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China offers $5.9 billion investment in Priok port
With Japan’s multi-billion dollar investment coming to Patimban Port, Chinese investors have zeroed in on Indonesia’s logistics industry, expressing interest in helping develop major ports in the country
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ith Japan’s multi-billion dollar investment coming to Patimban Port, Chinese investors have zeroed in on Indonesia’s logistics industry, expressing interest in helping develop major ports in the country.
State port operator Pelindo II has received an investment proposal reportedly amounting to US$5.9 billion from Chinese port operator Ningbo Zhoushan Port Co. Ltd. for its Kalibaru project — referred to as the New Priok port, an extension of Tanjung Priok Port — in Jakarta.
Ningbo Zhoushan vice general manager and director Chen Guopan said the consortium consisted of five companies: four Chinese companies and one French company, with Ningbo set to become majority shareholder.
“We are still discussing percentage details of each company’s share,” he said on Wednesday after signing a memorandum of understanding (MoU) on “sister ports,” which aims to bolster cooperation between the Priok port and Ningbo-Zhousan Port.
Ningbo is one of the country’s busiest ports in terms of cargo traffic, handling 920 million tons of cargo last year. Guopan revealed that the investment value for the Kalibaru project was estimated to hit $5.9 billion.
Responding to this, Pelindo II president director Elvyn G. Masassya acknowledged that the company had received offers from two consortiums, from Asian and European countries, to build the superstructure for the Kalibaru project.
A superstructure is an upward extension of an existing structure above its foundations, including fixed assets, such as sheds, fuel tanks, office buildings, fixed and mobile equipment such as cranes and van carriers, as well as technologies.
“We are in the process of looking for a partner for Container Terminal 2 and Terminal 3. There are two consortiums and we haven’t made up our mind yet,” Elvyn said on Thursday, adding that the appraisal was being conducted by an independent third party.
The firm is currently gearing up to build Terminal 2 and Terminal 3 in the port this year. The first terminal built, New Priok Container Terminal 1 (NPCT 1), started its commercial operation in August. To operate NPCT 1, the company teamed up with Japanese NYK Line, Mitsui and Co. Ltd, as well as Singaporean PSA International Pte Ltd.
Elvyn said Pelindo II had certain requirements in choosing partners for its projects, including in experience and expertise, funding capability, shipping network and cargo capacity.
With the chosen partners in Kalibaru, Pelindo II expects to form a joint venture in 2017, with the latter looking to be majority shareholder. “The decision will be made this year,” Elvyn said.
The construction cost for infrastructure in the Kalibaru project stands at around Rp 14 trillion (around US$1 billion) and its operation is expected to begin in 2019. It will add a combined capacity of 3 million twenty-foot equivalent units (TEUs) of cargo annually, adding to the existing capacity of 1.5 million TEUs in Terminal 1.
Pelindo II has set aside its internal cash for the construction of its projects, including the Kalibaru project. This year, it expects to use Rp 5.6 trillion in capital expenditure (capex), 40 percent of which will be used to upgrade seaports.
Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan stated that foreign investors were still needed despite developments in the country’s robust infrastructure, as the state budget would likely cover only 20 percent of total required funds.
“So we look to draw them [investors] in to the country and establish cooperation and development,” he said on the sidelines of the 2017 International Association of Ports and Harbors (IAPH) World Ports Conference, attended by representatives from 50 countries.
As the biggest port operator in Indonesia, Pelindo II plans to build eight projects short-term, including Kijing Port in West Kalimantan and Sorong Port in West Papua, with investments of Rp 5 trillion and Rp 3.2 trillion, respectively.
For Kijing Port, the firm aims to start the project’s groundbreaking process in August, assuming that a presidential regulation on land procurement is issued in July.
In the first quarter of this year, the port operator recorded Rp 2.3 trillion in revenue, a 21 percent increase from Rp 1.9 trillion last year, while its earnings before interest, tax, depreciation and amortization (EBITDA) surged by 3.4 percent to Rp 908 billion from the same period last year.
“It [revenue increase] is directly tied to improvements in the Indonesian economy and the flow of domestic trade,” Elvyn said.
Pelindo II saw a 23 percent surge in its container traffic volume, which jumped to 1.71 million TEUs from 1.44 million TEUs in the same period last year. Meanwhile, the traffic of non-container cargo rose 7.06 percent to 7.88 million tons.
