State-owned railway firm PT KAI has secured a Rp 19.25 trillion (US$1.4 billion) loan from 12 local and foreign lenders to speed up the development of the Greater Jakarta light rail transit (LRT) project.

The syndicated loan, the biggest-ever funneled into an infrastructure project outside the electricity sector, will be split into two areas, namely investment credit worth Rp 18.1 trillion and working capital worth Rp 1.1 trillion.

To access the fresh funds, KAI has used Rp 4 trillion in the state capital injection (PMN) funneled this year as equity. It is set to receive another Rp 3.6 trillion next year.

Speaking after the signing of the financial agreement by KAI and its partner lenders, Transportation Minister Budi Karya Sumadi said the event marked a new era in which infrastructure development could rely on alternative funding beyond the cash-strapped state budget.

“Infrastructure, especially in the transportation sector, could be funded by the private sector. [...] This was the first time it happened,” he said in his remarks.

Budi also highlighted that the loan provided financial certainty for the project.

The funds come from state lenders, such as Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI), and private lenders, such as CIMB Niaga and Bank BCA, in addition to Japan’s largest
bank, Bank of Tokyo-Mitsubishi UFJ, and South Korean Hana Financial Group subsidiary KEB Hana Bank.

The loan will have an 8.25 percent fixed interest rate in the first three years and a floating interest rate in the remaining years that will mature in 18 years.

The flow of the fresh funds is expected to progress the construction of the LRT network worth Rp 29.9 trillion in total.

The loan agreement came after KAI inked a 50-year concession to build, maintain and operate the LRT and its supporting facilities with the Transportation Ministry on Dec. 19.

Under the agreement, the firm also secures a public service obligation (PSO) to maintain the financial feasibility of the project.

The transportation minister further said the government would be committed to disbursing around Rp 1.6 trillion annually in the first 12 years of the LRT operation to support KAI’s PSO scheme, which will be cashflow-based, meaning it will make up for the gap between the operation cost and the firm’s revenue.

Stretching from Bogor in West Java to Jakarta, the LRT network is slated to transport 116,000 passengers when operating in 2019 and climb higher to 474,000 passengers within 50 years. The government has set the passenger fare at Rp 12,000, with a 5 percent increase per year.

KAI finance director Didiek Hartantyo said that, after signing the syndicated loan, the company would wait for the disbursement of another Rp 2 trillion in state capital injection from the 2017 state budget.

“We hope that we can receive the disbursement before the end of the year,” he said.

KAI will use the capital injection totaling Rp 4 trillion it received earlier this year to reimburse Adhi Karya, the sole contractor in the project that had provided funds using its internal cash, on Jan. 15. The payment will be made based on the construction cost spent until September.

Adhi Karya, previously assigned to invest only Rp 1.4 trillion in a train depot, was recently asked to spend a greater sum at Rp 4.2 trillion for the project, a fee that would cover the construction of all of the stations.

Didiek further said that the Development Finance Comptroller (BPKP) was still verifying the amount of money spent by Adhi Karya to be paid by KAI.

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