New Toll Road Construction Regulation Addresses Problematic Projects

The government has issued Minister of Public Works Regulation No. 06/PRT/M/2010 of 2010 (“Regulation”) on the Evaluation Guidelines in Continuing Toll Road Concession. Essentially the regulation gives guidelines to review private toll road construction companies (Badan Usaha Jalan Tol / BUJT) in continuing their toll road projects. In short the regulation is an attempt at a solution for delayed toll road projects due to BUJT problems with land acquisition, finance and equity issues.

The types of BUJT falling under the regulation are: BUJT that have not signed their Toll Road Procurement Contract (Perjanjian Pengusahaan Jalan Tol / PPJT), BUJT that has signed the PPJT but has not received full finance for their projects, and BUJT which face land acquisition problems.   

Object of evaluation is the BUJTs’ financial feasibility and performance. The performance is measured by the financial report which consist of liquidity ratios and solvability ratios for the preceding 3 years, and also by an ability to produce a credit agreement or provide a reference letter from a prospective creditor. Failing to meet the required standard set out in the regulation, will result in unilateral termination of the BUJT’s PPJT by the Minister of Public Work. However, the BUJT is given an option to avoid such termination by transferring its shares to new investors, a process that is further regulated under Article 14.   

Toll project financial feasibility is evaluated by considering the parameters set out under Article 8, the evaluation includes review of fund availability for acquiring land, revenue projection, the project schedules, and adjusted investment cost. The most influential evaluation parameter is the revenue projection, with the Regulation requiring a 4% yearly return from the project, with a failure to meet this requirement resulting in the toll road project being abandoned.

A determination for a BUJT to continue a toll road project is decided by the Minister of Public Work after receiving a recommendation from the Toll Road Regulator (Badan Pengatur Jalan Tol/ BPJT).

The Regulation was issued on 7 May 2010, and has been in force since then.