Financial closure, a phase in which all conditions of a financing agreement are met, is vital in allowing for the disbursement of funds for a project.

Coordinating Maritime Minister Luhut Binsar Pandjaitan said the government aimed to finalize the details of the financing scheme for the LRT project by October before the expected financial closure.

“The LRT is a new thing, so all of the regulations need to be harmonized,” Luhut said after meeting with representatives of the Transportation Ministry, state-owned railway operator PT Kereta Api Indonesia (KAI) and state infrastructure financing firm PT Sarana Multi Infrastruktur (SMI) on Monday.

“There are layers that need to be ticked off in the disbursement [of project funds] and the signing of the credit agreement,” he added.

The construction of the LRT network, which is set to run in two stages, is estimated to require Rp 27.5 trillion (US$2.08 billion) in investments.

The initial stage will span 43.3 kilometers of track connecting Bogor, West Java, to the capital across several lines, such as Cibubur-Cawang, Bekasi Timur-Cawang and Cawang-Dukuh Atas. It is set to finish in 2019.

The second stage of the project will include the Cibubur-Bogor, Dukuh Atas-Palmerah-Senayan and Palmerah-Grogol lines in a track covering 38.5 km.

SMI president director Emma Sri Martini said the firm set reaching financial closure by the end of the year as its “ultimate target.” The harmonization of the regulations were necessary for all stakeholders to have a synchronized time frame for the project, she added.

To achieve financial closure, new regulations, including those pertaining to the concession period of the LRT and its subsidy scheme, need to be harmonized.

“There were preliminary talks but they have yet to produce a final outcome. We need to make sure that the [new regulations] are issued in time to reach our target of financial closure by the end of this year,” said Emma.

Transportation Minister Budi Karya Sumardi said that, last month, the LRT ticket price would be Rp 12,000 per trip. The pricing was made under the assumption that the government would include a subsidy for LRT trips totaling Rp 16 trillion within 12 years, with the number of passengers expected to total 116,000 daily.

Emma said the progress of the harmonization was on track to meet SMI’s deadline.

“It has already reached more than 50 percent. For the rest of it, we need to further discuss the details,” said Emma.

The mega-project may receive a boost, with KAI expecting a Rp 2 trillion state capital injection. The railway operator will invest in the construction of the LRT by state-owned construction firm PT Adhi Karya.

KAI has estimated that it needs Rp 9 trillion in equity from the state to access syndicated bank loans and, with the capital injection, it has so far secured Rp 4 trillion in equity.

Meanwhile, Adhi Karya obtained a Rp 1.4 trillion state capital injection for the project.

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