Govt backs SOE involvement in infrastructure works

JAKARTA. The number of infrastructure projects is expected to increase in the next year, after the Ministry of Public Works and Housing (PUPR) raised the budget by 9% to IDR105.6 trillion.

“The budget rise will benefit construction and toll road sectors”, analyst at UOB Kay Hian Securities Bias Prasuryo said. 

The request for increasing the budget has been approved since the middle of September this year. The budget rise is expected to endorse State Owner Enterprises or SOEs issuers to participate in government projects.

However, SOEs need huge amount of capital to involve in government projects, because most of government projects require large number of investment, such as toll road project. For an example, PT Jasa Marga Tbk (JSMR) needs IDR30 trillion and IDR82 trillion in 2017 and 2019, respectively for funding toll road projects.

Financial Director of JMSR Anggiasari Hendratmo explained that JSMR is targeting to raise IDR1.8 trillion through right issue. The amount of funds consists of IDR1.25 trillion of funds of state capital participation (PMN) and IDR550 billion of public capital.  

Aside of right issues, JSMR will raise funds by releasing a worth of IDR 19 trillion of bonds in the first quarter of 2017. JSMR will allocate IDR2 trillion of the funds to refinance the mature bonds, and the rests for investment.

According to Adrianus estimation, JSMR’s gearing ratio will stand at the level of 3 times in 2019, on the grounds that the issuer becomes more active in finding funding resources.

Adrianus added that government has offered solutions in order to cope with viability gap fund (VGF) of the SOEs to participate in government’s projects.

For an example, government has allowed private sector to cover the VGF. In this case, government through Toll Road Regulatory Agency (BPJT) has requested PT Sarana Multi Infrastructure to provide loan with competitive interest rate for the SOEs. Government has also encouraged investors to release sukuk and even perpetual bonds.

BPJT has asked JSMR to form a new concession for the issuer’s toll road projects. “This will increase interest rate return (IRR) of the toll road projects, which need huge amount of investment”, Adrianus said.

(MUHAMMAD FARID/Translator)