will include the

provision of land, railway infrastructure, signalling, telecommunications and

electricity system, rolling stock, stations, depot, workshops, loading on/off

track facilities, stock piles, and an O&M system.

The project is prima facie technically, economically and financially feasible.

The project cost estimate is about US$ 1.5 billion. The forecast project ROE

is 13.8%.

The route passes through commercial forests which are now being

exploited. The project is likely to have impacts on the remaining adjacent

forests, particularly during the construction phase. Most of the land is state-

owned (Ministry of Forestry). The Central Kalimantan Provincial Government

now has responsibility for management of the land. There is unlikely to be

much acquisition of buildings or resettlement. The project will require an

AMDAL (Environmental Impact Assessment) which will be prepared by the

project concessionaire.

This Information Memorandum presents the currently available information

to potential investors. A proposed project implementation schedule indicates

a timeline for implementation.

Deleted: This Information Memorandum is on the proposed coal railway between Puruk Cahu - Bangkuang in the Barito river valley in Central Kalimantan. ¶

Deleted:

Deleted: e

Deleted: developer. Most of the land is state-owned (Ministry of Forestry). The Central Kalimantan Provincial Government now has responsibility for management of the land.

Deleted: A Public Consultation meeting for this project was conducted on 23

rd May 2009 and

there was general support for the Project.

Deleted: , in Appendix 2,

1. Introduction

1 Introduct ion

1.1 Background

Coal has always played an important role in the development of the overall

economy in Indonesia. The Country has extensive

sufficient for more than 150 years based on recent calculations. Coal is seen

as an alternative to the dwindling domestic

increased coal production in the early 1990’s and now has

largest annual coal production world-wide (approx

per year). Indonesia is now also the second largest

(150 million tons per year) after Australia. About

exported to Asian countries, of which Japan is the largest importer

(approximately 30 million tons).

Kalimantan has some of the most extensive coal resources and the coal

extracted is known for its high calorific, low ash and low sulphur content.

Coal resources in the Central Kalimantan are currently estimated to be about

4.8 billion tons.

1.2 Transportation Constraints

At present most of the coal mined in Central Kalimantan

private roads to the Barito River and then barged to intermediate and final

stockpiles downstream on the same river. Below Bangkuang

remains navigable by large barges throughout the year

the port of Lupak Dalam in 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, making the river impassable even

barges. The problems are obviously more acute in the upper reaches of the

river and during longer dry seasons.

The river constraints have the effect of limiting

Central Kalimantan to about 1.5 million tons per year. Other

unreliability of road transport and higher costs. Without these constraints

coal production could increase in the project area

1

has always played an important role in the development of the overall

has extensive deposits, possibly

years based on recent calculations. Coal is seen

domestic oil resources. Indonesia

and now has the seventh

wide (approximately 200 million tons

the second largest coal exporting country

bout 70% of Indonesian coal is

exported to Asian countries, of which Japan is the largest importer

coal resources and the coal

c, low ash and low sulphur content.

oal resources in the Central Kalimantan are currently estimated to be about

ost of the coal mined in Central Kalimantan is transported by

barged to intermediate and final

. Below Bangkuang, the river

the year that transport coal to

There are significant problems

associated with transporting coal on the Barito River due to the low water

the river impassable even for smaller

obviously more acute in the upper reaches of the

the effect of limiting present coal production in

1.5 million tons per year. Other factors are the

Without these constraints the

to 20 million tons per year.

The areas to be mined are mainly in

Barito river valley where barging is even more difficult.

1.3 Long Term Plan

As a result of the present transportation constraints t

Provincial Government is considering

� To secure a reliable all seasonof various resources such as overcome the very limited capacity of the road network and constraints in river transport;

� To provide a high volume, more It is also environmentally less damagingmodes;

� To ensure a more cost effective transportation

The development of a railway network for Central Kalimantan

following phases: (See Figures 1.1)

Phase 1A : Puruk Cahu-Bangkuang (185km)

Phase 1B : Bangkuang- Lupak Dalam (175km)

Phase 2 : Kudangan-Kumai (195km)

Phase 3 : Puruk Cahu-Kuala Kurun

Phase 4A : Tumbang Samba-Nanga

Phase 4B : Kuala Kurun-Lupak Dalam (390km)

Phase 1, which is the subject of this Information Memorandum

railway from Puruk Cahu to Bangkuang on the Barito River. At that point,

river transport will be utilized from Bangkuang to Lupak

terminal.

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

parliament (DPRD) (letter No. 162/1866/DPRD/2008).

in the upper and northern parts of the

even more difficult.

As a result of the present transportation constraints the Central Kalimantan

considering the development of a railway network;

season mode of transport for the exploitation such as coal, plantations and forests, to

limited capacity of the road network and

more reliable and safer mode of transport. less damaging compared to other transport

o ensure a more cost effective transportation system.

The development of a railway network for Central Kalimantan consists of the

Bangkuang (185km)

Lupak Dalam (175km)

Kumai (195km)

Kuala Kurun-Kuala Pembuang (466km)

Nangabulik (418km)

Lupak Dalam (390km)

, which is the subject of this Information Memorandum, will be a

to Bangkuang on the Barito River. At that point,

will be utilized from Bangkuang to Lupak Dalam offshore

The proposed project is in the Regional Medium Term Development Plan

2010 and Spatial Plans (RTRW) Central Kalimantan

rovince 2007. In addition, the project has been approved by the regional

parliament (DPRD) (letter No. 162/1866/DPRD/2008).

1. Introduction

Figure 1.1: Phased Railway Development Program in Central Kalimantan

Source: Central Kalimantan Provincial Government

1.4 Central Kalimantan Overview

The southern part of Central Kalimantan comprises coastal and swamp

areas with an altitude of 0-50 m above sea level, the middle part comprises

flat land and plateau with an altitude of 50-150 m above sea level, and the

northern part is hilly and mountainous, with an altitude of more than 150 m

above sea level. There are no volcanic mountains.

2

: Phased Railway Development Program in Central

The southern part of Central Kalimantan comprises coastal and swamp

50 m above sea level, the middle part comprises

150 m above sea level, and the

hilly and mountainous, with an altitude of more than 150 m

above sea level. There are no volcanic mountains.

The province has many rivers flowing through the area. From the northern

area there are with 11 major rivers and

Java Sea. Table 1.1 below shows the condition of the 11 wide

rivers in Central Kalimantan function as important transport links to connect

regencies, districts and villages, and

parts of Kalimantan. The Barito is clearly the most significant of these rivers.

Table 1.1: Condition of Main Rivers in Central Kalimantan

No. Name of River

Length of River (km)Potential Navigable Length (km)

1. Sungai Jelai 200 2. Sungai Arut 250

3. Sungai Lamandau

300

4. Sungai Kumai 175 5. Sungai Seruyan 350 6. Sungai Mentaya 400 7. Sungai Katingan 650

8. Sungai Sebangau

200

9. Sungai Kahayan 600 10. Sungai Kapuas 600 11. Sungai Barito 900 Source: Central Kalimantan Provincial Government

The Gross Regional Domestic Product (GRDP) of Central Kalimantan was

Rp. 32.35 trillion in 2008 at current market price. This is the lowest in the

whole of Kalimantan and is only 13%

The Central Kalimantan’s economic

constant 2000 prices, which is higher than the

Indonesia. The agriculture sector accounts for

followed by the trade, hotel and restaurant sector (1

sector (12.4%).

The total length of public roads in Central Kalimantan was

2007, consisting of 1,715 km of national roads, 1,708 km of provincial roads

province has many rivers flowing through the area. From the northern

rivers and over 30 small rivers flowing to the

Java Sea. Table 1.1 below shows the condition of the 11 widest rivers. The

rivers in Central Kalimantan function as important transport links to connect

and also the northern part and southern

The Barito is clearly the most significant of these rivers.

: Condition of Main Rivers in Central Kalimantan

Length of River (km)

Width (m) Depth (m)

Navigable Length (km)

150 150 8 190 100 4

250 150 6

100 250 6 300 250 5 270 350 6 520 250 6

150 100 5

500 450 7 420 450 6 700 500 8


The Gross Regional Domestic Product (GRDP) of Central Kalimantan was

at current market price. This is the lowest in the

% of the GRDP of Eastern Kalimantan.

The Central Kalimantan’s economic growth rate was 6.2% in 2008 at

higher than the growth rate for the whole of

accounts for 30.4% of total GRDP in 2008,

trade, hotel and restaurant sector (19.7%) and the services

ds in Central Kalimantan was 12,134 km in

consisting of 1,715 km of national roads, 1,708 km of provincial roads

1. Introduction

and 8,711 km of Regency/City roads. Although the road length in Central

Kalimantan is the second longest in Kalimantan, the road network density

(roads per 1,000 km2 area) is only 79 km, which is very low

200 km, the average for the whole of Indonesia.

56% of the total road length in Central Kalimantan is

40% of the road length is in poor condition. Even on national roads, the

average width is only 4.5 m and the maximum load capacity is limited to 8

tons.

Central Kalimantan has 10 seaports consisting of 6 national ports and 4

regional ports. In addition, there are also two special quays for loading CPO

(Crude Palm Oil) and two special ports for coal transportation.

The 2007 population of Central Kalimantan is 2,048,000, and this is forecast

to increase by about 60% to 3,414,000 by 2025.

highest population growth of the four provinces within Kalimantan. Such a

high growth of future population is an important factor for developing

regional economic activities.

Central Kalimantan is now seeking to attract investment

foreign but also local investors in such sectors as forestry, food crops, estate

crops, livestock, fishery, mining, trade, industry, tourism, etc. In order to

support such investment opportunities, the development of infrastructure is

indispensable, with the transportation sector is given the

3

and 8,711 km of Regency/City roads. Although the road length in Central

econd longest in Kalimantan, the road network density

y 79 km, which is very low compared to

the whole of Indonesia. It is estimated that about

of the total road length in Central Kalimantan is unsurfaced, and about

Even on national roads, the

average width is only 4.5 m and the maximum load capacity is limited to 8

Central Kalimantan has 10 seaports consisting of 6 national ports and 4

there are also two special quays for loading CPO

(Crude Palm Oil) and two special ports for coal transportation.

is 2,048,000, and this is forecast

5. The province shows the

growth of the four provinces within Kalimantan. Such a

important factor for developing

Central Kalimantan is now seeking to attract investment not only from

local investors in such sectors as forestry, food crops, estate

crops, livestock, fishery, mining, trade, industry, tourism, etc. In order to

support such investment opportunities, the development of infrastructure is

the transportation sector is given the highest priority.

2. Demand for Coal and likely Supply from the Project Area

2 Demand for Coal and Likely Supply from the Project Area

2.1 Global Demand for Coal

2.1.1 World Coal Consumption

According to the International Energy Outlook 2009, world coal consumption

is expected to increase by 49% from 2006 to 2030, and coal’s share of world

energy consumption will increase from 27% in 2006 to 28

world coal consumption will increase by 49%, from 127.5 quadrillion Btu in

2006 to 190.2 quadrillion Btu in 2030 (Figure 2.1).

The growth rate for coal consumption is fairly even over the period,

averaging 1.9% per year from 2006 to 2015 and 1.6

2030—generally reflecting the growth trends for both world GDP and world

primary energy consumption. Regionally, increased use of coal in non

OECD countries accounts for 94% of the total growth in world coal

consumption over the entire period.

Figure 2.1: World Coal Consumption by Country Grouping, 1980

4

upply from the Project Area

to the International Energy Outlook 2009, world coal consumption

from 2006 to 2030, and coal’s share of world

in 2006 to 28% in 2030. The

, from 127.5 quadrillion Btu in

).

rate for coal consumption is fairly even over the period,

d 1.6% per year from 2015 to

generally reflecting the growth trends for both world GDP and world

primary energy consumption. Regionally, increased use of coal in non-

of the total growth in world coal

: World Coal Consumption by Country Grouping, 1980-2030

Figure 2.2: Non-OECD Coal Consumption by Region, 1980, 2006and 2030

2.1.2 Non-OECD Countries

Led by strong economic growth and rising energy demand in nonAsia, total coal consumption in the nonincrease to 139.6 quadrillion Btu in 2030, an increase of 73 percent over the 2006 total (Figure 2.2). The increase of 59.0 quadrillion Btu, which represents 94 percent of the projected increase in total world coal consumption, underscores the continuing importance of coal in meeting overall energy demand in the non-OECD nations. Over the entire refercase horizon, coal accounts for about oneconsumption.

2.1.3 Non-OECD Asia

The countries of non-OECD Asia account for 90in world coal consumption from 2006 to 2030. Strong expected for non-OECD Asia, averaging 5.7

OECD Coal Consumption by Region, 1980, 2006, 2015 and 2030

Led by strong economic growth and rising energy demand in non-OECD Asia, total coal consumption in the non-OECD countries is projected to

to 139.6 quadrillion Btu in 2030, an increase of 73 percent over the ). The increase of 59.0 quadrillion Btu, which

represents 94 percent of the projected increase in total world coal consumption, underscores the continuing importance of coal in meeting

OECD nations. Over the entire reference case horizon, coal accounts for about one-third of total non-OECD energy

OECD Asia account for 90% of the projected increase in world coal consumption from 2006 to 2030. Strong economic growth is

OECD Asia, averaging 5.7% pa from 2006 to 2030, with

Deleted: Growth in DemaGrowth in Demand for Coal


China’s economy averaging 6.4% per year and India’s by 5.6Much of the increase in demand for energy in nonthe electric power and industrial sectors, is expected to be met by coal. Because China has limited reserves of oil and natural gas, coal remains the leading source of energy in its industrial sector. In India, more than 71the growth in coal consumption is expected to be and most of the remainder in the industrial sector. Coal use for electricity generation in India is projected to grow by 1.9% Btu in 2030, as an additional 65 gigawatts of coalretirements) is brought on line.

In the other nations of non-OECD Asia, coal consumption grow by an average of 3.0% per year, from 5.1 quadrillion Btu in 2006 to 10.4 quadrillion Btu in 2030, with increases in both the electric power andindustrial sectors. In the electric power sector, significant growth in coal consumption is expected in Indonesia and Vietnam, where considerable amounts of new coal-fired generating capacity are expected to come on line before 2030.

2.2 Domestic Coal Consumption and Supply

2.2.1 Estimate of Coal Production in Indonesi

Coal production in Indonesia reached 212.5 million tons 8.4% from 2005. The major part of this coal output companies which are PKP2B (mainly owned by Foreigcontractors while PT. Bukit Asam (PT. BA) (State Owned Enterprises)produced about 9.3 MT and companies with mining rights 0.22 MT. So far, all the coal produced by PT. Bwithin Indonesia as the fuel for the Suryalaya Thermal Power Plant

5


per year and India’s by 5.6% per year. Much of the increase in demand for energy in non-OECD Asia, particularly in

d industrial sectors, is expected to be met by coal. Because China has limited reserves of oil and natural gas, coal remains the leading source of energy in its industrial sector. In India, more than 71% of the growth in coal consumption is expected to be in the electric power sector and most of the remainder in the industrial sector. Coal use for electricity

per year, to 9.3 quadrillion Btu in 2030, as an additional 65 gigawatts of coal-fired capacity (net of

OECD Asia, coal consumption is expected to per year, from 5.1 quadrillion Btu in 2006 to

10.4 quadrillion Btu in 2030, with increases in both the electric power and industrial sectors. In the electric power sector, significant growth in coal consumption is expected in Indonesia and Vietnam, where considerable

fired generating capacity are expected to come on line

Consumption and Supply

Estimate of Coal Production in Indonesia

oal production in Indonesia reached 212.5 million tons (MT) in 2007, up output was produced by 29

(mainly owned by Foreign Private Companies) (State Owned Enterprises)

and companies with mining rights produced around Bukit Asam has been sold

Suryalaya Thermal Power Plant.

2.2.2 Future Domestic Coal demand

Figure 2.3: Estimation of Production, Export and Domestic Demand of Coal in Indonesia

Source: Ministry of Energy and Mineral Resources

As the demand for coal has steadily increased in the industries shown in Figure 2.3, it is expected that the demand keeps increasing in each industry in Indonesia. The domestic demand for coal has steadily increased in the industries as shown in Table 2.1

Table 2.1: Current Coal Demand by Industries in Indonesia

Electricity Cement

Metalurgy,

Textile,

Pulp

OthersSub

Total

2006 27.1 5.3 1.9 13.0 47.3

2007 28.9 6.5 7.2 7.5 50.1

2008 30.0 6.8 9.4 16.5 62.7

2009 32.0 8.1 10.9 6.6 57.6

2010 32.0 9.0 11.1 6.6 58.7

2011 30.0 9.9 27.0 66.9

2012 28.0 10.4 28.4 66.8

2013 28.0 10.9 29.2 68.2

2014 28.0 11.5 31.4 70.9

Source: Ministry of Energy and Mineral Resources

Year

Coal CV>5100 Kcal/kg

36 41 48 5469

95113

145163 160

131154

193217 229

0

50

100

150

200

250

300

350

400

450

2004 2005 2006 2007 2008

Million Tons

Year

Future Domestic Coal demand

: Estimation of Production, Export and Domestic Demand of Coal in Indonesia

As the demand for coal has steadily increased in the industries shown in , it is expected that the demand keeps increasing in each industry

demand for coal has steadily increased in the

: Current Coal Demand by Industries in Indonesia

(Units: Million Tons)

Sub

TotalElectricity UBC

Briquite,

Fertilizer,

BCL, Licol

Sub

Total

47.3 0.7 0.0 0.0 0.7 48.0

50.1 3.5 0.4 0.1 3.9 54.0

62.7 5.5 0.4 0.1 5.9 68.6

57.6 9.6 0.4 0.1 10.0 67.6

58.7 15.2 1.0 0.1 16.3 75.0

66.9 21.0 1.2 4.1 26.2 93.1

66.8 21.0 1.3 5.8 28.1 94.9

68.2 21.0 1.4 5.9 28.2 96.4

70.9 30.0 1.8 7.3 39.1 110.0

Coal CV<5100 Kcal/kg

Total

6684

120

170

220184 186 201 191 185

230250

321

361

405

2009 2010 2015 2020 2025

Year

Domestic

Export

Production


As seen in Table 2.1, the demand in the electricity industry is expected to double in 2010 - 2014 compared with the demand in 200improve production capacity at coal mining sites supply and transportation of coal to domestic coal users.

Between 2015 and 2020, it expected that the abroad and domestic demand in Indonesia will be balancedexpected that the growth in domestic consumption will be larger than that of coal exports. Furthermore, the demand for electricof domestic coal output is growing at a high rate. It is expected therefore that there will be no lack of demand for the coal to be mined in the parts of Central Kalimantan province.

2.2.3 Supply of Coal in Indonesia

The coal resources and reserves in Indonesia (in Table 2.2.

Table 2.2: Indonesian Coal Resources

Source: Indonesia Coal Brief 2007

Indonesia is one of the big coal exporters (with Australia and Colombia). Total measured reserves are more than 10,000 MT of coal, of which more than 80% is of medium to high calorific value.

Notes on Classification System:

Hypothetical: Undiscovered Coal Resources in beds that may reasonably be expected to exist in known mining districts under known geologic conditions. In general, Hypothetical Resources are in broad areas of coal fields where points of observation are absent and evidencdistant outcrops, drill holes, or wells. Exploration that confirms their existence and reveals quantity and quality will permit their reclassification as a Reserve or Identified SubResource.

Inferred: Coal in unexplored extensions of Demonstrated Resources for which estimates of the quality and size are based on geologic evidence and projection.

Quality kcal/kg

Hypothetical Inferred Indicated

Low <5100 1,685 8,711 2,382

Medium 5100-6100 1,924 19,653 9,176

High 6100-7100 71 4,998 670

Very High >7100 0 464 11

Total 3,680 33,826 12,239

Resources (million tonnes)

6


in the electricity industry is expected to compared with the demand in 2007. It is urgent to

mining sites and also to improve the domestic coal users.

, it expected that the quantity of coal exported abroad and domestic demand in Indonesia will be balanced. After 2020 it is

domestic consumption will be larger than that of electricity, which consumes 80%

. It is expected therefore that to be mined in the north-eastern

Indonesia (in 2007) are indicated in

: Indonesian Coal Resources/Reserves

Indonesia is one of the big coal exporters (with Australia and Colombia). Total measured reserves are more than 10,000 MT of coal, of which more

Undiscovered Coal Resources in beds that may reasonably be expected to exist in known mining districts under known geologic conditions. In general, Hypothetical Resources are in broad areas of coal fields where points of observation are absent and evidence is from distant outcrops, drill holes, or wells. Exploration that confirms their existence and reveals quantity and quality will permit their reclassification as a Reserve or Identified Sub-economic

monstrated Resources for which estimates of the quality and size are based on geologic evidence and projection.

Indicated: Coal for which estimates of the rank, quality, and quantity has been computed partly from sample analyses and measurements and partly

Measured: Coal for which estimates of the rank, quality, and quantity has been computed, within a margin of error of less than 20 percent, from sample analyses and measurements from closely spaced and geologically well-known sample sites.

Resources: Concentrations of coal in such forms that economic extraction is currently or may become feasible.

Reserves comprise the sum of Indicated and Measured Resources

2.3 Coal Resources, Reserves

Kalimantan

The coal resources and reserves in Central Kalimantan were announced by the Provincial Office of Mining and Energy 2008, as indicated in Table 2.3.

Table 2.3: Coal Resources in Ce(Unit: Million T

Measured Indicated

Resources 1,178 1,344

Reserves 1,178 1,344

Source：Provincial Office of Mining and Energy in Central Kalimantan excluding

Total measured and indicated resources (reserves) in Central Kalimantan Province amount to some 2,500 MT of coal.

2.3.1 Coal Reserves by Mining Concessionaires

The Indonesian coal industry consists of four State Owned Mining Company (PT Bukit Asam(PKP2B). Mining Authorization Holder(KUD). However in Central Kalimantan most coal development and production is confined to the Mining Conc

In Central Kalimantan at present the KP holders become important suppliers of coal, because of their large concessions.

Fifteen Mining Concessionaires are active

Coal resources are extensive and of high calorific value.

Measured Total

2,317 15,094 25

4,939 35,692 59

3,326 9,066 15

187 662 1

10,769 60,514 100

Resources (million tonnes)%

: Coal for which estimates of the rank, quality, and quantity has been computed partly from sample analyses and measurements and partly from reasonable geologic projections.

Coal for which estimates of the rank, quality, and quantity has been computed, within a margin of error of less than 20 percent, from sample analyses and measurements from

known sample sites.

Concentrations of coal in such forms that economic extraction is currently or may

the sum of Indicated and Measured Resources

Reserves and Production in Central

in Central Kalimantan were announced by Provincial Office of Mining and Energy of Central Kalimantan in June

: Coal Resources in Central Kalimantan Province (Unit: Million Tons)

Indicated Inferred Total

1,344 2,293 4,815

1,344 - 2,512

Provincial Office of Mining and Energy in Central Kalimantan excluding hypothetical resources

ndicated resources (reserves) in Central Kalimantan Province amount to some 2,500 MT of coal.

Coal Reserves by Mining Concessionaires (PKP2B)

Indonesian coal industry consists of four types of producer, namely: State Owned Mining Company (PT Bukit Asam /PTBA), Mining Contractors

Mining Authorization Holders (KP holder), and Cooperative Units (KUD). However in Central Kalimantan most coal development and

Concessionaire (PKP2B) group.

the KP holders are inactive but they may become important suppliers of coal, because of their large concessions.

active (see Table 2.4)

extensive and of high calorific value. Coal reserves total

Formatted: Font: 8 pt

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Formatted Table

Deleted: (Resources)

Deleted: 2,512

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stops: 3", Centered + 6",

Formatted: Normal, Tab

+ 6", Right

Deleted: (Reserves)

(Asian) Japanese,

(Asian) Japanese,

(Asian) Japanese,

(Asian) Japanese,

(Asian) Japanese,

(Asian) Japanese,

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stops: 3", Centered


some 1.42 BT. Many PKP2B mines have calorific values of over 7,000 ADB.

For example, during the period 2004-2008 PT Marunda Graha Mineral [MGM] mined about 5 MT of coal. In 2008 they mined 1.5 MT oproduction was exported.

2.3.2 Location of Resources and Concessions PKP2B

The location of the resources and concessions of the Mining Concessionaires (PKP2B) are shown in Figure 2.4

At present the 15 coal mining companies listed in Table 2.of Concessions.

7


T. Many PKP2B mines have calorific values of over 7,000 ADB.

2008 PT Marunda Graha Mineral 2008 they mined 1.5 MT of coal and all

Location of Resources and Concessions PKP2B

The location of the resources and concessions of the Mining 4.

At present the 15 coal mining companies listed in Table 2.4 have 527,444 ha

Table 2.4: Coal Reserves by Mining

(Unit: Billion Tons

Notes: [Coal Reserves): upper box provides Indicated key Reserves, lower box Measured Reserves Notes: Cal: Calorific Value, Ts: Total Sulfur, CSN: Crushable Swelling No.


No. Company

Coal Reserves/

Measured/ Indicated

0.12

0.10

0.01

0.02

0.01

0.02

0.06

0.03

0.22

0.17

0.08

0.10

na

0.00

na

0.00

0.01

0.00

0.00

0.13

0.07

0.02

12 PT Pari Coal na

13 PT Ratah Coal na

na

0.00

0.03

0.23

1.42

15

PT Suprabari

Mapanindo Mineral

Total

11

PT Multi Tambangjaya Utama

14PT Sumber Barito

Coal

9

PT Lahai Coal

10

PT Maruwai Coal

7

PT Juloi Coal

8

PT Kalteng Coal

5

PT Batubara Duaribu

Abadi

6

PT Bharinto Ekatama

3

PT Asmin Bara Jaan

4PT. Asmin Koalindo Tuhup

1 PT Marunda Graha

Mineral

2

PT Asmin Bara

Bronang

by Mining Concessionaires (PKP2B)

t: Billion Tons)

Notes: [Coal Reserves): upper box provides Indicated key Reserves, lower box indicates

Notes: Cal: Calorific Value, Ts: Total Sulfur, CSN: Crushable Swelling No.


Activity Condition

Quality

Cal : 7.239 – 7.627 adb’

Ts : 0,45 – 1,05 %: CSN : 3 – 5,5

Ca,l: 5.015 – 7.614 adb.

Ts : 0,22 – 3,43

Cal : 6.038 adb;

Ts : 0,63 %

Cal : 6.114 – 8.556 adb;

Ts : 0,79 % ; CSN : 0,5 – 9,0

Cal : 5.104 – 6.466 adb;

Ts : 0,19 – 2,74 %

Cal : 6.788 – 7.855 adb;

Ts : 0,3 – 2 %

Cal : 7.515 – 8.239 adb ;

Ts : 0,63 % ;

Cal : 7.736 – 8.507 adb,

Ts :0,62,

Cal : 7.223 – 7.731 adb

Ts : 1,24 %

Cal : 8.000 adb,

Ts : 0,52 %

Cal : 6.507 – 8.422 adb’

Ts : 0,4 – 2,4 %

Exploration na

Exploration na

Cal : 8.350 – 8.383 adb ;

Ts : 0,88 % ;

Cal : 5.853 – 8.157 adb;

Ts : 0.93 %

－

Construction

Production

Exploration

Exploration-Construction

Feasibility Study

Exploration

Exploration

Construction

Feasibility Study +

Construction

Construction

Construction

Production

Construction


Figure 2.4: Coal Concessions and Resources in Central Kalimantan

Source: Provincial Office of Mining and Energy Bureau in Central Kalimantan

8


and Resources in Central Kalimantan

Provincial Office of Mining and Energy Bureau in Central Kalimantan

Coal Mining Company (PKP2B)

① PT Marunda Graha Mineral

② PT Asmin Bara Bronang

③ PT Asmin Bara Jaan

④ PT Asmin Koalindo Tuhup

⑤ PT Batubara Duaribu Abadi

⑥ PT Bharinto Ekatama

⑦ PT Juloi Coal

⑧ PT Kalteng Coal

⑨ PT Lahai Coal

⑩ PT Maruwai Coal

⑪ PT Multi Tambang Jaya Utama

⑫ PT Pari Coal

⑬ PT Ratah Coal

⑭ PT Sumber Barito Coal

⑮ PT Suprabari Mapanindo Mineral

Legend

Coal Concession

River

Road

Scheduled Route of Railway

Scheduled Stockpile

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2.3.3 Coal Production by Mining Authorization Holders

Holders) and PKP2B

The list of mining companies of all types which have creserves in Central Kalimantan located in the eastern area near the River Barito are indicated in Table 2.5.

Table 2.5: List of Mining Companies and Plan

Source: Provincial Office of Mining and Energy in Central Kalimantan, June 2009.

There are some 24 companies, of KP and PKP2B classification, with plans for coal production in the influence area of the railway.

The total production plans illustrate a potential transport requirement (by railway and/or barge) of some 34 MT p.a. however not all of these plans are likely to be realized.

No. Name of Company Type of Average Target

Concession Production

Contract [ton / year]

1 PT Borneo Prima KP 600,000

2 PT Bara International KP 850,000

3 PT Daya Bumindo KP 850,000

4 PT Marunda Graha Mineral PKP2B 2,000,000

5 PT Asmin Koalindo Tuhup PKP2B 5,000,000

6 PT Lahai Coal PKP2B 600,000

7 PT Maruwai Coal PKP2B 3,000,000

8 PT Victor Dua Tiga Mega KP 600,000

9 PT Duta Nurcahya KP 600,00010 PT Trisula Kencana Sakti KP 600,000

11 PT Padang Anugrah KP 600,000

12 PT Batara Perkasa KP 600,000

13 PT Rizki Baratama Mandiri KP 600,000

14 PT Bharinto Ekatama PKP2B 5,000,000

15 PT Bara Prima Mandiri KP 600,000

16 PT Batubara Duaribu Abadi PKP2B 5,000,000

17 PT Multi Tambang Jaya Utama PKP2B 2,000,000

18 PT Batubara Duaribu Lestari KP 600,000

19 PT Bara Prima Mandiri KP 600,00020 PT Batubara Bandung Pratama KP 600,000

21 PT Bangun Nusantara Jaya Makmur KP 1,500,000

22 PT Bara Meratus KP 500,000

23 PT Kike KP 600,000

24 PT Karya Gemilang Limpah Rejeki KP 300,000

Total 33,800,000

9


Mining Authorization Holders (KP

The list of mining companies of all types which have coal resources and located in the eastern area near the River

and Plans for Coal Production

Source: Provincial Office of Mining and Energy in Central Kalimantan, June 2009.

There are some 24 companies, of KP and PKP2B classification, with plans ailway.

The total production plans illustrate a potential transport requirement (by railway and/or barge) of some 34 MT p.a. however not all of these plans are

Although the target production is high, actual implementation upon a) the mining contractor’s capabilities (at present the existing coal production is only some 1.5 MT p.a.would need approvals from the Ministry of Forestry.

The latest coal mining concessions stages) as well as the railway alignment

Average Target Port Plan / District

Location

600,000 Laung Tuhup Sub-District Murung Raya



2,000,000 Laung Tuhup Sub-District Murung Raya




600,000 Lahai Sub-District Barito Utara

600,000 Lahai Sub-District Barito Utara600,000 Teweh Tengah Sub-District Barito Utara

600,000 Teweh Tengah Sub-District Barito Utara



5,000,000 Teweh Tengah Sub-District Barito Utara

600,000 Dusun Utara Sub-District Barito Selatan

5,000,000 Karau Kuala Sub-District Barito Selatan

2,000,000 Karau Kuala Sub-District Barito Selatan

600,000 Karau Kuala Sub-District Barito Selatan

600,000 Dusun Utara Sub-District Barito Selatan600,000 Telang Baru Barito Timur

1,500,000 Telang Baru Barito Timur

500,000 Telang Baru Barito Timur



33,800,000

Although the target production is high, actual implementation will depend capabilities (at present the existing coal

MT p.a.) and b) the areas of utilization which Ministry of Forestry.

(under the production and construction alignment plan is shown in Figure 2.5.


Figure 2.5: Coal Mining Concessions and Proposed Kalimantan

Source: Provincial Office of Mining and Energy in Central Kalimantan, June 200

10


Proposed Railway in Central

2.3.4 Estimate of Coal to be Hauled on the Coal Freight Railway

Based on the above preliminary demand exercises, fixed 10 million ton/year for the first 10 tenth year onward have been assumedthe effective restriction of the construction of new private coal roads to the Barito River and its tributaries and the use of the Barito RiverBangkuang for transportation of coal. The construction of new roads between mines and the proposed railway will of course be allowed.

Over a 30 year concession period, it is therefore expected that a minimum of 500 MT of coal would be mined in the nortrailway. If exploration confirms larger deposits of coal then annual coal transport of 20 MT could commence earlier than 2022.

The Project, based on somewhat conservative estimates of coal transport demand, and the known problems with river transport on the Barito River, results in rail transport becoming the most reliable mode of transport to move coals speedily from the mines to river ports to the south having all year round barge access.

Source: Provincial Office of Mining and Energy in Central Kalimantan, June 2009

Estimate of Coal to be Hauled on the Coal Freight Railway

Based on the above preliminary demand exercises, demand projections of a million ton/year for the first 10 years and 20 million ton/year from the

tenth year onward have been assumed. These projections depend also on the effective restriction of the construction of new private coal roads to the Barito River and its tributaries and the use of the Barito River beyond Bangkuang for transportation of coal. The construction of new roads between mines and the proposed railway will of course be allowed.

Over a 30 year concession period, it is therefore expected that a minimum of 500 MT of coal would be mined in the northern area and transported on the railway. If exploration confirms larger deposits of coal then annual coal transport of 20 MT could commence earlier than 2022.

somewhat conservative estimates of coal transport problems with river transport on the Barito River,

results in rail transport becoming the most reliable mode of transport to move coals speedily from the mines to river ports to the south having all year

3. The Project

3 The Project

3.1 Project Scope

The Project Scope is as follows:

a) Land acquisition b) Construction of single track between Puruk Cahu

(185km) including civil, bridge, signaling & facilities works;c) Others station, workshop and depot, coal loading/unloading

facilities; d) Procurement and maintenance of rolling stock;e) Consultant service; and f) Operation & management.

3.2 Project Cost Estimate

The financial cost estimate in Table 3.1 is derived from

estimates. Hence, in the absence of a basic engineering design,

somewhat difficult to validate some figures, but they have been r

based on field visit and on-site inspection. Capital cost (

1.5 billion.

3.3 Implementation Schedule

A proposed implementation schedule is shown in Appendix 2.

11

Construction of single track between Puruk Cahu – Bangkuang (185km) including civil, bridge, signaling & facilities works;

depot, coal loading/unloading

Procurement and maintenance of rolling stock;

Table 3.1 is derived from engineering cost

c engineering design, it is

ut they have been refined

tal cost (capex) is about US$

A proposed implementation schedule is shown in Appendix 2.

Table 3.1: Project Cost for Puruk Cahu (Financial)

No Item

1 Civil Works

2 Bridge Works

3 Railway Track

4 Preparing Works

5 Station

6 Workshop and Depot

7 Signal & Telecom

8 Loading/Unloading Facility

7 Maintenance Equipment

8 Consultant Fee

9 VAT

10 Project Management Fee

11 Land Cost

12 Contingency

Railway Infrastructure (excl. Rolling Stock)

13 Main Locomotive

14 Shunting Locomotive

15 Coal Wagon

Rolling Stock

Railway Infrastructure

(incl. Rolling Stock) Source: TAS-IRSDP/JTC Study 2009

Puruk Cahu – Bangkuang Coal Railway (Financial)

Cost Total Cost USD 1,000

1 USD = Rp 10,000

637,448

5,742

102,856

115,000

875

33,300

10,100

90,000

1,000 Sub-Total 1

996,321

49,766

104,609

99,532

10,606

13,226

Sub-Total 2 277,739

Grand Total A 1,274,060

78,000

6,000

144,900

Sub-Total 3 228,900

Grand Total B 228,900

Grand Total C 1,502,960

Deleted: erify

Deleted: the estimated

Deleted: . Some (downward) adjustments to some of the cost elements have been made based upon information received during the Consultant

Deleted: s

Deleted: to Central Kalimantan

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ome (downward) adjustments to some of the cost elements have been made based upon information received during the

to Central Kalimantan

Left

(Default) Arial, 10 pt

4. 4.0 4. Economic and Financial

4 Econ omic and Financial Evaluat ions

4.1 Economic Evaluation

The most important benefits from the transport improvement could include

any or all of the following:

• Reduced operating expenses, • Stimulation of economic development; • Savings in time for freight shipments; and• Fewer accidents and reduced property damage.

In the calculation of EIRR, only direct benefits were

indirect and intangible benefits, the results are shown in (Table 4.1).

and costs were calculated based on constant 2008 price

Table 4.1: Base Case: Results of Economic Analysis

EIRR

NPV (million US$ )

Source: TAS IRSDP

The sensitivity analysis confirmed that the project is economically via

The EIRR is well above a cut-off rate of 10%, and NPV is still substantial.

4.2 Financial Evaluation

4.2.1 Assumptions

� The investment cost is projected to be about US $1.5 billion. � Financial modeling is in US$ terms � US$ denominated debt is charged at 8% interest rate with a 12

loan repayment assumed. � Minimum target Return on Equity is assumed at 12%� Tariff is assumed US$ 22 per ton of coal transported.

12

important benefits from the transport improvement could include

Savings in time for freight shipments; and Fewer accidents and reduced property damage.

s were considered excluding

gible benefits, the results are shown in (Table 4.1). Benefits

2008 prices.

: Base Case: Results of Economic Analysis

27.9%

2,909

confirmed that the project is economically viable.

%, and NPV is still substantial.

The investment cost is projected to be about US $1.5 billion.

US$ denominated debt is charged at 8% interest rate with a 12-year

quity is assumed at 12% Tariff is assumed US$ 22 per ton of coal transported.

4.2.2 Financial Results

� Return on Equity (IRR on Eqpoints above the cost of capital at 8%.

� Financial Net Present Value = US$ 125� Debt Service Coverage Ratio � Project Cost recovery is estimated to occur

concession period)

Table 4.2: Debt Service Coverage Ratio (tariff of $22 per ton)

Source: TAS IRSDP

4.2.3 Risk Allocation

An assessment of project risks is shown in

Year 2013 2014 2015 2016 2017

DSCR 1.17 1.16 1.15 1.14 1.13

Return on Equity (IRR on Equity) = 13.8%, nearly 6 percentage cost of capital at 8%.

cial Net Present Value = US$ 125 million Coverage Ratio as shown in Table 4.2 ecovery is estimated to occur in 2028 (19

th year of

: Debt Service Coverage Ratio (tariff of $22 per ton)

An assessment of project risks is shown in Appendix 1.

2017 2018 2019 2020 2021 2022 2023 2024

1.13 1.11 1.10 1.09 1.07 1.05 1.98 1.96

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5 Railway Alignment and Train Operations

5 Rai lway Al ignment and Trai n Operat ions

5.1 Selection of Location for Coal Loading or U

Considering several requirements for the location of coal loading or

unloading, such as the required space for on and off loading, access from

mines or to the existing barge ports, consistency with the railway

development program for Central Kalimantan Province, and to construct a

special place for unloading from where it would be possible to carry out the

stable transport of coal throughout the year to large ships

location near Puruk Cahu was selected as a loading terminal and

Bangkuang was selected as an unloading terminal.

The rail alignment connecting these two locations is shown in the figure

has been selected as the most suitable route, however

reference purposes.

13

Alignment and Train Operations

Coal Loading or Unloading

Considering several requirements for the location of coal loading or

unloading, such as the required space for on and off loading, access from

ge ports, consistency with the railway

development program for Central Kalimantan Province, and to construct a

for unloading from where it would be possible to carry out the

stable transport of coal throughout the year to large ships offshore, a

was selected as a loading terminal and

Bangkuang was selected as an unloading terminal.

connecting these two locations is shown in the figure 5.1

has been selected as the most suitable route, however this is only for

Figure 5.1: Rail Alignment

Source: JTC Study

: Rail Alignment

5 Railway Alignment and Train Operations

5.2 Provisional Train Operations Plan

The required numbers of trains per day, the train formation, the rolling

etc. to transport the programmed coal volume (10 million ton/year in Case A

and 20 million ton/year in Case B) have been estimated, as shown in the

table below, based upon various conditions

Table 5.1: Estimated Numbers of Trains per Day

A

1. Transport Volume (Ton/Year)

a 10,000,000

2. Transport Volume (Ton/Day)

b = a/300 33,300

3. Required No. of Wagon

c = b/70 476

4. Required No. of Train per Day

d = c/100

5. Headway (min.) e = 1440/d 288

Source : JTC Study

The crude train diagram has been arranged, based upon the travel time

between stations with 300 min. (5 hours) for both cases, whereby the

average operating speed is 37.2 km/h. It is necessary to allocate

intermediate stations for train passing.

14

Alignment and Train Operations

The required numbers of trains per day, the train formation, the rolling stock,

etc. to transport the programmed coal volume (10 million ton/year in Case A

have been estimated, as shown in the

Numbers of Trains per Day

Case

B

10,000,000 20,000,000

33,300 66,600

476 952

5 10

288 144

The crude train diagram has been arranged, based upon the travel time

between stations with 300 min. (5 hours) for both cases, whereby the

t is necessary to allocate

Table 5.2: Train Formation and Rolling Stock

1.Condition

(1) Transport volume (ton/day)

(2) No. of train to be operated per day

(3) Headway (min.)

(4) Operating time without stopping (min.)

(5) Dwelling time (min.)

(6) Total stopping time at intermediate station

(7) One cycle operation time (min.)

2.Train Formation

(1) No. of train formation for operation

(2) No. of reserved train formation

(3) Total of required train formation

3.Locomotive for Hauling

(1) Required number for operation

(2) Reserved one for maintenance (15%)

(3) Total number of required locomotive

4. Wagon

(1) Required number for operation

(2) Reserved one for maintenance

(3) Total number of required wagon

5.Locomotive for Shunting

(1) Required for shunting

(2) Reserved for maintenance

(3) Total number of required shunting locomotive

Source : JTC Study

: Train Formation and Rolling Stock

Case A Case B

Transport volume (ton/day) 33,300 66,600

No. of train to be operated 5 10

288 144

Operating time without 290 290

288 (Max) 144 (Max)

Total stopping time at

10 10

One cycle operation time 588 444

No. of train formation for 4 (588 x 2/288)

6 (444 x 2/144)

No. of reserved train 2 2

Total of required train 6 8

Required number for 12 (6x2) 16(8x2)

2 3

Total number of required 14 19

Required number for 600 800

90 120

Total number of required 690 920

Required for shunting 2 2

Reserved for maintenance 1 1

Total number of required

3 3

Deleted:

Deleted: ¶According to this train diagram, i

Deleted: with three stations in Case A, and with five stations in Case B (e.g. the addition of two intermediate stations to Case A).

train diagram, i

with three stations in Case A, and with five stations in Case B (e.g. the addition of two intermediate stations to Case A).

6. Outline of Key Laws and Regulations Applicable to the Project

6 Outl ine of Key Laws and Regulati ons Applicable t o the Project

6.1 Railway Sector Law

Railway Law No.23/2007 promotes private provision of infrastructure and

related services in the railway sector. On the basis of the Law, the MOT

permits a local government to act as a contracting authority for PSP.

The Law superseded the previous law, which stipulated that PSP could only

be undertaken under a joint venture agreement with a state entity. The

movement away from a joint venture modality is consistent with Presidential

Regulation No.67/2005, as the latter stresses the principle

The separation of the contracting, regulatory and operating roles

minimize conflict of interest.

6.2 PPP Cross Sector Regulatory Framework

Presidential Regulation (Perpres) No.67/2005 provides the cross sector

regulatory framework for Private Sector Participation (PSP) in infrastructure

and related facilities. Perpres No.67/2005 stipulates

concessionaire must be selected through competitive

bidding and that tariffs have to be set for full cost recovery

No.67/2005 further states the principle that risks should be allocated to the

party that is best able to manage and control them. The

describes in detail the rules and procedures for the

6.3 Relevant Ministerial Regulations

To ensure that risks of individual PPP projects are appropriately allocated

between the public and private sectors, and that the Government’s overall

exposure is well managed, the Minister of Finance issued Regulation

No.38/2006. The dual objective of the new risk mitigation and management

policy is to support infrastructure development while maintaining fiscal

sustainability of the Government budget. Regulation

the types of risks the Government may consider sharing (those related to

political events, project performance and demand).

15

Outline of Key Laws and Regulations Applicable to the Project

Railway Law No.23/2007 promotes private provision of infrastructure and

related services in the railway sector. On the basis of the Law, the MOT

to act as a contracting authority for PSP.

which stipulated that PSP could only

be undertaken under a joint venture agreement with a state entity. The

movement away from a joint venture modality is consistent with Presidential

e latter stresses the principle of transparency.

he separation of the contracting, regulatory and operating roles would

PPP Cross Sector Regulatory Framework

2005 provides the cross sector

Participation (PSP) in infrastructure

stipulates that the private sector

competitive and transparent

that tariffs have to be set for full cost recovery. Perpres

67/2005 further states the principle that risks should be allocated to the

party that is best able to manage and control them. The Regulation

the rules and procedures for the bidding process.

re that risks of individual PPP projects are appropriately allocated

between the public and private sectors, and that the Government’s overall

exposure is well managed, the Minister of Finance issued Regulation

k mitigation and management

policy is to support infrastructure development while maintaining fiscal

sustainability of the Government budget. Regulation No.38/2006 describes

the types of risks the Government may consider sharing (those related to

nce and demand).

As the proposed coal railway is essentially a private railway and is deemed

financially viable, the demand risk will not be covered by any government

support.

6.4 Environmental and Social Resettlement Laws and

Regulations

As the project alignment is more than twenty

must comply with the EIA requirements

Environment No.11/2006) and an AMDAL must be prepared.

6.5 Other Laws

Law No. 17/2008 on Shipping, Law No. 25

No. 41/1999 on Forestry may also be relevant to the Project, and

lawyer should be consulted.

As the proposed coal railway is essentially a private railway and is deemed

financially viable, the demand risk will not be covered by any government

Environmental and Social Resettlement Laws and

roject alignment is more than twenty-five (25) kilometres, the Project

requirements (Regulation of Ministry of

.11/2006) and an AMDAL must be prepared.

on Shipping, Law No. 25/2007 on Investment, and Law

1999 on Forestry may also be relevant to the Project, and a local

Deleted: Regulations on impacts assessment (EIA)acquisition and resettlement,been revised, and,

Deleted: a

Deleted: P

Deleted: that are described under of the Central Kalimantan Government.

Deleted:

Deleted: counsel

Regulations on environmental ssessment (EIA), to include land

acquisition and resettlement, have recently

that are described under the decrees Provincial

7. Environmental and Land

7 Environmental and Land

7.1 Environmental and Social Characteristic of the Area

The area through which the proposed rail alignment passes is suffering from

environmental pressures and the southern and central areas are already

degraded through the activities of commercial forest

mining transportation routes. In the northern part of the alignment much of

the forest remains untouched.

The remaining areas of forest have extensive flora and fauna resources. No

information is available at present as to the st

species. However the development of forestry and coal mining in the

southern and central areas has significantly impacted the local forest

biodiversity.

The main areas of human settlement lie adjacent to the river Barito. There

are a number of sizeable settlements in this area, the largest being Bu

with a population of approximately 20,000. Other urban settlements inclu

Muara Teweh and Puruk Cahu which are ports on the Barito River. Other

permanent urban settlement is very small and there are reported to be no

settlements along the rail alignment. Traditional activities by local

communities in the forest areas (collection of fruits and nuts, hunting, fishing,

slash and burn agriculture etc) may have already been abandoned in many

areas.

7.2 Land Acquisition and Resettlement Characteristics of the

Area

It is reported by the Provincial Forestry agency that only production for

are affected by the alignment. The Central Kalimantan Provincial

Government now has responsibility for management of the land

Governor has also requested all Kabupaten along the alignment not to issue

any new development and transaction permits for land along the alignment.

Land acquisition has not yet been examined in detail but it has been

estimated that about 70% of the land is stated-owned

Resettlement of permanent housing is not likely to be significant. It is

estimated that 16 million m² (1,600ha) of land is required for all of the rail

16

Environmental and Social Characteristic of the Area

The area through which the proposed rail alignment passes is suffering from

environmental pressures and the southern and central areas are already

degraded through the activities of commercial forestry, opencast mining and

mining transportation routes. In the northern part of the alignment much of

The remaining areas of forest have extensive flora and fauna resources. No

information is available at present as to the status of any endangered

species. However the development of forestry and coal mining in the

southern and central areas has significantly impacted the local forest

The main areas of human settlement lie adjacent to the river Barito. There

this area, the largest being Buntok

with a population of approximately 20,000. Other urban settlements include

h and Puruk Cahu which are ports on the Barito River. Other

l and there are reported to be no

Traditional activities by local

of fruits and nuts, hunting, fishing,

slash and burn agriculture etc) may have already been abandoned in many

Land Acquisition and Resettlement Characteristics of the

It is reported by the Provincial Forestry agency that only production forests

The Central Kalimantan Provincial

Government now has responsibility for management of the land. The

Governor has also requested all Kabupaten along the alignment not to issue

and transaction permits for land along the alignment.

Land acquisition has not yet been examined in detail but it has been

owned (Ministry of Forestry).

Resettlement of permanent housing is not likely to be significant. It is

estimated that 16 million m² (1,600ha) of land is required for all of the rail

activities but this can only be confirmed later in the pl

process.

Central Kalimantan Provincial Government

responsible for all land and building acquisition activities and all costs

associated with acquisition and resettlement.

7.3 Outline of Environmental and Land

the Coal Rail Project

Throughout this part of Central Kalimantan there are very significant

environmental issues connected with coal mining and commercial forestry.

Of particular concern is the extensive use made of purpose built coal

from the coal mining areas to the Barito River. Public roads are not used for

the transportation of coal within the project area. The coal roads cause

significant environmental problems. The road corridors are wide and the

construction and operation of these roads have caused: loss of forest cover

for long distances, significant dust creation particularly during the

construction phase, blocking of local drainage channels and only limited

replacement of cross and parallel drainage. The operation of th

causes considerable noise disturbance to the area.

The most significant environmental impacts will be related to the direct loss

of some forest and disturbance to adjacent

will be particularly acute during the construction phase when noise, vibration

and dust will occur. There will also be disturbance to any remaining

traditional forest communities.

Although the rail construction and operation

impacts it is likely that these impacts will be less than impacts caused by the

continued construction of coal roads. In addition the environmental benefits

of rail for the transportation of coal will be greater if the construction

coal roads is restricted for all new coal mines. Coal roads will still be

necessary from the mine to the rail head, but coal roads to the Barito River

will not be necessary. Restricting the development of coal roads to the river

will have significant environmental benefits and can be achieved through

activities but this can only be confirmed later in the planning and design

Government has stated that they will be

responsible for all land and building acquisition activities and all costs

associated with acquisition and resettlement.

Outline of Environmental and Land Issues Connected with

Throughout this part of Central Kalimantan there are very significant

environmental issues connected with coal mining and commercial forestry.

Of particular concern is the extensive use made of purpose built coal roads

from the coal mining areas to the Barito River. Public roads are not used for

the transportation of coal within the project area. The coal roads cause

significant environmental problems. The road corridors are wide and the

of these roads have caused: loss of forest cover

for long distances, significant dust creation particularly during the

construction phase, blocking of local drainage channels and only limited

replacement of cross and parallel drainage. The operation of the road also

causes considerable noise disturbance to the area.

he most significant environmental impacts will be related to the direct loss

of some forest and disturbance to adjacent forest areas. This disturbance

will be particularly acute during the construction phase when noise, vibration

and dust will occur. There will also be disturbance to any remaining

uction and operation will cause environmental

impacts it is likely that these impacts will be less than impacts caused by the

continued construction of coal roads. In addition the environmental benefits

of rail for the transportation of coal will be greater if the construction of new

coal roads is restricted for all new coal mines. Coal roads will still be

necessary from the mine to the rail head, but coal roads to the Barito River

will not be necessary. Restricting the development of coal roads to the river

nt environmental benefits and can be achieved through

Deleted: No detailed information is available on any Indigenous or traditional communities living within the forests.

Deleted: in Government ownership

Deleted: but there is no information on townership characteristics of the other 30%

Deleted: e

Deleted: Based on a recent review by the Technical Advisory Services (TAS)

Deleted: t

No detailed information is available on any Indigenous or traditional communities

in Government ownership

but there is no information on the ownership characteristics of the other 30%

Based on a recent review by the Technical Advisory Services (TAS)

7. Environmental and Land

controls and agreements with the Province and/or Kabupaten: the exact

means of doing this is still to be determined.

7.4 Environmental Requirements

In accordance with the regulation of the Ministry of En

2006 for all railway developments of over 25 km an AMDAL (Environmental

Impact Assessment) is required and should be prepared by

Certain preliminary activities are however required to be undertaken prior to

selection of the concessionaire in order to assist in defining the main impacts

and their characteristics. These preliminary activities include

an initial environmental examination (IEE) and preparation of Draft Scoping

and Draft Terms of Reference (TOR) for the AMDAL.

7.5 Land Acquisition-Resettlement Requirements

To ensure a transparent and equitable process a Resettlement Plan should

be prepared. The Resettlement Plan should include details of the area of

land required, estimate of the number of owners, estimate of the number of

houses and buildings required, compensation and resettlement policies,

estimate of total compensation costs, and any resettlement requirements.

Full community consultation will also be necessary. The Resettlement Plan

can only be completed later in the planning and design process when mo

detailed information is available on the alignment.

17

controls and agreements with the Province and/or Kabupaten: the exact

In accordance with the regulation of the Ministry of Environment No. 11 year

2006 for all railway developments of over 25 km an AMDAL (Environmental

Impact Assessment) is required and should be prepared by consseionaire.

Certain preliminary activities are however required to be undertaken prior to

in order to assist in defining the main impacts

preliminary activities include preparation of

an initial environmental examination (IEE) and preparation of Draft Scoping

for the AMDAL.

Resettlement Requirements

To ensure a transparent and equitable process a Resettlement Plan should

be prepared. The Resettlement Plan should include details of the area of

land required, estimate of the number of owners, estimate of the number of

pensation and resettlement policies,

estimate of total compensation costs, and any resettlement requirements.

Full community consultation will also be necessary. The Resettlement Plan

can only be completed later in the planning and design process when more

detailed information is available on the alignment.

Deleted: This will not be a formal Kerangka Acuan (KA ANDAL) which will be prepared later by the concessionaire.

Deleted: As stated above all land acquisition costs and activities will be the responsibility of Central Kalimantan Province.

This will not be a formal Kerangka Acuan (KA ANDAL) which will be prepared later

As stated above all land acquisition costs and activities will be the responsibility of Central Kalimantan Province.

Appendix 1: Risk Allocation

Appendix 1: Risk Allocation

Item

Land acquisition

Risk of delay and cost. Central Kalimantan LG will acquire and pay for the land

Landsite unsuitability Risk is that ground conditions are unsuitable.

Environmental Risk is that there are major adverse environmental impacts requiring major mitigation cost.

Construction & completion

Risk is that there will be

Operational performance (including maintenance)

The risk is that the railway is not fully functioning.

Inflation

Foreign exchange Risk related to foreign exchange fluctuations

Interest Rate Risk is that debt service cost will be higher because of interest rate rise.

Demand Risk that demand is insufficient

Political/Regulatory Risk

Risk that certain terms and conditions in the PPP agreement are not fulfilled.

Force Majeure Risk of acts of God and certain man

i

Risk Risk Allocation

Description / Comments Shared Government

Risk of delay and cost. Central Kalimantan LG will acquire and pay for the land

a

is that ground conditions are unsuitable.

Risk is that there are major adverse environmental impacts requiring major mitigation cost.

isk is that there will be delays and cost over-run.

The risk is that the railway is not fully functioning.

Risk related to foreign exchange fluctuations

Risk is that debt service cost will be higher because of interest rate rise.

Risk that demand is insufficient

Risk that certain terms and conditions in the PPP agreement are not fulfilled.

a

Risk of acts of God and certain man-made events occurring. a

Risk Allocation

Government

Private

a

a

a

a

a

a

a

a

a

a

Appendix 2: Proposed Implementation Schedule

Appendix 2: Implementation Schedule

ID Task Name

1 A. Pre-FS Preparation

2 Survey & Analysis

3 Report & Recommendation

4 Corridor/Alignment Approval (from MOT)

5 Completion of the Study (Extended)

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

7 Project Assessment

8 Preparation of Public Consultation Document

9 Public Consultation

10 Preparation and Finalization of Info Memo

11 Pre-Market Sounding

12 PQ Documentation

13 Issuance of Request for Expression of Interest (EOI)

14 RFQ Announcement and Distribution of PQ Document

15 Submission of PQ Proposal

16 Evaluation of PQ Proposals

17 Announcement of PQ Result

18 Bid Documentation (incl. Draft Concession Agreement)

19 Environmental Analysis (IEE, Draft Scoping, Draft TOR Amdal & Draft Resettlement Plan)

20 C. Bid Process

21 RFP Issuance

22 Extended Bid Conference

23 Due Diligence and Submission of Bids

24 Evaluation of Bids and Announcement of the Preferred Bidder

25 Announcement of Concessionaire

26 Signing of Concession Agreement

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

2009 2010

Contacts:

PPP Directorate

National Development Planning Agency / Bappenas

Jl. Taman Suropati 2

Jakarta 10310

Contact No. +62 21 31934175

Email: [email protected]

Regional Development Planning Agency / Bappeda

Provincial Government of Central Kalimantan

Jl. Diponegoro 60

Palangka Raya, Central Kalimantan

Contact No. +62 536 3221645

Email: [email protected]

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Kalimantan Coal Railway Project

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