The Palembang-Indralaya (Palindra) toll road will cost 50 percent more than conventional toll roads, as it located on peat land that requires a soil drying process prior to being built on.

PT Sarana Multi Infrastruktur's (SMI) president director Emma Sri Hartarti said the toll road would need a bigger investment than ordinary projects, since 70 percent of the project was located on peat land, consisting in parts of 20-meter-deep, wet, unstable soil.

"Construction on peat land is more expensive than on other soils. For Palembang-Indralaya, the cost is up to Rp 150 billion per kilometer on average, while other toll projects cost just Rp 100 billion per km on average," said Emma in a press statement on Thursday.

The Palembang-Indralaya toll road, the first phase of the trans-Sumatra toll road, is 22 km in length and divided into three sections: Palembang-Pemulutan, a distance of 7.1 km; Pemulutan-Kota Terpadu Mandiri, 4.9 km; and Kota Terpadu Mandiri-Indralaya, 9.9 km.

The project will take an investment of around Rp 3.3 trillion. The House of Representatives (DPR) has approved a state capital injection (PMN) of Rp 3 trillion to Hutama Karya. Of that amount, around Rp 1.3 trillion is to be invested in the Palindra project.

"The benefit of this toll will not come immediately, but its role in Sumatera'€™s economy is crucial. In Malaysia the existence of north-south toll road contributes about 30% to national economic growth," said Hutama Karya president director I Gusti Ngurah Putra.

The developer has been working on the land preparation, starting with soil drying, since Oct. 23. The composite pavement process is scheduled to start in January 2016 and finished by 2018 at the latest.

To assist with funding, SMI has arranged a financing proposal for the toll road in three tranches totaling Rp 1.24 trillion.

Tranche A totals Rp 690 million with a 25-year tenure and 15-year grace period, tranche B is worth Rp 300 million with a 15-year tenure and 5-year grace period, while tranche C amounts to Rp 250 million and has a 20-year tenure and a 15-year grace period.

SMI would absorb the securities and prepare a cash deficiency support system. If the project failed to meet targeted profits, a cash deficiency support system would inject funds to make the project profitable.

Because investors are not interested in the sector, the government appointed Hutama Karya. "We are focusing on finishing the southern section before eight-eight-eight [Aug. 8, 2018] when Palembang holds the Asian Games," Putra added. (ags)(+)

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