The East Java administration of Indonesia and private consortium PT Meta Adhya Tirta Umbulan, formed by Medco Gas Indonesia and construction firm Bangun Cipta Kontraktor, have signed the contract for the Umbulan Drinking Water Supply System PPP project.

The signing of the contract has meant a step forward in the development of project and now the construction works can finally begin.

In late January 2016 we reported that the company was awarded the contract after submitting the lowest bid among all competitors, including:

• Marubeni, Nippon Koei and Perkom Indah Murni;
• Bakrieland Development's consortium with Amerta Bumi Capital and Beijing Enterprise Water; and
• China's Beijing Enterprise Water and Kukdong Engineering 7 Construction.

As per the signing of the contract, the consortium will have the rights to design, construct, operate and maintain the facilities and transmission network under a 25-year agreement. The total value of the concession stands at  IDR2.05 trillion (US$156.23 million).

The Umbulan water plant project, which is expected to be operational within two years, will provide drinking water to 350,000 households in Pasuruan, Sidoardjo and Gresik districts as well as Surabaya municipality. This is the first drinking water system to be developed on PPP basis in the region.

The project, which was initiated by the East Java provincial government in 2010, has been lon delayed by red tape and pricing scheme disputes.

According to sources, investors have already secured funding for the project, with the government funding in a total Rp 300 billion (US$21.6 million) from the 2016 and 2017 state budgets. The Finance Ministry will also provide a viability gap for the project.