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Big boys roll up sleeves to battle for Jakarta's monorail project
Publication Date : 20-02-2013
After being left idle for more than four years due to legal and financial woes, the Jakarta monorail project has unexpectedly attracted family conglomerations into vying for a piece of the action.
A decision last week by PT Jakarta Monorail (JM), a consortium that will construct and operate the monorail, to harbour a new investor has apparently shed some light on the rivalry of two influential families; the Kallas and the Soeryadjayas.
After years of effort to take over JM, the Kallas, through its flagship Hadji Kalla Group, may have to dump the ambition after JM decided to bring aboard Ortus Group, controlled by Edward Soeryadjaya.
The Soeryadjayas are among Indonesia’s iconic conglomerations, in which Edward’s late father, William, founded PT Astra International with businesses now ranging from the automotive sector to plantations. The family is no longer in control of the group following the 1997 Asian financial crisis.
JM decided to partner with Ortus, which is based in Singapore, after the company agreed to inject US$300 million into the consortium in exchange for majority shares.
With the cash injection, JM is expected to kick start the idle project, which left rows of support pillars along roads in Senayan, Central Jakarta, and Kuningan in South Jakarta as part of the planned first line of a 14.3-kilometre route connecting Kuningan and Semanggi in Central Jakarta.
The consortium has proposed to build two lines: the green loop line and the blue line. The green line will run 14.27 kilometres from Komdak, South Jakarta, to Satria Mandala Museum in South Jakarta with 16 stations. The blue line will cover a 9.72 kilometre-long line from Kampung Melayu in East Jakarta to Roxy in West Jakarta with 11 stations. The project will cost a total of US$725.59 million.
“The target [I have set] is for at least one monorail train to be placed on the track by the end of this year. It should be operational the following year,” said Jokowi after JM’s partnership announcement with Ortus last week.
With Ortus now making its mark, it has not only cemented the revival of the family, but also adds a new entry to the long list of companies in Soeryadjaya’s business empire.
Edward’s portfolios already include plastic businesses, technical and engineering consultancies, infrastructure development through publicly listed PT Siwani Makmur and energy company PT Sugih Energy.
His brother, Edwin, has more imminent business portfolios that include investment company Saratoga Capital, coal miner PT Adaro Energy, PT Tower Bersama Infrastructure, plantation company PT Provident Agro and airline operator Tiger Mandala.
But the family’s expansion has not been without trouble. After years of battle with tycoon Sukanto Tanoto over Adaro, for example, the family now may face a possible dispute with the Kallas, whose chief patron, former vice president Jusuf Kalla, is vying for another round of presidential candidacy in the upcoming 2014 election.
Hadji Kalla Group corporate secretary Andi Asmir said over the weekend that Ortus had cut corners that resulted in the ousting of the group from the monorail project.
“We see that JM doesn’t have goodwill and transparency. However, the most important thing is that congestion can be quickly resolved,” Andi said.
“They have offered us the project, and we were in the process of due diligence. When we asked them for their financial reports, however, we received nothing. Then they suddenly came up with Ortus,” he said.
The Kallas may have plenty of reason to be upset, as Jusuf was among the backers of Joko “Jokowi” Widodo’s gubernatorial bid and was the mentor of Jakarta Deputy Governor Basuki “Ahok” Tjahaja Purnama when the later was still politician with the Golkar Party.
A few days after JM’s announcement of its partnership with Ortus, Basuki said that the Jakarta administration would review JM’s decision, particularly in regard to the company’s financial ability. “It’s not final yet,” he said.
Indeed, the Kalla Group may still have a chance to take over JM as the company was currently still negotiating ways for Ortus to enter the partnership. The Kalla Group has even planned to allocate US$729 million in investment for the project.
JM financial adviser Sujoy Ganguly said over the weekend that Ortus would become the majority shareholder in the company. However, the exact shareholder percentage had yet to be determined.
According to Ganguly, there are at least two options for Ortus to enter JM; first by purchasing new shares to be issued by the company or to buy shares from existing shareholders. Ganguly said that negotiations on the options were ongoing.
Ortus entry may also be at risk should one of JM’s major shareholders, state-run construction company PT Adhi Karya, decline to accept the offer. JM is 91 per cent owned by PT Indonesia Transit Central (ITC), 7.65 per cent by Adhi Karya and the remaining by Omnico Singapore Pte. Ltd.
According to Adhi Karya’s financial report as of the end of September 2012, the company has 24.57 per cent stake in ITC, a joint venture with PT Futura Indotransit Prima Performa and PT Radiant Pillar Pacific.
“With the current situation, the [Kalla] group will not back down from the project,” Andi said.
The Kallas’ ambition to land the monorail project may relate to its expansion in the infrastructure businesses, and the need for a success story to replicate the monorail development in other major cities, such as in Makassar, Bandung, Denpasar, Surabaya and Medan.
In the past five years, the group has already become known for its many infrastructure business lines, such as toll roads and power plants.
The group’s hallmark will be the Poso hydro-power plants in central Sulawesi that will cost 6 trillion Indonesian rupiah (US$616.8 million), which are expected to contribute to the largest chunk of the group’s earnings aside from selling Toyota cars.
The Kallas possible row with the Soeryadjayas may seem ironic as Kalla had once teamed up with William Soeryadjaya to sell Toyota cars in eastern Indonesia. Astra is the principal seller of Toyota in Indonesia.
And it was proceeds from the Toyota businesses that contributed much to Kalla’s rise to the national politics and businesses.