JAKARTA (TheInsiderStories) – Minister of State-Owned Enterprises Rini Soemarno has urged ‘creative fund raising’ from the firm under her ministry (SOEs) to fulfill their financial needs in infrastructure development. Currently the government has begun to promote Rp4 trillion (US$300.75 million) worth of asset-backed securities (ABS) issued by power producer PT Indonesia Power followed toll operator PT Jasa Marga Tbk (IDX: JSMR) with same amount.
The Government is also looking at real estate investment trust (REITs) with mortgage credit as the underlying asset as an alternative to raise fund for the financing of the SOEs business expansion. Soemarno said, PT Bank Mandiri Tbk (IDX: BMRI) has plans to issue REITs in this year.
Another example of financing for SOEs, is list SOEs or its unit at the Indonesia Stock Exchange like PT Garuda Maintenance Facilities, scheduled for next month. All this effort is exacted to attempt to compensate for the unnerving funding gap for infrastructure spending over the next five years.
President Joko Widodo’s infrastructure development plan will require some Rp5,500 Trillion ($450 billion) in investment between 2015 and 2019 – the term of his Presidency – the funds to derive from the state as well as from other partners. It is estimated that the state budget can cover only about 30 percent of these needs.
ABS has merged as a popular ‘new’ fund-raising instrument among SOEs. Today, Indonesia Power, a subsidiary PT Perusahaan Listrik Negara (PLN) engaged in power generation, has listed their ABS on the bourse, with a maximum value of Rp4 trillion.
This fund will be used to support the development of several new power plants, including Suralaya power plant units 9 and 10 in West Java, with a capacity of 2×1000 megawatts (MW). Currently, the company manages 14,578 MW of generators spread from Sumatra to Papua; in 2016 the company contributed approximately 29 percent to national electricity production.
At least four SOEs are in the pipeline, ready to offer asset-backed securities for a total amount Rp15 trillion this year, the Minister said last week. Power producer PLN plans to raise Rp10 trillion in funds from securities instruments, while Jasa Marga is going for Rp5 trillion, PT Bank Tabungan Negara Tbk (IDX: BBTN) Rp 1trillion and PT Bank Mandiri Tbk (IDX: BMRI) Rp1 trillion.
To get a bigger picture about how interesting this ABS instrument promises to be, The Insider Stories has interviewed Sarwono Sudarto, Financial Director of PLN.
Below is the detail interview :
Q: Will PLN raise more funds?
We plan to raise Rp10 trillion in total. Currently, through subsidiary company PT Indonesia Power, we have issued two ABS tranches. We already spent the first Rp3.6 trillion from tranche (A), the remaining tranche will be expended by next year. We will seek other fund-raising potentials; basically, we plan to spend up to Rp10 trillion by next year. Sure we will need more fund raising: as projects show more progress we will need more income.
Q: So, Indonesia Power will establish power plant Suralaya 9 and 10; how much is the total financing needed for it?
Suralaya 9 and 10 has total capacity of 2 x1,000 megawatts and it will need a Rp43 trillion investment. Of this, 30 percent is equity (around Rp12 trillion) and Indonesia power hold 51 percent of this equity, equal to Rp6 trillion. Actually current financial needs are already completely fulfilled. However, considering it’s a multi-year project, we will raise funds gradually.
Q: So this fund will be used to finance equity? Instead of using internal funds?
Rp4 trillion in ABS will be used by Indonesia Power for equity need. We basically use not only ABS to finance company equity. We also use internal funding. The Rp4 trillion ABS is actually internal funding that will be used up front, regarding the PPA as clearly done with PLN. So we use future revenue as underlying
Q: Other power plant projects, excluding Suralaya?
We have several other projects, including a mine mouth in East Kalimantan with 2×100 megawatt capacity and a hydro power plant in Sulawesi with 30 megawatt capacity and Rp60 trillion in investment.
Q: How big is the capability of PLN to leverage their loans?
We have great equity and solvency actually. We also have a good debt-to-equity ratio. Basically we borrow the funds to maintain liquidity as there is a time lag. For example, we have debt that will be mature in the next 5 years, so we spend a part of this to maintain liquidity. Ideally we can leverage 3 times our equity. Let’s say our equity is currently around Rp855 trillion; we can borrow up to Rp2,565 trillion, yet in fact our obligation is only a half of our equity.
Q: Will the Company take out more loans this year?
This year we are already fully-funded. We have Rp40 trillion in internal funding, plus Rp60 to 70 trillion in loans. We have done enough. Yet this year we need less funding compared to our expectation for next year.
Writing by Linda Silaen/Yosi Winosa, email: firstname.lastname@example.org