Adani Group pulls out of $1.7bn Indonesian railway project

Adani Group has pulled out from a USD 1.7 billion coal railway project with Indonesian state coal miner PT Bukit Asam in South Sumatra due to Indonesia's tough restrictions on licensing, said Bukit Asam's chief executive.

Bukit Asam's CEO Milawarma also said that it is still in ongoing discussions with Indonesia's Rajawali Group to start another USD 2 billion South Sumatra coal railway project, which has also been delayed for years on licensing and valuation issues.

The setbacks show the difficulty for investors in developing large infrastructure projects in Southeast Asia's biggest economy due to uncertain and overlapping rules, despite government commitments to support development.

The projects are in theory straight-forward and should be easy to get going, the soft-spoken Milawarma told Reuters in his Jakarta office. "But there are lots of sectors involved ... mining regime changes and this scare off investors."

Officials with the Adani Group were not immediately available to comment.

The delay in the projects has hurt expansion plans from the state coal miner, which owns one of the nation's largest coal deposits at 7.3 billion tonnes.

Bukit Asam will produce around 17 million tonnes in 2013, a 30 percent increase from 2012. But that is far below the expected production by Asia's biggest thermal coal exporter PT Bumi Resources at 77 million tonnes this year.

The future of the projects also faces other risks, including weak coal prices and concerns China will reduce imports of low-calorie coal, Milawarma said.

He said that the company plans to shift its coal shipments to India if China declines to take it.