ING & ADB arrange PGN's US$225 million loans

ING Bank and Asian Development Bank is working on new US$225 million loans for Indonesian gas distribution company PT Perusahaan Gas Negara Tbk.

The new loans will be used to fill the financing gap of South Sumatra-West Java Phase II (SSWJ II) gas pipeline project.

The board of directors of PGN had asked approval from government as the major shareholder. Sources close to the deal said government had approved the plan last week.

PGN is working on two pipelines project to transport natural gas from South Sumatra to West Java. Japan's JFE Engineering Corporation has started construction of the 270 km South Sumatra West Java SSWJ Phase I pipeline in Java for PGN. The 32 inch gas line will run from the CPP Pertamina DOH Prabumulih gas field in Pagardewa and be complete by March 2007.
PGN is also working on SSWJ Phase II line of 661 km for completion by the end of 2006. Punj Loyd Ltd has been awardeda contract to build a 274 km section of the line, consisting of 32 and 28 diameter pipe. SEAPI, a unit of Bakrie & Brothers bags US$84 million pipe supply contract for this project. Total cost for these projects at around US$1 billion.

Technically, these two projects, side by side, looks dumb. Why the hell PGN build two pipelines in the same route instead of one with bigger diameter of pipes?

My source said PGN didn't realize that demand for gas in Jawa would be big enough as the marketing was difficult when the company started the SSWJ project. What do you think?

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