By Fathiyah Dahrul and Randy Fabi
JAKARTA (Reuters) - Indonesia's state-owned PT Angkasa Pura I plans to partner with GVK Power & Infrastructure next year on a project to build a second airport in the central Java city of Yogyakarta worth up to $700 million, said the head of the Southeast Asian firm.
GVK is expected to be the first foreign firm allowed to own a major stake in an Indonesian airport, as the government looks overseas for help in funding much needed infrastructure.
Indonesian airports are barely coping with a surge in passenger traffic, trying to catch up with airlines, like Garuda Indonesia and privately held Lion Air, that have placed unprecedented plane orders.
"Our cooperation with GVK from India on the Yogyakarta airport will be the first foreign joint venture," Angkasa Pura's President-Director Tommy Soetomo told Reuters. "We are still preparing the master plan."
The deal has yet to be finalised and must be approved by Angkasa Pura's shareholders, he said. GVK's share in the joint venture will not be more than 49 percent.
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Work on the new airport is expected to start in 2015, with operations starting as early as 2017. Angkasa Pura will fund the project through loans or equity, Soetomo said.
It was not immediately clear if the new airport would complement or replace the existing airport.
The Indonesian company, which manages 13 airports, also plans to increase capacity at two other domestic airports next year for around $300 million each.
Indonesia announced plans earlier on Wednesday for $35 billion in new infrastructure projects from next year in a bid to tackle one of the biggest deterrents to investment in Southeast Asia's largest economy.
Indonesia's government is expected to announce by the end of this year new regulations that will open up foreign investment to the country's airports and ports.
(Editing by Jeremy Laurence)