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PT PP to join Mandalika MotoGP construction project
State-owned construction company PT PP will participate in the development of the MotoGP race circuit in Mandalika, Lombok, West Nusa Tenggara
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span>State-owned construction company PT PP will participate in the development of the MotoGP race circuit in Mandalika, Lombok, West Nusa Tenggara.
Planning and development director M. Aprindy said his company had signed a memorandum of understanding (MoU) with the Indonesia Tourism Development Corporation (ITDC) as the developer of the project.
He said his firm would also work together with French-based construction firm Vinci Construction Grands Projects, the project’s main investor, which would develop the street circuit and supporting facilities in the area.
Apart from helping build the circuit, he said, PT PP would also invest in the project. However, he declined to reveal any numbers, explaining that the company was still studying legal and business aspects of the construction project.
Aprindy said he hoped the company would finish the study in the near future and sign an agreement within three months, so that construction work could begin soon.
“We hope we can start the construction next year at the very latest, so that it can be completed by the end of 2020 at the very latest,” he said during a media gathering in Jakarta.
The Mandalika racing circuit is expected to be used as the venue for the 2021 MotoGP. It will be the first time in more than two decades for Indonesia to hold an international racing event. Indonesia hosted the MotoGP event for the first time at the International Sentul Circuit in Bogor, West Java, in 1997.
Last week, President Joko “Jokowi” Widodo visited Kuta Mandalika beach in Central Lombok to inspect the construction work for the MotoGP event. He expressed hope the street circuit construction could commence in January 2020 at the latest.
Aprindy said he was confident that the company could finish the 4.32-kilometer race track on time, as it had experience from building a 3.2-km runway at Kulon Progo Airport, Yogyakarta, in less than a year.
Other than securing the MotoGP race track project, the company’s finance director, Agus Purbianto, said PT PP had also secured other construction contracts in April worth Rp 10.75 trillion (US$742.74 million), about 21 percent of its total target this year.
Those projects included Pertamina’s Balikpapan refinery worth Rp 3.38 trillion in South Kalimantan, the Indrapura-Kisaran toll road in North Sumatra worth Rp 3 trillion and the Mualimin Islamic boarding school construction in Yogyakarta worth Rp 470 billion, he said.
He added that the company had allocated Rp 8.7 trillion in capital expenditure this year, 30 percent of which would come from the company’s internal cash.
As for the rest of its capex, he said, the company would look for other funding sources, such as bank loans and bond issuance.
Even though the company had secured a permit to issue Rp 1.5 trillion worth of bonds up until March 2020, it was unlikely to realize that plan. “The current yield is quite high, so bond issuance is not our priority right now,” Agus said.
He further explained that issuing a high-yield bond for the next two to three years could increase its cost of funds. Instead, he said, the company would wait until interest rates and bond yields declined.
In the meantime, he said, the company would resort to short-term bank loans to meet its financing needs.
He noted that the company was also eyeing an additional Rp 500 billion from the planned divestment of some infrastructure assets, namely the Pandaan-Malang toll road in East Java and Kuala Tanjung Port in North Sumatra, in each of which the company held more than 20 percent.
