Investment Feasibility Analysis of the Palembang–Indralaya Toll Road
Abstract
The Palembang–Simpang Indralaya Toll Road, spanning 21.93 km, is a strategic component of the Trans-Sumatra Toll Road network, intended to improve regional connectivity and reduce logistics costs in South Sumatra. However, average daily traffic between 2017 and 2024 reached only 26%–45% of projected levels, raising concerns about the project's financial viability. This study evaluates the financial feasibility of the existing financing structure and compares alternative schemes, including the tariff-based Base Case, Availability Payment (AP), 30% Viability Gap Funding (VGF), and asset divestment at 49%, 51%, and 100%. Using a capital budgeting approach, financial performance was assessed through Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period (PP). Under the tariff scheme, the project generates an IRR of 10.98%, an NPV of IDR 1.37 trillion, and a payback period of 16 years. The 30% VGF scheme provides the strongest financial results, increasing the IRR to 12.41% and NPV to IDR 2.01 trillion while reducing the payback period to 14 years. Conversely, the AP scheme records an IRR of 4.17% and a negative NPV of IDR 635.43 billion, indicating financial infeasibility. Asset divestment also weakens financial performance as the divested share increases. These findings identify 30% VGF as the preferred financing alternative for improving investment feasibility and addressing risks arising from lower-than-expected traffic volumes. The results highlight the importance of targeted public financial support in sustaining infrastructure investment under persistent demand uncertainty. This assessment offers practical guidance for policymakers and investors selecting financing arrangements for comparable toll road developments.
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