RAK fund seeks investors for Indonesia coal scheme

UAE investment fund RAK Minerals & Metals Investments (RMMI) is seeking partners to finance a $1 billion (Dh3.67 billion) project to develop a rail link and terminal to ship coal from Indonesia, a company executive said on Wednesday.

RMMI was awarded a licence in March to build a 150 km rail link to carry 15 million tonnes of thermal coal a year from a mine in the East Kalimantan province to a coal terminal.

RMMI would provide around $100 million of the initial $600 million investment in the project, Madhu Koneru, the company's managing director, told Reuters.

"The rest will come from other partners whom we are now seeking," he said.

Around $500 million would come from institutions such as the World Bank and development banks, he said.

"This project has a very strong socio-economic angle to it and will help create at least 4,000 jobs," Koneru said. "That's why a multilateral bank would be interested in taking part. We have also seen a lot of interest from development banks, especially those in China, Canada and Germany."

Coal production in East Kalimantan accounts for over half of Indonesia's total coal output, forecast to come it at around 230 million tonnes in 2009. Indonesia is the world's top exporter of thermal coal.

Koneru said shipments of 3 million to 5 million tonnes could start in 2010 using a service road under construction, and would rise to 15 million tonnes in 2012 once the rail link was in place.

"The reason why we have already started to build a road is because we want to get the project up and running," said Koneru. "You can't really ship 15 million tones all at once, the process has to be gradual."

Nearly 5 million tonnes of coal will be used to power industrial projects in the UAE's northern emirate of Ras Al Khaimah, home to RMMI. The remaining 10 million tonnes would be divided equally between exports and supply to Indonesia's domestic market, said Koneru.

RMMI had considered South Africa and Australia as potential sources of coal before deciding on Indonesia, Koneru said.

"The reason we chose Indonesia is because it's an emerging market, we are familiar with its policies, and the government has been very supportive and flexible with our plans," said Koneru.

 

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.