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Jakarta Post

Wika to boost capex for high-speed rail, power plants

  • Anggi M. Lubis

    The Jakarta Post

Jakarta   /   Mon, December 28, 2015   /  05:08 pm

State-run construction company Wijaya Karya (Wika) is moving to boost its capital expenditure (capex) by nearly 50 percent from this year'€™s initial target in the belief that infrastructure projects, particularly power plant projects, will speed up next year after progressing slowly throughout 2015.

Wika corporate secretary Suradi Wongso said that his company planned to spend Rp 2.5 trillion (US$183.6 million) to expand the publicly-listed company'€™s business in 2016, despite falling short of fully absorbing this year'€™s capex allocation on contracted demand amid an economic slowdown and sluggish government spending.

'€œWe are optimistic that next year will be far better than this year because tenders for infrastructure projects have started to progress,'€ he said, adding that the construction sector remained an interesting industry on account of the fact that the government was planning a number of railway, dam, power plant and toll road projects across the country.

Suradi said that most of the budget would be allocated for high-speed rail (HSR) projects and independent power plant (IPP) projects.

Indonesia'€™s first HSR project, which will connect Jakarta with Bandung, is expected to start next year and will absorb around $5.5 billion in investment.

Wika owns the biggest portion, a 38 percent stake, of a local consortium that will work on the project. The consortium, which also comprises state-run train operator KAI, state-run toll road operator Jasa Marga, and a state plantation firm, has a 60 percent stake in the HSR project, while the remainder is owned by China Railway International.

Meanwhile, Wika had also joined in bidding for the the Java 5 and Java 7 power plant projects.

Both power plants will be located in Banten and will have the capacity to produce 2x1000 megawatts of electricity.

As previously reported, Wika will work with China Nuclear Group Engineering Corporation (CNEC) and a local firm, Sumber Segara Primadaya, on the Java plants.

Suradi added that Wika was also eyeing power plant projects in Aceh and in North Sulawesi, with capacities to produce 2x100 and 2x50 megawatts of electricity, respectively.

Wika is looking to see its capex increase next year by about 47.06 percent from this year'€™s target and to nearly triple its expansion spending from this year'€™s realization.

Wika initially aimed to spend Rp 1.7 trillion in capex this year. However, the company, according to Suradi, has only managed to spend Rp 898 billion to date, or slightly more than half of its initial plan.

'€œWe have not spent much this year not because we don'€™t have the money. This year has been very challenging with the economic slowdown, a bureaucratic transition and sluggish infrastructure development,'€ Suradi explained.

Wika has been struggling to meet its new contract targets for this year and Suradi has stated that his company expects to close the year with a maximum of Rp 25 trillion in new contracts in its order book, or around 79 percent of its initial plan to pocket Rp 31.64 trillion.

However, he said that his company was upbeat that it would book a 20 percent increase in new contracts next year.

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