Pasuruan East Java, July 20, 2017 -
Following the signing of a working agreement and Financial Close in 2016, the Ground Breaking ceremony for the Umbulan Drinking Water Supply System (SPAM) was held today in today in Pasuruan, East Java. The event was attended by Vice President of the Republic of Indonesia Mr. Yusuf Kalla and Coordinating Minister for Economic Affairs Mr. Darmin Nasution. A milestone project for water and local projects, this project was implemented through a Public-Private Partnership (Kerja Sama Pemerintah dan Badan Usaha, or PPP).
Construction for the Umbulan SPAM project, which requires investment of around Rp 2.05 trillion, is targeted for completion and the project operational by mid-2019. The project has a capacity of 4,000 liters per second, with the water being sourced from Umbulan Spring in Umbulan Village, Winongan District, through a 93 km water supply pipeline. The drinking water will be managed by the East Java Provincial Government Water Supply Company (PDAB), which will distribute the water to 5 district and city water utilities (PDAM). The party responsible for this collaborative project (PPJK) is the East Java Provincial Government with PT Meta Adhya Tirta Umbulan as the Implementing Business Entity.
The Umbulan SPAM Project is a National Strategic Project and Priority Project with a long history of development. The successful realization of the project, which was initiated some 40 years ago, was made possible by the coordination and hard work of various parties from both the government and private sector. Mr. Darmin Nasution, the Coordinating Minister for Economic Affairs and Chairman of the Committee for the Acceleration of Priority Infrastructure Provision (KPPIP), which led coordinated efforts to resolve the resolution of the SPAM Umbulan Public-Partnership bottlenecks, said, "The limitations of the State Budget have not prevent the Government’s acceleration of infrastructure development, among others by continuing to fully support the involvement of private business entities in infrastructure development through the Public-Private Partnership scheme. After the construction is completed, it is also important for the project to be managed in such a way that the benefits can be immediately felt by the community. Therefore, the support and commitment of various stakeholders is needed not only during the construction period but also during the operational period, in order to achieve the supply of drinking water for the people of East Java."
In its implementation, the project received Government support to drive the acceleration of infrastructure projects development through a PPP scheme in the form of VHF Support valued at Rp 818 billion from the Ministry of Finance, which aims to improve financial feasibility in order to ensure that affordable tariffs for the community; Project Development Facility (PDF) from the Ministry of Finance implemented by PT Sarana Multi Infrastruktur (Persero) / PT SMI to assist the East Java Provincial Government in preparing and executing Umbulan SPAM project transactions; and a Government Guarantee through PT Penjaminan Infrastruktur Indonesia (Persero) / PT PII.
To meet the need for affordable Umbulan SPAM drinking water rates for the community, the Ministry of Public Works and People's Housing (PUPR) through the SPAM Implementation Improvement Agency (BPPSPAM) has been involved in the planning and preparation of a feasibility study, the DED and business plan through to the water sale and purchase between the PDAB Water Supplier and PDAM Water Utilities.
The Ministry of Public Works and Housing has also provided support in the form of pipeline construction from the offtake point to the main distribution point; the construction of a treatment plant for water from Rejoso River with capacity of 300 liters per second; the provision of permits for installation of a pipeline along the toll road, among others the Pasuruan-Gempol, Gempol- Pandaan, Surabaya-Gempol, Surabaya-Mojokerto and Surabaya-Gresik toll road segments; and reduced land lease fees on the toll roads. In addition, in 2017 the Ministry of Public Works and Housing through the Housing Settlement Director General will build SPAM in 2 districts in East Java of Rp 40 billion, a SPAM in Surabaya City at a cost of Rp 21 billion, and SPAM in 12 districts of Pasuruan Regency that are prone to water problems.
In realizing this project, the Provincial Government of East Java as the Responsible Party for this Collaborative Project (PJPK) has procured around 7 hectares of land in the Umbulan water source area for production and relocation of a swimming pool. Procurement of the land needed for transmission lines will soon be carried out as needed.
In parallel to the implementation of the project, the PJPK together with PT PII has formulated a joint risk mitigation plan which has been implemented starting 2017. This is intended to maintain the environment towards ensuring that the Umbulan spring remains continuously sustainable in terms of both quality and quantity, while also mitigating the risks of this development project.
Some commitments to be met by the Provincial Government East Java include the distribution of bulk water to PDAM Water Utility beneficiaries of bulk drinking water through the East Java PDAB Water Supplier with a total distribution of 3,920 lt / sec. Whereas the Governments of the Regencies / Cities receiving the bulk water must fulfill a commitment to distribute the bulk drinking water channeled by the Government of East Java Province through the East Java PDAB Water Supplier to the community, using the distribution network in each PDAM service area in accordance with the agreed-upon capacity.
"It is an honor for PT Indonesia Infrastructure Finance ("IIF") to lead the provision of funding for the Umbulan SPAM project, which is one of the National Strategic Projects related to the provision of drinking water to 1.3 million people so that the project can run," said President Director IIF Arisudono Soerono. The Umbulan SPAM project taps springs to provide access to clean water for local communities and deliver social and economic benefits to impacted communities.
Furthermore, Arisudono Soerono said that drinking water treatment is one of the eight infrastructure sectors that IIF focuses its financing on as mandated by the government, the others being transportation, roads, irrigation, waste water, telecommunications and informatics, power and oil and gas.
Arisudono added that this agreement is the first KPBU water sector project in Indonesia to achieve financial close. This underlines the fact that private parties are increasingly interested in and accepting of infrastructure projects using PPP schemes, which certainly has to potential to reduce the burden of the Government.
PT SMI President Director Emma Sri Martini stated, "It is an honor for PT SMI to be involved in and assigned to this project by the Ministry of Finance of the Republic of Indonesia in supporting the East Java Provincial Government to prepare the Umbulan SPAM KPBU project. This project was initiated 43 years ago and thanks to the strong support and synergy of the Stakeholders, the Umbulan SPAM KPBU has project finally been realized as a feasible, bankable, fiscally acceptable project in accordance with the prevailing laws and regulations. Furthermore, PT SMI has committed to participate as a financing syndicate member, which will enable the project to reach financial close by December 2016 ". At the Umbulan SPAM groundbreaking, PT PII President Director Sinthya Roesly also stated that the Umbulan SPAM groundbreaking ceremony is the starting point for the construction of drinking water supply projects, which are a basic need for society and also accelerates infrastructure development in Indonesia. This project is the first regional project that is financed by private parties, with PT PII as a single window policy government guarantor providing guarantees as well as guidance to local governments on working with private parties.
This project aims to serve 1.3 million people in 5 districts and cities in East Java Province, namely Pasuruan, Pasuruan, Sidoarjo, Surabaya and Gresik. This Umbulan SPAM project is also categorized as a National Strategic Project (PSN) as stated in Presidential Regulation No. 3 of 2016 on the Acceleration of National Strategic Project Implementation.
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