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span class="caption" style="width: 398px;">On track: A bucket wheel excavator loads coal onto a conveyor belt at PT Bukit Asam’s open pit coal mine in Tanjung Enim, South Sumatra. The company and its partners will build a new railway linking its mine in the province to the Tarahan coal terminal in Lampung. Bloomberg/Dadang TriCoal mining firm PT Tambang Batu Bara Bukit Asam (PTBA) expects to be able to begin the long-delayed construction of a railroad connecting a coal mine in South Sumatra and a port in Lampung this year.

PTBA president director Milawarma said in Jakarta that the government had informed them that the legal problem which had caused the delay would be settled this year.

“We are sure we will carry out the ground breaking this year. After the revised regulation is issued, we will perform a business-restructuring scheme of PT Bukit Asam Banko [BAB],” he said.

The railroad project will be carried out by PT Bukit Asam Transpacific Railways (BATR), under a joint venture between PT Transpacific Railway Infrastructure (80 percent), China Railway Engineering Corporation (10 percent) and PTBA (10 percent).

The railroad’s construction has been delayed since 2005 for various reasons including problems related to land acquisition and mining licenses for BAB.

The 300-kilometer BATR project, which will be used to transport BAB’s coal production from a mining site in Banko Tengah, will expand the existing railroad track connecting Bukit Asam’s coal mine in Tanjung Enim, South Sumatra and the Tarahan coal terminal in Lampung.

The existing track has a load capacity of about 15 million tons a year, while the new track will have a capacity of about 25 million tons a year.

BAB, which is 65 percent owned by PTBA and 35 percent by PT Rajawali Asia Resources, is expected to produce 25 million tons of coal per year.

However, BAB is still waiting for a mining license, known locally as an IUP, to mine in Banko Tengah. PTBA possesses an IUP, however, in accordance with the 2009 Coal and Mineral Resources Law, which stipulates that a company must hold an IUP to perform mining activities.

The government is in the process of revising the regulation on the IUP.

“We had planned that the IUP would remain in PTBA hands with BAB as an operating company. We hear that the revision is almost complete. We hope that the revision will allow the mining to be operated by BAB, which is controlled by the consortium. However, there is also the possibility that BAB may not be allowed to do so,” Milawarma said.

He added that the process of regulation revision and BAB’s restructuring had affected ongoing activities, such as land acquisition and loan negotiations to finance the project.

Last November, BATR secured a financing deal amounting to US$1.3 billion from the China Development Bank for the railroad’s construction.

Milawarma said a change in the business scheme might lead to an adjustment in the ownership of BAB and BATR.

“We are still waiting for the revised regulation and so we haven’t made any decision yet. When the new business scheme comes up, there must be changes made to its value. We will decide whether to increase our share or maintain it at current levels. We have to balance economic benefits between mining developments and infrastructure despite the changes in the ownership composition,” Milawarma said.

Milawarma also said that PTBA was assessing the possibility of participating in the construction of the 1,000-kilometer trans-Sumatra toll road.

“The South Sumatra government has invited us to take part in the project. We are still studying it. The road will probably be built parallel to the BATR railroad,” he said.

—JP/Raras Cahyafitri