Fang Fenglei-led Hopu Investment Management and the private equity unit of state-backed China Development Bank are in talks with Indonesian state-owned coal mining company Tambang Batubara Bukit Asam to invest in a new rail project in Indonesia.
Bukit Asam signed contracts worth $4.8 billion with China Railway Engineering Corporation for a railway project to transport coal to a port in Sumatra in March. This comprised of a $1.3 billion contract for the construction of the railway line and another contract worth $3.5 billion for the operation and maintenance of the railway line over the next 20 years, it said in a statement at the time.
The railway consortium is a joint venture between PT Transpacific Railway Infrastructure, a privately-owned company which has an 80 percent stake, and Bukit Asam and China Railway Engineering Corporation, both which hold stakes of 10 percent.
The consortium is in talks with private equity firms including Hopu Investment Management and the private equity arm of China Development Bank to partially fund the construction of the railway line, Sukrisno, the president director of Tambang Batubara Bukit Asam, told Reuters.
Hopu, CDB’s private equity unit and Bukit Asam could not be reached by press time.
The 307 kilometre railway line will have the capacity to transport 27 million tons of coal per year. The rail line will transport the company’s coal from Central Banko Coal Mine in South Sumatra Province to Srengsem in Lampung province.
According to Sukrisno, the project’s financing will comprise of 15 percent equity and 85 percent in debt and China’s Export-Import Bank will lead the debt financing of the project. The project is expected to begin commercial operations in 2014.
Bukit Asam is engaged in coal mining, general surveying, exploration, exploitation, processing, refining, transportation and trading, and maintenance of coal port facilities and providing consulting services related to the coal industry.
China Development Bank set up China Development Finance Company, a unit focused solely on private equity, in September 2009. The bank transferred all non-financial equity assets to this unit and this included its stakes in private equity funds. In addition to committing capital to private equity funds, the private equity unit also makes direct investments.
If the deal goes ahead, it will mark Hopu’s second investment in Indonesia. In October last year, the firm reportedly acquired a stake of 4.9 percent in Lippo Karawaci, a publicly listed real estate and hospital developer, for about $45 million.