Jasa Marga: Toll roads

THE COMPANY: Jasa Marga, established in 1978, was the first toll-road operator in Indonesia. The company is the market leader of toll road operators, managing approximately 532 km, or 72%, of toll roads in the country. Jasa Marga is currently in the process of developing another 200 km of toll roads. Operations are expected to begin gradually between 2011 and 2014.

DEVELOPMENT STRATEGY: At present Jasa Marga’s development plans are in the land acquisition phase. Jasa Marga has already completed the construction of the Semarang to Ungaran phase, which will be the first section of the Semarang-Bawen toll road. Jasa Marga has also completed the construction of the Waru to Sepanjang phase, which is the first section of the Surabaya-Mojokerto toll road. Jasa Marga has already begun operating the first section of the Bogor Ring Road, which is a part of the Sentul-Kedung Halang, which will be approximately3.8 km long once completed. Development of the second and third sections of the Bogor Ring Road will begin once a feasibility study of the first section’s traffic patterns is completed.

As previously mentioned, Jasa Marga has several projects that are currently in the land acquisition phase. The second section of the Semarang-Bawen toll road, Ungaran to Bawen, will be approximately 11.8-km long once completed. Jasa Marga is also in the process of acquiring land for the development of each section of its Surabaya-Mojokerto toll road. This toll road will be comprised of five sections. The sections to be developed are Waru-Sepanjang (2.3 km); Sepanjang-WRR (4.3 km); WRR-Driyorejo (4.3 km); Driyorejo-Kriyan (4.3 km); and Kriyan-Mojokerto (4.3 km).

GETTING THE JOB DONE: One of the major obstacles to Jasa Marga’s further expansion is land acquisition. The Republic of Indonesia’s government has supported the company by awarding it a revolving fund and land-capping programme. Jasa Marga will pay for the concession agreement plus 10% of the initial estimated acquisition costs. Following that, the government will pay the remaining costs related to land acquisition.

Once the land has been acquired and paid for, Jasa Marga can begin construction of the toll road. It will then assume the remaining development costs.

To acquire just one section of the Bogor Ring Road, Jasa Marga had a concession agreement that cost Rp57.5bn ($6.9m), followed by the additional 10%, at R5.7bn ($684,000). The total realisation cost was Rp126.9bn ($15.23m). Thus, the remaining Rp63.7bn ($7.64m) became the responsibility of the government.

The concession agreement fee and additional 10% that was paid to the government will then be used as a revolving fund. The fund will be used for future land acquisition in order to build another toll road.

OUTLOOK: Jasa Marga’s capital expenditure budget is Rp3.23trn ($387.6m) in 2011. This is a significant increase over 2010, when its budget was Rp1.55trn ($186m). Approximately 43% of Jasa Marga’s capital expenditure plan — or Rp1.4trn ($163.2m) — will be used for capacity expansion, part of which will be used for additional lanes for existing toll roads. Jasa Marga has also allocated Rp848.8bn ($101.86m) for the development of new toll roads, Rp104.8bn ($12.2m) of which will be used in Jasa Marga investments and Rp744bn ($86.7m) for investments in its subsidiaries. Jasa Marga has formed subsidiaries for most of the new toll road development by cooperating with regional government-owned companies and private companies.

Demand for toll roads in Indonesia is very high. Toll roads can help stimulate economic growth and improve public transportation. The locations of existing toll roads are mainly in Java due to high levels of traffic. Jasa Marga has a competitive advantage, as it controls the majority of domestic toll roads. This advantage is further strengthened by strong capital and Jasa Marga’s experience in managing toll roads. In order to expand its network, Jasa Marga is developing some new toll roads. It expects to complete the developments of all new toll roads by 2014. It is estimated that Jasa Marga is going to book revenue of approximately Rp5trn ($600m), with net profit of Rp1.5trn ($180m) in 2011.