CMNP to build 100-km coal haul road in S. Sumatra

Publicly listed toll road operator PT Citra Marga Nusaphala Persada Tbk (CMNP) will construct a 100-kilometer-long coal hauling road connecting mining areas in South Sumatra with an estimated total project investment of Rp 7 trillion (US$763 million).

The hauling road, spanning from Lahat to Palembang, is aimed at supporting the growing coal mining industry, which lacks proper infrastructure, said Hudaya Arryanto, CMNP operational director, on Thursday.

“The coal deposits are huge. However, distribution remains restricted by difficult terrain,” he added.

“We hope to start construction in the second half of the year or in the first half of next year at the latest.”

Indonesia is the world’s largest coal exporter but infrastructure bottlenecks remain among the key impediments to the sector’s growth potential and for it to meet the increasing global demand for coal.

CMNP business development director Daniel Reso said he expected the coal haul road to help coal
miners transport their product because local administrations forbade their trucks from using provincial roads.

Coal miners’ trucks can pass through Musi but the road have limited capacity, according to Daniel.

“We are still assessing coal mining companies to determine what specific infrastructure we will construct,” he said.

CMNP is in talks with several possible partners to run the coal-hauling road project, according to Hudaya. “There is also the possibility that we create a new subsidiary, for which we will look for bank loans to finance the project.”

The company is planning to issue bonds worth a total Rp 1.2 trillion; Rp 700 billion in conventional bonds and Rp 500 billion in Islamic bonds (sukuk) with a maturity period of 5 years, finance director Indrawan Soemantri said.

Proceeds from the bond offering will be used to finance toll road infrastructure projects as CMNP looks to acquire one to two toll roads, according to Indrawan.

“We hope to issue bonds in the first half of the year,” he added.

PT Indo Premier Securities, PT Sucorinvest Central Gani, PT Ciptadana Securities and PT Equator Securities had been appointed as underwriters for the bond offering.

Many companies have taken advantage of the low interest rate environment to collect funds from the bond market as borrowing costs have been declining, making it cheaper for corporate expansion.

“We have internal cash of about Rp 700 billion. We can finance a project with that cash. However, we want the company to grow faster, and therefore the projects will need more funds such as from the bonds issuance,” Hudaya said.

CMNP has also planned to issue rights shares this year to partly support funding for the Sumatra coal-hauling project, he added.

The company obtained approval from shareholders last year to off-load 200 million new shares at a minimum price of Rp 1,200 per share this year, meaning that it could collect about Rp 240 billion from
the offering.

CMNP’s shares closed Thursday’s trading session at Rp 2,200 apiece, soaring 4.76 percent from the previous day following the coal haul road announcement. The company could raise more funds to support the project if it increases the rights shares prices.

It is allowed to offer the rights shares within the next two years, and it prefers to do this after the bond issuance, executives said.