Reached Into Indonesia Kaltim Project Construction And Financing Models

Chengda Engineering Corporation of China(hereinafter referring to as"Chengda") is an engineering company carrying out domestic and overseas project establishment of contracting. During the year 2000 to 2002, supported by the Export & Import Bank of China in the way of Seller's Export Credit, Chengda carried out a project of Urea Storage House & Conveyance System in the model of BLT(Build-Lease-transfer) for PT. Pupuk Kalimantan Timur (Hereinafter referring to as"KALTIM"), an Indonesian state-owned company. Within the 6 years after the Project completion, Chengda worked as a lessor to lease this system to KALTIM. In this way, Chengda collects the rents to make profits and to repay the credit of the Export & Import Bank of China.To some extent, BLT model shall be some kind of combination of EPC contracting and financing lease. For the content of B, it shall cover the investment and construction. Generally speaking, a standard financing lease shall mean the different parties working as project investor and project contractor. However, under the BLT model, Chengda worked as investor and contractor. Thus this BLT model shall not only be a financing model but also a construction model.EPC contracting also being called as engineering contracting, means that an engineering company or the alike which appointed by the owner to carry out the project contracting through the whole project construction process including engineering, procurement, construction and installation, commissioning and start-up etc.. Leaded by the process of engineering, contracting the whole process including project feasibility study, investigation, engineering, procurement, construction & installation, and commissioning & start-up shall be the best way to control the investment, schedule, and quality during construction period. Around these years, as the development of project contracting, it becomes the prevailing way of project establishment model in the world.Financing Lease, which is widely utilized as a financing model in the developed countries such as European countries, USA, and Japan, is one of the generally used financing models just as bank credit and public listed financing in the capital market developed countries. It is an important and effective means for many enterprises to realize the financing.For this Project, the Export & Import Bank of China, as the lender, provided a Seller's Credit RMB 103,000,000 to Chengda, as the borrower. In accordance with the requirement for the Export & Import Bank of China, Chengda applied the Credit insurance policy to China Export & Credit Insurance Corporation (SINOSURE) for this Project. For the time being, this Project is under control of SINOSURE.Signed on August 24, 2000, the EPC Contract was put into effectiveness on Feb. 19, 2001 after the completion of bilateral government approval and the settlement of financial arrangement. The Project was mechanically completed on July, 23, 2002, and was taken over on Oct. 7, 2002. From the date, the rent was paid by the rentor. It is still under the lease period.BLT model, as a model of project construction and financing, covers two points: EPC contracting and financing lease. For EPC contracting, it is a prevailing project construction model in the international project construction market, and for financing lease, it is also a developed, effective, and widely used financing model in overseas market. As the combination of these two models, BLT is a newly developed project construction model and is becoming more and more accepted by the contractors and owners. Compared to BOT, BOOT, one of medium process is deleted, and the owner shall play as a management, operation and maintenance party after project take-over. Thus it enhances the responsibilities and liabilities of the owner to the project and it shall be helpful to the plant final transfer. As the contractor, only services regarding the two-year spare parts and one year mechanical warranty shall be provided after the project take-over. The main connection to the owner shall be the rent payment. Such kind of model shall no doubt be the better model due to its simple relationship and serious obligations between the contractor and the owner.Such kind operation in this Project is successful. For KALTIM, this system without its any investment solved the problem of product storage and conveyance. For Chengda, on the other hand, this Project made profits, improved its market share, and meanwhile, made Chinese machinery and materials exported to overseas market and made foreign currency.