Investment Opportunity in East Java Province — Indonesia

Investment Opportunity in East Java Province - Indonesia “Potential and Attractiveness” by: Warno Harisasono Chairman of Investment Board The Government of East Java Province Istanbul– Turkey, April 25 th, 2013

Where is East Java Province ? Turkey Istanbul q Land Area : 47. 154 km 2 Largest in Java Island q Sea Area : 100. 000 km 2 q Coastal Length : 1. 920 km Singapore Jakarta q. Admistration Area : 29 Regencies & 9 Cities Biggest # in Indonesia Banten West Java Central Java Yogyakarta Surabaya q Population in 2012 : 38. 05 million people 2 The Government of East Java Province Bali The Investment Coordinating Board of the Republic of Indonesia East Java Province Istanbul – Turkey, April 25 th, 2013

Why Investing in East Java ? High Economic Performance Pro Investment Low ICOR Strategic Location, Secure & Pleasant Region Abundant Natural Resources I N D O N E S I A Skillful Human Resources East Java Great Potential Market Good Infrastructures Sufficient Energy /Electricity The Government of East Java Province Istanbul-Turkey, April 25 th, 2013

Economic Growth & Structure - Inflation Graphs of Economic Growth in East Java and the National (c to c) % 15, 42% Agriculture 5, 70% - Transportation & Communications C to C 30, 40% THR 27, 11% Processing Industry 2, 08% - Mining & Quarrying 5, 05% - Finance, Leasing & Services Company 8, 35% - Other Services 1, 35% - Electricity, Gas & Water Supply INFLATION 4, 55% - Construction Inflation 2009 2010 2011 2012 % 3, 62 6, 96 4, 09 Inflasi (y o y) Sept 2012 : 3, 55 % 4, 50 v The increasing economic growth followed by decreasing inflation value indicated The Growth Potentially increasing social welfare Source : BRS Peb 2013 The Government of East Java Province Istanbul-Turkey, April 25 th, 2013

Investment Performance in East Java Top 10 Ranking of FDI Country (2001 – 2012) Investment Realization (2008 -2012) 16 A 14 K 12 E B 4% 13% F 4% 41% 10 Billion US Dollar 15% 8 C 6 4 2 - 2008 TOTAL 3. 58 Reg. Invest. 2. 86 DDI 0. 29 FDI 0. 43 D 6% 5% G 4% J I 3% H 2% 3% 2009 4. 93 4. 08 0. 45 0. 40 2010 8. 69 5. 92 1. 01 1. 76 2011 11. 62 7. 37 2. 14 2. 11 * US$ 1 = Rp. 9. 500 2012 14. 03 8. 37 3. 02 2. 64 Billion US$ F. Australia 1, 55 A. Singapore 6, 50 G. Arab Saudi B. Netherland 1, 54 5, 65 H. RRC C. Japan 1, 41 2, 63 I. Malaysia D. Switzerland 1, 04 1, 86 J. USA 0, 94 E. U. Kingdom 1, 71 K. Others 17, 44 Total The Government of East Java Province Istanbul-Turkey, April 25 th, 2013 42, 27

Guidance of Direct Foreign Investment Investors intending to invest should go through step-by-step procedure in accordance with the prevailing laws and regulations in Indonesia. The Procedure includes legal entity establishment, licenses, recomendations and facilities. The Procedure for investing and doing business in the jurisdictionof Indonesia consist of three steps : The Government of East Java Province Istanbul – Turkey, March 1 st, 2013

Fiscal Incentive and Facility TAX HOLIDAY Refers to Regulation of The Financial Minister, PMK No. 13/0/PMK/011/2011, issued on August 15 th 2011. TAX ALLOWANCE Refers to Government Regulation No. 52 Year 2011 regarding income tax facility on investment in certain business field or certain region. INCOME TAX Refers to The Legislation no. 36 Year 2008 REDUCING OF INCOME TAX RATE Refers to Government Regulation No. 81 Year 2007 regarding Income Tax Rate Reducing for Domestic Agency Taxpayer in form of Opened Company. OTHER INCENTIVE Refers to Governement Regulation No. 45 Year 2008 regarding Guide of incentive and facility awarding on Regional Investment. CAPITAL GOODS IMPORT Refers to Regulation of The Financial Minister No. 76/PMK. 011/2012 regarding The Regulation of Financial Minister Amandement No. 176/PMK. 011/2009 regarding Allowance of Import duties of Machine , Goods and Material for industral development in order of Investment. The Government of East Java Province Istanbul-Turkey, April 25 th, 2013 11

Offered Investment Projects INFRASTRUCTURE o Probolinggo - Banyuwangi Toll Road o Pandaan – Malang Toll Road o Gresik - Tuban Toll Road o New Runway and Passanger Terminal Development of Juanda International Airport o Sendang Biru Seaport - Malang in Southern Coast of East Java o Surabaya - Juanda Airport Rapid Transportation System The Government of East Java Province Istanbul – Turkey, March 1 st, 2013

Probolinggo - Banyuwangi Toll Road Project LOCATION : Probolinggo – Banyuwangi is a closest city to Bali and the only access for distributing goods and services through Gilimanuk Port. Everyday traffics from Lombok Bali going to Surabaya and Jakarta pass through Banyuwangi - Probolinggo Pasuruan - Surabaya - Jakarta roads. An existing primary road consists of Pasuruan - Probolinggo road along 29. 80 km and its width around 7. 00 - 11. 00 m and Probolinggo - Banyuwangi along 118. 60 km and width of 6. 00 – 7. 00 m makes service capacity insufficient. In case of supporting industrial estate acceleration within 5 years future in Pasuruan, Probolinggo and Banyuwangi and developing economic growth and distribution of goods and service, therefore Pasuruan-Probolinggo. Banyuwangi toll road development is highly required. SCOPE OF WORK : - Preliminary Study - Toll road construction with specification : Length : 170. 30 km Pavement Road : 2 x 3. 6 lanes Median : 5. 50 m Outer Shoulder : 3 m Inner Shoulder : 1. 50 m ROW : 60 - 100 m Daily Traffic Volume : 51, 226 veh/day Probolinggo – Banyuwangi INVESTMENT CONCEPT : • Development of toll road infrastructure by using private/social • investment funds with readmission of toll road receipt. FINANCIAL ANALYSIS : • Discount Rate : 10. 00% • Benefit Cost Ratio : 1. 75 • Internal Rate of Return : 18. 04% INVESTMENT COST : Cost for construction and land aquisition estimated around US$ 2, 183. 2 Billion The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Pandaan – Malang Toll Road Project LOCATION : is along Pandaan - Malang road Malang is a destination tourism city and one of biggest city in East Java Province after Surabaya. Meanwhile Pandaan is one of existed industrial estate in East Java. The high society mobility between Malang and Pandaan as for closer location. Pandaan – Malang toll road will make transportation from Malang to Pandaan which connected with Surabaya conversely running well. PROJECT PURPOSE : • Make freight traffic of goods and services is running well and support economic development in Pasuruan and Malang. SCOPE OF WORK : Preliminary Study - Toll road construction with specification : : 37. 62 km Length : 2 x 3. 6 lanes Pavement Road : 12. 7 m Median : 3 m Outer Shoulder : 1. 50 m Inner Shoulder : 60 m ROW Daily Traffic Volume : 17, 425 veh / day Traffic. Volume (existing) : 83, 555 vehicle/day INVESTMENT CONCEPT : • Development of toll road infrastructure by using private/social investment funds with readmission of toll road receipt. FINANCIAL ANALYSIS : • Discount Rate : 10. 00% • Benefit Cost Ratio : 1. 96 • Internal Rate of Return : 19. 94% > 16% INVESTMENT COST : Cost for construction and land aquisition estimated around US$ 266. 0 Million The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Gresik – Tuban Toll Road Project LOCATION : Bulu –Tuban - Widang – Lamongan - Gresik - Tuban Road is the nothern road accross (Pantura) Semarang Rembang - Tuban - Surabaya and pass through regions which has high density port, such as : Tanjung Emas Port in Semarang, Juawana, Rembang, Tuban and Tanjung Perak Port in Surabaya. The traffic passes through mostly is heavy vehicle which carried commodities from port and industrial area. The length of arterial primary road Gresik – Tuban is ± 88 km with width around 7 – 14 m. The Government endeavors to overcome traffict density in the nothern road accross (Pantura) by proposing new toll road development which noticed on Government Regulation Number 26 of 2008 concerns on national spatial plan, i. e: - Semarang – Demak - Demak – Tuban - Gresik – Tuban PROJECT PURPOSE : • Make freight traffic of goods and services in Pantura is running well and support economic development in Gresik and Tuban. SCOPE OF WORK : - Preliminary Study - Toll road construction with specification : Lenght : ± 85. 00 km Design Speed : 80 - 100 km Pavement Road : 2 x 3. 5 lanes Median : 4 m Shoulder : 2 x 2. 5 m ROW : 40 - 60 m Daily Traffic Volume : 44, 725 veh / day Traffic. Volume (existing) : 85, 419 vehicle / day INVESTMENT CONCEPT : • Development of toll road infrastructure by using private/social investment funds with readmission of toll road receipt. FINANCIAL ANALYSIS : • Discount Rate : 10. 00% • Benefit Cost Ratio : 1. 56 • Internal Rate of Return : 18, 25% INVESTMENT COST : Cost for construction and land aquisition estimated around : USD 9, 263. 1 Million The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Juanda Airport Passanger Terminal Development Project LOCATION : Juanda Airport, Sidoarjo District Juanda airport passenger growth at 15% every year, now reached 11, 6 million passengers per year. With the design capacity to accommodate 6, 5 million passengers per year, expansion of Juanda airport terminal passengers needed to maintain the level of service. On the short term, re-utilization of the ex-passenger terminal on the southern area, separated by runway, should be the solution for the lack of space to accommodate over 4 miilion passenger per year. PROJECT PURPOSE : To increase the level of comfort, security and safety for the passengers. MARKET OPPORTUNITY : Domestic flight, international flight, and airlines hajj. SCOPE OF WORK : INVESTMENT CONCEPT : • Joint investment with PT. Angkasa Pura I to built this project and its infrastructure; • Joint management with PT. Angkasa Pura I to operate this project. INVESTMENT COST : The construction of passanger’s terminal expansion estimated USD. 189. 5 Million. Expansion of the terminal passenger only, both for domestic and international, with capacity of 4 million passengers per year. Estimation of passengers (national) 2011 : +/- 27. 000 passenger (actual)/day 2029 : +/- 43. 000 passenger (est) / day Estimation of passengers (international) 2011 : +/- 4. 000 passenger (actual)/day 2029 : +/- 7. 000 passenger (est)/day The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Juanda Airport New Runway Development Project LOCATION : Sidoarjo District-East Java Province The Juanda International Airport only have one runway which nowdays it condition is geeting bad (the runway asphalt often peel-off). The flight intensity “from”/”to” Juanda Airport is so high that reach 22 flight/hour in peak season. To anticipate the increment of future flight intensity is necessary to build a new runway for serving up coming fight frequent to 25 flight/hour PROJECT PURPOSE : • To be able for serving the flight intensity “from”/ ”to” Juanda Airport up to 25 flight/hour. • To overcome the problem when one runway is damaged or experiencing an emergency condition. SCOPE OF WORK : To built a concrete runway with length of 3600 m and width about 1300 meter and other supporting facilities with capacity for 600 aircraft movement, and has to be able to accomodate the aircraft B 747 -400 or simillar. 1. Existing Terminal Building, 2. Existing runway, 3. Old Terminal Building, 4. Independent Paralel Runway Planned , 5. Terminal Building III Developed INVESTMENT COST : INVESTMENT CONCEPT : Estimation of land aquisition and soil improvement : USD. 342. 1 Million Estimation of runway construction : USD. 421. 1 Million • Joint investment with PT. Angkasa Pura I to built this project and its infrastructure; • Joint management with PT. Angkasa Pura I to operate this project. . The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Surabaya-Juanda Airport Rapid Transportation System Project LOCATION : Surabaya and Sidoarjo district Supporting increasing demand of Juanda Airport and provide rapid transportation for medium-high cluster community in Surabaya – Sidoarjo area. PROJECT PURPOSE : • To give positive impact on the performance of highway that has been experiencing congestion. • To reduce congestion and provide better mass transportation for the community TARGET MARKET : Communities in Gresik, Bangkalan, Mojokerto, Surabaya, Sidoarjo, and Lamongan (GERBANG KERTASUSILA) regions. SCOPE OF WORK : Construction of Electrified Elevated Double Track Train from Gubeng to Juanda Airport. With Specification: Capacity of 30. 000 passagers/day INVESTMENT CONCEPT : To refund all the entire cost, investors will get a share of the net ticket revenue. The percentage is determined by agreement between the Investor as funder and the Government. INVESTMENT COST : Cost for construction and land aquisition estimated around : USD 195 Million The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Sendang Biru Seaport Project LOCATION : Southern Part of Malang Regency To encourage faster development of sea transportation in the southern part of East Java territory henceforth give directly or indirectly effect promote the growth of the area surrounded. PROJECT PURPOSE : • To provide alternative handling of container and general • cargo for the area located surrounding the short way • Selatan (South Coast Road). SCOPE OF WORK : To provide facilities and infrastructure of Sendang Biru port. INVESTMENT CONCEPT : The investor role is to built and funding the port development and supporting facilities including warehouse and stock yard, to be rent in the future. INVESTMENT COST : The construction cost of port development and warehouse / stock yard building is estimated around USD 27 million. SUPPORTING FACILITIES : The development of South Coast Road from Pacitan to Banyuwangi. The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Offered Investment Projects SUPPORTING INFRASTRUCTURE o Hazardous Waste Treatment Plant at Pasuruan, Mojokerto and Gresik Regencies o New Industrial Estate Development In Banyuwangi, Situbondo, Probolinggo, Mojokerto, Lamongan, & Bangkalan The Government of East Java Province Istanbul – Turkey, March 1 st, 2013

Hazardous Waste Treatment Plant Project LOCATION : The alternative location will be around : Pasuruan Industrial Estate Rembang (PIER) Ngoro Industrial Park (NIP) Mojokerto Gresik Industrial Estate (KIG) The number of East Java industries which produce hazardous waste reach 30, 000 industries ; Estimation of total East Java’s hazardous waste in 2011 is 14, 269 ton ; Whereas toxic and hazardous waste management facility is restrictively existed. The only toxic and hazardous waste management facility on high scale is located in Cileungsi, Bogor , West Java ; Industries stakeholder should expend high cost since their hazardous waste should be processed in Bogor ; The inclination of mostly industries do not process their hazardous waste to Bogor or another processing centre, then it impacts to pollution and destruction of environment. In conclusion, Toxic and Hazardous Waste Management Facility should be constructed to keep waste processing cost more efficient and industries will obey their hazardous waste management. INVESTMENT COST : Estimation cost for construction : USD. 47. 07 Million Estimation of working capital (3 month) : USD. 271 Thousand CAPACITY : PROJECT PURPOSE : • Addressing the needs of the industries in East Java and surrounding on Hazardous waste treatment facilities (increase company efficiency); • Maintaining environmental sustainability. Up to 16, 344 ton/month (2012) ; Up to 23, 650 ton/month (2015) ; Up to 33, 232 ton/month (2020); Up to 38, 119 ton/month (2025) Land required : 50 Ha or 500. 000 m 2 The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Industrial Estate Development Projects LOCATION : Banyuwangi, Situbondo, Probolinggo, Mojokerto, Lamongan & Bangkalan Sales growth rate of industrial estate in east java reaches between 5% to 8% per year, From the study of Investment performance in East Java, the land required for Foreign Direct Investment and Domestic Direct Investment business in 2011 - 2016 are predicted will reach 4359 Ha while the remaining area only 800 Ha left (from the existing). To cover the lack of industrial site, several districts/cities in East Java have made the development plan to functioning their areas for industrial zones. By analyzing some factors and region condition, we offer the best alternative location to be Jombang Regency, Probolinggo Regency, and Bangkalan Regency. PROJECT PURPOSE : • Addressing rapid outgrowth of industrialization and anticipating the government regulation no. 24 year 2009. This industrial estate development expected to enhance regency competitiveness, which also support East Java competitiveness in the end. SCOPE OF WORKS : To develop and operates an integrated industrial estate to support fast growing industrialization in East Java. INVESTMENT CONCEPT : Investor role is to built and funding the establisment of New Industrial Eastate including it support facilities and infrastructure, to be manage and operate by the investor it self in the future. INVESTMENT COST : The construction cost for basic industrial estate also additional property for 7 (seven) year is estimated to US. $ 393 million. While investment cost 4 years ahead (warehouse) is about : US. $ 19 million. The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Offered Investment Projects ENERGY o Oil Refinery Development Project in Situbondo o LNG Receiving Terminal & Regasification Unit in Gresik and/or Pasuruan o Geothermal Power Plant in Arjuna-Welirang Mountain The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

OIL REFINERY ESTABLISHMENT LOCATION : will be located in Situbondo Regency, East side of East Java • According to observation, national domestic of Indonesia oil fuel needs more than Indonesia’s existing refineries capacity (Pertamina owned). Even, no more oil refinery in East Java. • National oil fuels demand is illustrated as follows: PROJECT PURPOSE : To fulfil East Java oil fuels demand, incase there are no oil refinery in East Java Province nowdays. Whereas oil demand for East Java/Bali/NTT/ NTB is quite high i. e. around 207 MBSD (‘ 2006), 252 MBSD (‘ 2011) and 307 MBSD (‘ 2016) /equal to 352 MBSD Crude Oil. INVESTMENT COST : Initial Investment: USD 4, 242 million Total Investment (incl. IDC and other cost) : USD 5, 018 million SCOPE OF WORK : Constructing and operating an offshore Oil Refinery with basic design as follow : • Crude oil processing capacity is 300 MBSD (300, 000 BBL/D) with composition 150 MBSD Arabian Light Crude (ALC), and 150 MBSD Arabian Heavy Crude (AHC). • Process configuration is based on concepts as follows: o Maximize Middle Distillate product; o Optimizing Gasoline product; o Minimizing Fuel Oil and Asphalt products. The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

Continue. . INVESTMENT ANALYSIS : INVESTMENT Evaluation (1 st Configuration) : Project profitability based on the assumptions: Project life = 20 years Financing loan = 70% Equity = 30% Interest rate = 8. 0% p. a. EPC Period = 4. 0 years Depreciation = 20 years Crude Price = USD 95/Bbl Based on the assumptions as above, the economical evaluation gives: Net Present Value = USD 3. 649 billion IRR on Investment, = 13. 1% Pay Out Time = 6. 9 years Profitability Index = 1. 8 DSR = 1. 09 The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

LNG TERMINAL & REGASIFICATION UNIT LOCATION : Gresik and/or Grati-Pasuruan, East Java Natural gas demand in East Java Province increases from time to time, while the supply could not catch up with this increasing demands. The highest supply of gas will take place in 2016 with total of 709 MMSCFD Gas, unfortunately in the same year the total gas demand may reach 1712 MMSCFD. Power station is the most consumer of Natural Gas, they need around 1. 5 BSCFD gas to produce consumed electricity in the area. To cap this big electricity demand, Indonesia Power Stations have to use Coal and Gas Oil as their Fuels. Coal as fuel will end up with pollution, while gas oil price is very high and increasing with the coal price increase, therefore LNG Regasification is the only answer to solve this problem. We have conducted study for LNG Regasification, both ON- shore and OFFshore Operation. CAPACITY 2, 500, 000 TON/ANNUM LNG (360 MMSCFD GAS) INVESTMENT CONCEPT : SCOPE OF WORK : LNG Regasification Terminal projects be planned as follows: 1. Sources of LNG is from outside of Java (Tangguh/Australia/Qatar). 2. Design option: Ground Terminal Option (on-shore) and the Off-shore Terminal option (off-shore). 3. Gas distribution: by piping and/or Truck Tank 4. Use Grafifloat Technology. Total Gas capacity produced from Regasification LNG is 2, 500, 000 TPA, or equivalent to 360 MMSCFD Gas. INVESTMENT COST : Gravi. Float LNG Terminal (offshore) : US$ 345 million Regasification Plant (on land) : US$ 104 million Units : C. 1. Grafi. Float LNG Terminal (offshore) Reservoir tank with a capacity of 6 Tanks 42, 000 m 3 each (a total of 252, 000 m 3 or 15 days of operation) or as per demand increased gradually. C. 2. Regasification Plant (on land) With production of 360 MMSCFD Gas The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

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GEOTHERMAL POWER PLANT OF ARJUNO-WELIRANG LOCATION : Malang Regency (Mount. Arjuna and Mount. Welirang) East Java Province has potential of geothermal energy in 11 point locations , which are three points have been managed by developers ( WKP Ngebel-Willis, WKP Blawan- Ijen and WKP Argopuro). To meet the electricity needs of society and industry, East Java continue to increase the power and capacity of local power. Now days East Java power supply is in surplus condition for 2100 MW, but still The Local Government targeting total of 8. 584 MW power supply in 2015. This also an effort to address the Central Government issue of gain 5% contribution from geothermal energy for national energy mix program in 2025. THE GEOTHERMAL PROSPECT LOCATION OF MOUNT ARJUNO WELIRANG SCOPE OF WORK : Before constructing and operating the project, the winner of the auction, after Business Permit issuance, obligate to carry out the exploration and feasibility study of project before execute the exploitation. Tender regulation: Gov. Reg. No. 59/2007 on Geothermal; MEMR No. 14/2008 on Benchmark Price Of The Selling Of Electricity From Geothermal Power Plants; MEMR No. 11/2009 Guidelines for the Execution of Geothermal Business Activities; MEMR No. 02/2011 on Reference Price for Purchace of Electricity by PT. PLN (Persero) From Geothermal Power Plants. PROJECT PURPOSE : • To meet electricity sufficiency in East Java from alternative natural energy. • Maintaining environmental sustainability. INVESTMENT COST : Estimates cost of project is USD 573. 9 Million The Government of East Java Province Istanbul – Turkey, April 25 th, 2013

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Please Come and Invest in East Java Thank You Cok Tesekkurler EAST JAVA PROVINCIAL GOVERNMENT Pahlawan Street No. 110 Surabaya +6231 -3520005, 3520004 +6231 -3538589