Indonesia's South Sumatra province plans to invest 11 trillion rupiah ($1 billion) in new railroads so that its huge coal reserves can be moved from the mines to the ports more efficiently, the governor said on Thursday.

South Sumatra has 47 billion tonnes of coal resources, or half of Indonesia's total of 93.4 billion, according to data from the energy and mines ministry, but its coal production averages just 12 million tonnes a year due to poor transportation. Kalimantan island accounts for most of the other coal produced.

The governor, Alex Noerdin, said he plans to build 270 kilometres (168 miles) of railway in the province, which will have the capacity to transport 50 million tonnes of coal mined in the province each year.

We want to catch up with Kalimantan. Coal production depends on the availability of transportation, Noerdin told reporters after meeting with Vice President Jusuf Kalla in Jakarta.

We will hold a tender for the project this year but we have received interest from investors, he said, adding that the project could be completed within three to four years.

State coal miner PT Tambang Batubara Bukit Asam Tbk (PTBA.JK: Quote), which has coal mines in South Sumatra, is one of the firms that could benefit from the project.

Bukit Asam's customers include the state electricity firm, but poor infrastructure in the area has affected its deliveries, leading to blackouts.

Bukit Asam has already said it would form a joint venture with state train operator PT Kereta Api Indonesia to upgrade an existing railway linking its coal mines to a port on the southern tip of Sumatra -- a project estimated to be worth $1.8 billion.

But it will also be able to use the new railroad to deliver 20 million tonnes of coal a year to a port on the southeast side of Sumatra, once the new railroad has been completed, said Sukrisno, the firm's president director.

Indonesia's total coal output may be unchanged in 2009 from last year, at 225 million tonnes, the energy and mines ministry has said. ($1=10,925 Rupiah) (Reporting by Fitri Wulandari, editing by Sara Webb)

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