JAKARTA (TheInsiderStories) Indonesian state-controlled port operator PT Pelabuhan Indonesia III (Pelindo III) is considering selling up to US$1 billion of bonds in 2018 to strengthen its equity and enable refinancing.
President Director I Gusti Ngurah Askhara Dana Diputra, popularly known as Ari Askhara, has an in-depth experiences in financial-related positions after for over 10 years. He once served as Executive Director of Natural Resources Group and SOE at PT ANZ Bank Indonesia (2012-2014), also briefly became the Finance Director at PT Garuda Indonesia Tbk (2016) and Director for Human Capital and Development at PT Wijaya Karya Tbk and Finance Director at Pelindo III (2014).
As a professional banker, he knows exactly how the market works. The company has decided to go to the debt markets to raise investment funds, following the cancellation of a planned initial public offering of its subsidiary, PT Berlian Jasa Terminal Indonesia.
The company has yet to decide whether to sell dollar or rupiah-denominated bonds, Askhara said recently, adding that they could set pricing at a premium of around 50 basis points to the government’s 10-year dollar bonds. In 2014, the company sold US$500 million in global bonds, with a 4.88 per cent coupon.
He said the new instrument would be similar to its 2014 $500 million global bond issue. Pelindo III worked with ANZ, Credit Suisse, Standard Chartered Bank and PT Mandiri Sekuritas on that project but Askhara declined to reveal who would be appointed as underwriters for the upcoming bond issue.
Askhara said next year the company will be involved in several strategic projects in national port development. This is the full transcript of Askhara’s talk with TheInsiderStories and other reporters :
Q: Why did Pelindo III decide to issue up to US$1 billion in bonds?
A: We want to maintain the financial flow and a healthy equity position. We are very confident that our Debt Ratio and Debt EBITDA Ratio are still capable of leveraging funding, and a $1 billion bond promises to be very attractive for investors.
Q: When is the exact date of issuance?
A: We haven’t decided this yet. We must comply with both domestic and overseas regulations.
Q: What do you prefer, local or global bonds?
A: We are still considering the matter. Almost 40 per cent of our revenue is in US Dollars ($250 million per year) so it is possible for the company to be flexible, issuing USD-indexed global bonds or IDR Global Bonds (Komodo Bonds) currently promoted by the government and many institutions.
But if we consider this matter from a tax, interest rate and cost perspective, a global bond (US$) issue is the most efficient and cheaper. Our projection showed the issuance of a $1 billion instrument would cost almost Rp3 trillion ($221 million) with a rate assumption of Rp14,500.
Q: Will the company do any hedging?
A: With our 40 per cent US$-based income, we actually already hedge naturally. But we do still comply with the central bank’s rules. We have to fulfill our needs target in early 2018.
Q: Any roadshow plan for the bond?
A: In Asia, we are planning to go to Singapore, Hong Kong, while for Europe, we plan to go to London, as well as Boston, New York and Los Angeles in the USA.
Q: Any further plans to conduct an IPO?
A: There is no immediate plan to conduct an IPO. Entering political year in 2018, we expect many investors will only take a ‘wait and see’ position. We will optimize external loans and capital markets to raise funds.
Q: Where will the funds be allocated? Any strategic projects in the upcoming year?
A: We have a plan to develop 11 strategic projects, including integrated economic development of Java Integrated Industrial & Port Estate (JIIPE) in Gresik, East Java, and Kalibaru Terminal Development at Tanjung Emas Integrated Port with an industrial area in Semarang.
There is also the commencement of construction of the overpass to Teluk Lamong terminal in Surabaya, the deepening of the Benoa port in Bali, and the construction of the Gili Mas quay at Lembar Port in Lombok.
That is why we need financing to fund those projects. We need to find external financing because our internal cash-flow. We generate net cash of Rp2.5 trillion per year, while we need financing around Rp7.8 trillion per annum.
Q: How was Pelindo III performance in 2017?
As of November we have booked net profit after tax of Rp1.75 trillion. We estimate full year (2017) net profit would have reached Rp2 trillion.
Q: Can the Holding concept also be applied in port sector?
I think that is the second priority. What we are focusing now is strengthening the cooperation between the state-owned port operators. The cooperation are being done in standardized the port service, tariff as well as cross ownership in subsidiaries. Pelindo III, as a case in point, invest and own shares in subsidiaries of Pelindo II and vice versa.
We have also signed strategic cooperation agreements with Pelindo I and Pelindo II to cooperate in several business.
In term of speeding up of port service, Pelindo III as a port operator, can not work alone. In the 3.5-days of average dwelling time, we (port operator) only contribute six hours. Much of the works are done by the Customs Office, and other government ministries and agencies. In other countries, those services – customs, loading and uploading, quarantine-, are done under one entity, namely the port operator.
Written by Elisa Valenta, email: firstname.lastname@example.org