Sunday, June 03, 2012

Indonesia Infrastructure Report Q3 2012 (14 May)

We have revised down our 2012 construction forecasts for Indonesia, with real growth expected to reach around 6.9% in 2012 (previously 7.1%). This revision is primarily due to a government plan to cut fuel subsidies, which we believe is likely to reverse the conducive monetary conditions for construction activity. In addition, we believe there is a real risk that Indonesia's construction sector could fail to realise its long-term growth potential, as key regulatory reforms have either failed to transpire or been overturned We believe that these negative factors could lead to a lack of private investment and have thus revised down our forecast for annual average construction real growth between 2013 and 2016 to 7.7% (previously 7.9%). Key factors that will facilitate growth include:

In January 2012, PLN announced that it has identified 96 locations that are suitable for new hydroelectric power plants across the country, reports PLN will develop 60% of the proposed facilities, with the remaining 40% to be offered to independent power producers (IPP) through a series of tenders. The power plants will have a total production capacity of 12,800MW.

In February 2012, the Indonesian government announced that it will undertake a feasibility study for the proposed US$13.9bn Sunda Strait bridge project during 2012. However, the government said that it would only pay IDR1.5trn (US$164mn), equivalent to 1%, of the project's total cost for the feasibility study. The 31km bridge will run between Anyer on the island of Java to Bakauheni on the island of Sumatra and be the largest inter-island edifice in the country. Construction is scheduled to start in 2014 and the bridge is expected to be operational by 2025. The development of the project is led by the consortium PT Graha Lampung Banten Sejahtera.

In March 2012, PLN announced plans to launch a tender for the IDR20trn (US$2.18bn) Sumatra-Java high-voltage-direct current interconnected project in April 2012. Construction is expected to start in 2013, with completion scheduled for 2017. Once completed, the system is expected to distribute 3GW of electricity from Sumatra to Java and Bali Island, or vice versa. The project involves the construction of a converter station in Muara Enim [South Sumatra] and an inverter station in Bogor [West Java]. The line will be used to supply power from South Sumatra to fulfil the rising demand for power in Java, with several coal-fired power plants being built in the former region.

Reference: Indonesia Infrastructure Report © Business Monitor International Ltd.


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Ross Taylor said...

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