KPPIP Achievement – Semester 2 2016

The development plan of KTIHP project has been prepared by a number of stakeholders since 2012. However, no effort has been undertaken to integrate the port development plan with the development of industry, access and supporting infrastructure which are key factors in the sustainability of port’s operational in the future.

Having taken this current condition into account, KPPIP provided consulting service for the preparation of Pre-feasibility Study/?OBC of KTIHP, which was conducted by the consortium of Mott MacDonald Consortium, Deloitte Indonesia and Hanafiah, Ponggawa & Partners (HPRP). The scope of study prepared for OBC of KTIHP was discussed and approved by key stakeholders, namely the Ministry of Transportation, PT Pelindo I and PT Inalum. Following the completion of such OBC, the discussion and determination of project funding scheme can be conducted. OBC of KTIHP was completed in December 2016.

In compliance with Presidential Regulation No. 146 of 2015 on the Implementation of the Construction and Development of Domestic Oil Re fiery, Bontang Oil Refinery’s fuel oil products are to be determined based on economic prices. These economic prices are calculated based on reasonable return on investment and profit on Construction of Oil Refinery or based on Oil Refi nery Development with amount determined by the Minister of Energy and Mineral Resources (MEMR) after coordination with the Minister of Finance.

In April 2016, the MEMR sent a letter of request to KPPIP to conduct study on economic prices. KPPIP, in response to the request, provided consulting service and selected Argus/Santi Group as the consultant to conduct the study.

The study on Economic Prices was completed in October 2016 after having conducted three workshops to discuss methodology and results of price calculation. The results of the study on economic prices can serve as the basis for the reference rate of Bontang Re nery products, which is an important information for potential investors and will be used during market sounding to attract investors’ interest in developing Bontang Oil Re nery project.

In July 2016, the President instructed for Merauke SEZ to be established immediately. In order to accelerate the completion of the project proposal to establish Merauke SEZ by the Regional Government of Merauke Regency, KPPIP provided consulting service to prepare EIA document where PT Karsa Buana Lestari was selected through direct appointment process.

In December 2016, EIA Document was completed and followed by introducing the SEZ development plan to the locals. The introduction was done by the Consultant who prepared EIA Document with the support of KPPIP. With the completion of EIA Document, the proposal submission for the establishment of SEZ is expected to be conducted in early 2017.

Considering the infrastructure’s signi cant funding needs and State Budget/Regional Budget limitation on nancing capacity, alternative sources and nancing schemes are needed. In response to such condition, KPPIP provided consulting service and selected PT Wiswakharman to conduct study on Institutional Study of Infrastructure Delivery Funding in Indonesia.

This effort is aimed at seeking recommendation for alternative financing to accelerate infrastructure development in Indonesia. The study was completed in October 2016.

Moreover, the study is expected to provide recommendation for KPPIP and project owners on the concept of nancial institution and infrastructure investment that needs to be further explored in Indonesia to help project funding using instruments or schemes that have not yet optimally utilized.

Following the completion of Umbulan SPAM Project’s tender process in February 2016, the signing of PPP Agreement between the Provincial Government of East Java as GCA and Business Entity could not been done until May 2016.

This matter results from the incomplete requirements in the form of approval on Detail Engineering Design (DED) of Umbulan SPAM Project by all affected Regional Water Drinking Companies (PDAM), namely PDAM Gresik Regency, PDAM of Surabaya City, PDAM of Sidoarjo Regency, PDAM of Pasuruan City, and PDAM of Pasuruan Regency.?In regards to DED approval, only PDAM of Pasuruan Regency has not provided its approval.

Through KPPIP’s Ministerial Level Coordination Meeting on 17 July 2016, KPPIP facilitates discussion to reach an agreement among the Provincial Government of East Java, Regent Government of Pasuruan, PDAM of Pasuruan, and the Ministry of PWPH as well as participates actively in communicating with the Governor of East Java to ensure all requirements that GCA is responsible for the signing of PPP agreement are fulfilled. The signing of PPP agreement itself was conducted on 22 July 2016.

KPPIP assists the acceleration process of financial close by holding Umbulan SPAM’s weekly meetings chaired by the Deputy VI of the Coordinating Minister of Economy Affairs as the Head of KPPIP’s Implementation Team. KPPIP also conducted Coordination Meeting at KPPIP’s Ministerial Level on 21 November 2016 when deadline for the acceleration target of financial close was nearing.

The meeting discussed the efforts taken to meet the requirements?for financial close such as the allocation of Special Allocation Fund (DAK) for the development of Umbulan SPAM’s distribution network?in Pasuruan Regency, and it also discussed amendment to PPP agreement between GCA and Business Entity to allow the acceleration of financial close.

In relation to the allocation of DAK for the development of Umbulan SPAM’s distribution network in Pasuruan Regency, KPPIP works with the Deputy of Infrastructure, Bappenas; Deputy of Regional

Development, Bappenas; Directorate General of Cipta Karya, the Ministry of PWPH; as well as the Directorate General of Fiscal Balance, Ministry of Finance. The outcome of this coordination by KPPIP is that the three ministries issued letter of commitment on Umbulan SPAM Project to allocate DAK for the development of forward distribution network in Pasuruan Regency.

With regard to amendment of PPP agreement between GCA and Business Entity, KPPIP works closely with GCA Team led by the Governor of East Java and the Head of BPPT of East Java, PT Sarana Multi Infrastruktur as the project owner of project development facility, PT Indonesia Infrastructure Guarantee Fund as the risk guarantor, PT Indonesia Infrastructure Finance as the lead arranger, and PT Meta Ardhya Tirta Umbulan as the business entity.

KPPIP plays a role as the mediator in negotiations over matters such as condition precedent and its modification to condition subsequent of nancial close. These modifications can promote the acceleration of financial close from 1 year to 6 months since the signing of PPP agreement. Umbulan SPAM’s financial close was successfully fulfilled on 30 December 2016.

Following the signing of PPP Agreement of Palapa Ring West Package on 29 February 2016 and Central Package on 4 March 2016, the Ministry of Communication of Informatics as the GCA has taken steps to realize the financial close so that funds can be drawn down to start the construction. The nancial close of West Package was achieved on 26 July 2016 and subsequently Central Package on 29 August 2016.

In order to reach this milestone, KPPIP monitors and facilitates the coordination to accelerate the achievement of financial close so that construction can start immediately.

KPPIP facilitates a coordination meeting with relevant stakeholders at the Vice President Secretariat on 30 August 2016 to expedite the issuance of Location Determination by the Head of Tegal Regency. Through series of discussions held at technical level and coordination meeting, the iissuance?of Location Determination on 17 October 2016 can be issued. Following the Location Determination issuance, the land acquisition process can take place to reach construction target in January 2017.

KPPIP supports Indonesia Toll Road Authority (BPJT) as the project owner for Serang – Panimbang Toll Road to accelerate the determination of funding scheme. KPPIP conducts nancial and

institutional analysis of funding scheme prepared for Serang – Panimbang Toll Road.

KPPIP also conducts intensive coordination and discussions with the stakeholders such as Indonesia Toll Road Authority (BPJT) as the toll road authority, PT Indonesia Infrastructure Guarantee Fund (PII) as risk guarantor, and the Ministry of Finance to discuss the form of support the Government can provide.

In result, the Indonesia Toll Road Authority (BPJT) has conducted Request for Final Proposal (RFP) or submission of nal bid on 27 October 2016. One participant who submitted RFP was the consortium of PT Wijaya Karya and PT Jababeka. Currently, the negotiation process is underway and the winning bidder is expected to be stipulated in January 2017.

KPIP monitors the advancement of project and facilitates coordination meeting required to resolve the issues that inhibit the development of Sumatra 500kV Transmission Line. One of the issues arising is the Regional Spatial Planning of Riau Province has not been made official; therefore, the Location Determination and Environment Permit of the Transmission Line passing Riau Province, New Aur Duri – Peranap – Perawang track, cannot be proceeded at this stage.

On 16 September 2016 discussion meeting about spatial plan related to the development of New Aur Duri – Peranap – Perawang 500 kV Extra High Voltage Overhead Transmission Lines that aims specially to formulate and provide discretion over the settlement of issue regarding the Regional Spatial Plan of Riau Province that has not been validated.

The result of the meeting facilitated by BKPRN is the signing of recommendation formulation stated that the development of New?Aur Duri – Peranap – Perawang 500 kV Extra High Voltage Overhead Transmission Line (SUTET) is in accordance with East of Sumatera Transmission Network and Central of Sumatera Transmission Network; therefore the development can be continued.

The role of KPPIP in this activity is to support and ensure that the decision can be applied by the relevant stakeholders in land acquisition process of Sumatra 500 kV Transmission Line.

After the determination of funding scheme for Zone 1 and Zone 6 of JSS projects, prioritization for other zones has not been done yet. The decision on prioritization and determination of JSS’s action plan other than Zone 1 and 6 is needed in order to reach the target service of waste management in DKI Jakarta Province.

KPPIP works with the Ministry of PWPH to hold coordination meeting with JSS’s stakeholders in October 2016 to obtain opinion related to the following JSS’s preparation plan. KPPIP, with the assistance of Indonesia Infrastructure Initiative (IndII) as the funding donor institution, conducts scoping study to determine zones that can be the next priority and has the potential to be developed after Zone 1 and Zone 6 of JSS. The study is expected to be completed in January 2017. The results of the study will serve as the basis for KPPIP to conduct gap study on priority zones in 2017.

The gap study completes the studies that have been conducted such as basic engineering design and initial study. The results of the gap study can complement the existing studies and can become an OBC if combined altogether. The OBC can serve as the basis for decision making of funding scheme for priority zones and preparation for the zones.

Initially, the fund allocated for land acquisition in the Ministry of Transportation for Makassar – Parepare Railway project was not sufficient to pay Monetary Compensation (MC) for the land in order to reach the target operation in 2019.

In response to this condition, KPPIP facilitates the coordination and prioritization of fund allocation between BLU-LMAN and the Ministry of Transportation to ful ll the budget needed for MC for 2017 Budget Year. The allocation of the fund enables land acquisition for the project to be done in accordance with the target and at the end ensure the punctual commencement of project construction.

South Sumatera LRT project is one of the infrastructures planned to support the Asian Games, a sporting event, which will be held in August 2018. In order to ensure that the project operation target in August 2018 is achieved, acceleration is needed

which leads to the issuance of Presidential Regulation No. 116 of 2015 j.o. Presidential Regulation No. 55 of 2016 on Revision to Presidential Regulation No. 116 of 2015 on Acceleration in the Implementation of Light Rail Transit/LRT in the Province of South Sumatera. Following the issuance of Presidential Regulation No. 116 of 2015, PT Waskita Karya has started construction yet several issues on project preparation level have to be resolved as they can prevent the implementation of the project, including the determination of technical speci cation/design and the signing of project contract. PT Waskita Karya started infrastructure development in November 2015 to reach the construction completion date in June 2018 and the rolling stock procurement completion date in March 2018.

In order to ensure that the development of South Sumatera LRT is aligned with Presidential Regulation No. 1162 of 2015 j.o. Presidential Regulation No. 55 of 2016, on 14 November 2016 KPPIP facilitated a meeting to obtain agreement on legal standing by involving the President’s Of ce (KSP); the Ministry of Transportation; State Development Audit Agency (BPKP); Government Monitoring, Security and Development Team (TP4); National Public Procurement Agency (LKPP); and PT Waskita Karya.

This legal standing development is aimed at having common understanding among stakeholders on the implementation of LRT infrastructure development by PT Waskita Karya as stipulated in Presidential Regulation No. 116 of 2016. Having common understanding among stakeholders is needed to ensure that the project implementation will not result in certain ndings when audit takes place in the future.

KPPIP is involved in discussion on the source of funding for 8 priority alignments?of Trans Sumatera Toll Road (JTTS). KPPIP actively discusses and recommends potential JTTS’ funding source alternatives. This recommendation was developed by working closely with PT Hutama Karya as the assigned SOE to implement the project and PT Indonesia Infrastructure Finance (IIF) as the consultant whom supports PT Hutama Karya to develop an alternative nancing of JTTS. It was decided that PT Hutama Karya’s required equity will be ful lled through the issuance of Medium Term Notes (MTN) and bonds; nevertheless, Government support in the form of guarantee is needed to attract potential investors’ interest.

In November 2016, the Government through the Ministry of Finance issued the Minister of Finance Regulation No. 168/PMK.08/2016 on Implementing Procedure of Guarantee Bond for the Acceleration of Toll Road Development Project in Sumatera. The guarantee was given pursuant to the mandate of Presidential regulation No. 100 of 2014, in addition to providing guarantee for PT Hutama Karya’s loan in the development of toll road in Sumatera.

KPPIP takes part in the discussion, preparation and acceleration of the revision of Government Regulation No. 79 of 2000 on Implementation of Construction Service. Having this Government Regulation revised will enable the assignment of Regional Owned Enterprise (ROE) by the Government to directly appoint the project contractor.

This Government Regulation is needed by ROE who is appointed directly by the Government to conduct infrastructure delivery within a short period (18 – 24 years) so that operation target can be achieved. Allowing ROE to direct appoint contractor will shorten procurement process from approximately

6 months to 3 months. The outcome of such support is the issuance of Government Regulation No. 54 of 2016 on Third Amendment to Government Regulation No. 29 of 2009 on Implementation of Construction Service.

In order to ensure the availability of monetary compensation fund for PSN’s land acquisition, KPPIP works with Public Service Agency- State Asset Management Institution (BLU-LMAN) to provide land acquisition fund needed for infrastructure development for public interest. With the issuance of such Presidential Regulation, the project owners of National Strategic Project through the relevant Minister/Head of line ministries/agencies allocates funding based on the rating list which has been coordinated with KPPIP under State Budget within State General Treasurer (BUN).

In addition, this Presidential Regulation also stipulates mechanism of land acquisition using business entity’s fund to pay monetary compensation fund of the required land for project to ensure timely project implementation. The related Minister/Head of line ministries/agencies needs to conduct agreement with relevant Business Entity to receive responsibility over land acquisition and to further request BLU-LMAN approval. Land acquisition funds that have been spent will be reimbursed through State Budget after the waiver of the rights over land acquisition terminates.