State-owned construction firm, PT PP Tbk (IDX: PTPP) provides loans to its subsidiary, PT PP Properti Tbk (IDX: PPRO) with worth of Rp495 billion (US$34.02 million) - Photo by PP Properti Office

JAKARTA (TheInsiderStories) – State-owned construction firm, PT PP Tbk (IDX: PTPP) provides loans to its subsidiary, PT PP Properti Tbk (IDX: PPRO) with worth of Rp495 billion (US$34.02 million), it said on Tuesday (09/01). The debt have an interest rate 9.5 percent per year with a term 36 months.

Earlier, the developer has provided loans to the unit of Rp295 billion with an interest rate of 9.5 percent and the first phase disbursement Rp175 billion was made on July 24. The company’ director, Agus Purbianto, said that the loan is given to increase the working capital of the subsidiary.

PP Properti  is a company resulting from the separation of the company’ property division which has been formed since 1991 and is domiciled in Jakarta. PTPP holds 64.96 percent of the unit’ shares, while the rest is held by YKK Pembangunan Perumahan 0.07 percent, and public 34.97 percent.

The parent is pursuing to acquires a new contracts up to Rp25.5 trillion by the end of 2020. The CEO of PTPP, Novel Arsyad reported, as of July 2020, the company has pocketed new contracts of Rp10.05 trillion. 45 percent of the new contracts obtained come from other state run firms, 31 percent from the government, and private sectors contributed 24 percent.

Due to the pandemic, PTPP intends to stop a number of projects, including construction and property businesses. Until July 15, 2020, there were 16 projects in the status of slowing down, nine projects in lockdown status and six projects being suspended.

With these conditions, the company’ revenue is estimated to be corrected by 50 percent from last year worth of Rp24.66 trillion. The decline in the company’ net profit is also expected to exceed 75 percent compared to 2019 of Rp1.5 trillion.

This decline in performance, he said, would have an impact on the PTPP‘ ability to pay its principal debt obligations. At present, the builders has total liabilities of Rp 1.63 trillion. He said, the company would take a number of strategies to overcome this problem.

In addition, this state-owned enterprise will carry out special mitigation for the operations and finance also conduct stress tests related to financial performance to project performance until the end of 2020. Before COVID-19 hit, the firm budgeted capital expenditures of Rp6.5 trillion, consisted of financing banks, other financial institutions or strategic partners, and came from company cash.

Currently, the developer managed several projects such as two steam power plants in East Nusa Tenggara and North Sulawesi with total costs Rp8 trillion. The capacity of each steam power plant is 2×50 megawatts (MW). The issuer was optimistic to complete the first projects in West Kupang in three years and in Bolaang Mongondow in 39 months.

Its also expected the two steam power plants will be ready to operate in 2022, so it will be able to electrify several villages and sub-districts in the East Nusa Tenggara and North Sulawesi regions. PTPP also become a contractor for ferro-nickel smelter construction located in Kolaka, Southeast Sulawesi with a total investment of Rp14.5 trillion. The contractor has signed a contract to build a smelter with PT Ceria Nugraha Indotama as an investor in April 2019.

Abdul Haris Tatang, a director at the company, stated that  the company will be cooperate with Chinese’ ENFI consortium to construct the smelter project. The management said that the project to build the fero nickel smelter will require an investment of Rp4 trillion in the first phase.

The plant has a total capacity of 4×72 MVA and targeting to operate in 2021. The production is projected to reach 229,000 tons of ferro nickel annually at a rate of 22 percent – 24 percent. The company also planned to sell part of its ownership in three toll road concessions, namely Pandaan – Malang toll road in East Java (35 percent), Kualanamu – Tebing Tinggi toll road (15 percent) and Kuala Tanjung Port (25 percent) in North Sumatera.

PTPP expects to raise around Rp500 billion from the equity sales. In addition, the company also eyes construction projects in the Philippines and port development project in Malaysia worth of Rp2 trillion, after getting the project in Vietnam with worth of Rp500 billion.

US$1: Rp14,550

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