Three SOEs to Issue Komodo Bond

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JAKARTA (TheInsiderStories) – Minister State-owned Enterprises (SOEs) Rini Soemarno has revealed, toll operator PT Jasa Marga Tbk (Persero) (IDX: JSMR), construction firm PT Wijaya Karya Tbk. (Persero) (IDX: WIKA) and power producer PT Perusahaan Listrik Negara (PLN) to issue ‘Komodo Bond’ soon.

According to Rini, JSMR and WIKA would be the first two to offer Komodo Bond to foreign investors; thus the companies have to hold grade from international rating agencies. Meanwhile the bond issuance of the state electricity company PLN will be ready to roll next year.

“We expect all the ratings to be completed next month, within the first week of November,” said Soemarno on Thursday (28/9).

Recently, financial service company Bank Mandiri Group, has introduced Global IDR Bonds, their newest international capital market investment instrument, to offer an alternative for investors.

The Global IDR Bond is a Rupiah-denominated bond sold in foreign markets, structured similar to the ‘Dim Sum Bond’ issued by the China Development Bank in July 2007.

According to Aloysius Ro, Deputy of Restructuring & Business Development at Indonesia Ministry of SOEs, the IDR Bond Global offering is expected to increase global investor participation in supporting national development, and is expected to provide access and diversification of Rupiah-based funding sources for companies in Indonesia engaged in various sectors, in particular for infrastructure.

‘This is an alternative fund to boost infrastructure development,’ Aloysius confirmed, on Wednesday (27/9).

Many Indonesian companies, particularly those in the commodities sector, have issued bonds denominated in U.S. dollars over the past few years, but struggled to service their debt after the local currency shriveled against the greenback.

In the future, government expects Global IDR Bond offerings can increase global investor participation in supporting national development, and these are expected to provide access and diversification of Rupiah-based funding sources for companies in Indonesia engaged in various sectors, in particular for infrastructure.

This product was suitable for infrastructure-related SOEs because infrastructure projects generate income in Rupiah and are long-term investments.

“This has never been done, so this is the first time,” she said.

Speaking of budgets, it has always been an issue for governments to raise funds from the private sector since there are so many infrastructure projects offering a miserly Internal Return Rate (IRR).

Donny Arsal, Finance Director at JSMR, says the toll road operator needs about Rp7 trillion (US$526 million) for the funding of its development projects in 2017. These funds need to be collected through bank loans, bonds, and asset securitization. The global Rupiah-denominated bonds would open up a new pool of investors for JSMR.

However, Arsal emphasized that it will take a long process before these Komodo Bonds can be sold, while he said it is currently difficult to predict the size of external interest in them.

Meanwhile, Awalludin, President Director at PT Angkasa Pura II (AP II) said bond issuance has becomes one alternative besides commercial funding from other financial institutions. AP II is seeking nearly Rp3 trillion from bond issuance or 30 percent from its Rp10 trillion capital expenditure target next year, with the remainder to be fulfilled by internal equity.

The Indonesian government needs a massive pool of funds to invest in the infrastructure sector around US$373 billion, or Rp5,500 trillion over the next five years, broken down into Rp1,100 trillion ($81.3 billion) per year, of which around Rp900 trillion ($61 billion) annual investment needs can be financed by domestic financing, meaning there is a potential of Rp200 trillion per year investment ‘draw’ to be financed from abroad.

Writing by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com

 

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