State-owned railway operator Kereta Api Indonesia (KAI) has earmarked Rp 7.5 trillion (US$557.8 million) for its capital expenditure to finance its expansion next year.

The fund, which is 13.33 percent lower than this year, will be channeled to finance the operation of new services, such as the airport railway, according to finance director Didiek Hartantyo.

“It will also cover the government’s assignments for our firm,” he said on Tuesday after signing a loan agreement with state-owned lender Bank Mandiri.

As the government-appointed operator of major infrastructure, KAI was also required to invest in the railway facilities, such as the rolling stocks, Didiek added.

The railway company is set to run the airport railway connecting the capital city and Indonesia’s main gate Soekarno-Hatta International Airport and the light rail transit (LRT) in Greater Jakarta and Palembang, South Sumatra.

In the airport railway project, which aims to reduce the congestion that hampers the flow of air passengers to the airport, KAI is in charge of building the rail infrastructure, to be later run under its subsidiary Railink.

The 36.4-kilometer airport track will link Manggarai train station in South Jakarta as well as Kota train station in Central Jakarta with Soekarno-Hatta International Airport, according to the project design.

KAI is tasked with acquiring land for the track spanning 12.1 km, adding to the existing line of 24.2 km.

The total investment of the project is estimated to reach Rp 2.7 trillion, which also covers the purchase of 10 trains worth $70 million.

The operation of the airport railway, the second of its kind in Indonesia after the first in North Sumatra, is scheduled in the first half of 2017.

Meanwhile, the operation for the LRT in Palembang is intended to support the Asian Games that Indonesia will host in 2018.

Didiek further said the firm was also eyeing to construct the double track railway in Sumatra, which would particularly help coal distribution between Bukit Asam mining spot in Tanjungenim Baru, South Sumatra, and Tarahan, Lampung.

KAI has secured a contract from state-owned coal mining company Bukit Asam to distribute 20 million tons of coal this year, which will increase to 23.1 million tons next year.

“We also provide a coal distribution service [with the infrastructure] for three to four other firms,” Didiek said.

Sizeable investment will also be spent by the firm to procure 438 cars from state-owned train manufacturer INKA next year, with each car costing Rp 5 billion.

Apart from expansion in railway-related projects, KAI has been expanding into logistics services.

KAI commercial and IT director Kuncoro Wibowo earlier said the firm aimed to see the contribution of its logistics business lead to a revenue increase to 60 percent, from less than 50 percent at present.

It targets to collect a revenue totaling Rp 6.1 trillion from its cargo service in 2017. That will be up 19.6 percent from Rp 5.1 trillion estimated for this year, out of its Rp 20 trillion revenue target.

To support its sizeable capital expenditure in 2017, KAI secured on Tuesday a Rp 1.2 trillion loan from state-owned lender Bank Mandiri.

The remaining Rp 6.3 trillion will be covered by domestic bond issuance totaling Rp 2 trillion and other bank loans.

Meanwhile, Bank Mandiri corporate banking SEVP Alexandra Askandar said the company had jacked up the figure channeled for infrastructure credit by more than 50 percent so far to Rp 96.9 trillion.

From the total funding, Rp 37.1 trillion is allocated for the transportation sector.

“We want to grow the funding by a double digit [percentage] next year. In the first quarter next year, we will also have another funding commitment for the railway,” she said.

Popular

Indonesia may offer dual citizenship to attract overseas workers, minister says

Ministry unveils new funding initiative for climate-resilient health system

Sri Mulyani vows to improve customs services