UPDATE 1-Rajawali unit talks to China banks on rail finance

Published: 21 Jun 2010 04:36:12 PST

* Talking to 4 Chinese banks about loans for Sumatra project

* Seeking loans for 70 percent of $1.5 billion railway

* Project to be completed in 2013/2014

JAKARTA, June 21 - Indonesian investment firm Rajawali Group said its unit Transpacific Group was in talks with four Chinese banks over financing of a $1.5 billion railway project in Sumatra.

The banks are China Development Bank, ICBC, Bank of China and China Export-Import Bank, Rajawali Managing Director Darjoto Setyawan said on Monday.

"Our unit Transpacific is currently in talks with Chinese banks to finance about 70 percent of the total project," Setyawan said. "I hope it will be finalised soon so by the time we start the construction, we don't have to worry about the financing issue."

Rajawali group, a conglomerate owned by Indonesian tycoon Peter Sondakh, got an 80 percent interest in the $1.3 billion railway construction project in its acquisition of Transpacific Group its unit in April.

Setyawan said that the contract value for the railway was about $1.3 billion but the actual value was $1.5 billion, including funding for land acquisitions.

Setyawan said Rajawali would inject equity worth $390 million into the project, funded by the sale last month of a 24 percent stake in PT Semen Gresik, Indonesia's biggest cement producer, worth about $1.1 billion.

A consortium made up of Transpacific Railway, with an 80 percent stake, and China Railway Engineering Corp and state coal miner PT Tambang Batubara Bukit Asam, each with 10 percent, signed contracts in March worth a combined $4.8 billion for the railway project to transport Bukit Asam's coal.

The deal consists of the $1.3 billion contract for the construction of a 300 km (190 miles) railway from Bukit Asam's central Banko coal mine in South Sumatra province to Srengsem port in Lampung province and a second worth $3.5 billion to operate and maintain the line for 20 years.

Rajawali said earlier this month it had secured a 35 percent stake in the Banko mine.

Bukit Asam has total coal reserves of 2 billion tonnes, the country's second-largest reserves after PT Bumi Resources.

Bukit Asam has said it plans to increase its production to 50 million tonnes a year within five to six years from 12 million in 2009, by buying new mines and developing the railway.