Adani Enterprises Ltd (AEL), through its step-down Indonesian subsidiary PT Adani Global, on Wednesday announced signing of a binding, tripartite agreement for setting up a dedicated rail and port project with the Regional Government of Sumatra Selatan, Indonesia, and PT Bukit Asam, a Government of Indonesia coal mining company.
The project is estimated to cost $1.65 billion (about Rs 7,500 crore) and will be constructed within 48 months. The Government of South Sumatra, Indonesia, has undertaken to provide and facilitate all permits/approvals and arrange for land for the development of rail and port project. The investment will provide the much-needed funding to Indonesia for infrastructure development.
Work on the project will start within the next three months, Mr Devang Desai, Chief Financial Officer (CFO), told Business Line.
Funding for the project — 70 per cent debt and 30 per cent equity — will be two-way.
While Mundra Port and SEZ Ltd (MPSEZL) will invest in the port development, other Adani companies will put in money for the rail part.
PT Bukit Asam is a leading producer of coal in Indonesia and owns the second largest coal reserves in that country.
AEL will have access to two billion tonnes of mineable coal in the reserves, he added. The project provides coal purchase rights to the Adanis and the infrastructure created will be used for transportation of a minimum volume of 35 million tonnes/annum (mtpa) of coal on a “take or pay” basis from PT Bukit Asam concessions in South Sumatra.
Validity of concession
The concession is initially valid for a maximum period of 30 years, which can be extended by mutual agreement.
The project envisages the ownership, construction and operation by the Adanis (through their various subsidiaries) of a 250-km rail line capable of transporting a minimum of 35 mtpa of coal (expandable to 60 mtpa). The rail line will connect Tanjung Enim, a coal mining area to Tanjung Carat, where the Adanis will build a port with matching capacity for evacuating the coal. PT Bukit Asam will sell 60 per cent of coal to Adani at Government notified price and the balance tonnage would be a contract carriage for Bukit Asam.
The long-term price for the transportation has been linked to CPI and fuel prices in order to provide a fair return to both parties.
The Adanis have a large coal mining set up in East Kalimanthan and the present initiative in Sumatra will further strengthen its coal sourcing reach from Indonesia.
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