Presentation to EIBD Stakeholders’ Briefing
Financing Infrastructure Projects in Indonesia:
Current Availability and Issues
Richard Michael 22 October 2013
1. IIF Profile
2. PPP Framework
3. Current Status
4. MP3EI
5. Recent Developments
6. Transport Sector Overview
7. Project Finance Market
8. Case Study 1: Cikampek-Palimanan Toll Road
9. Case Study 2: Tangerang City water BOT
CONTENTS
2
IIF PROFILE (1)
3
PT Indonesia Infrastructure (IIF) is a private non-bank financial institution formed by and under the Ministry of Finance of the Republic of Indonesia. Licensed under the Minister of Finance Regulation (PMK) No. 100/2009, IIF is professionally managed and focused on supporting and investing in commercially feasible infrastructure projects. The establishment of IIF is a key element of strategic development by Government of Indonesia and development partners among international financial institutions to address the constraints on the flow of private investment in Infrastructure.
Board of Commissioners President Commissioner : Sofyan A.Djalil Commissioner : Marwanto Harjowiryono Commissioner : Arif Baharudin Commissioner : Jemal-ud-din Kassum Commissioner : Robert Dolk Commissioner : Rajeev Kannan Commissioner : Hans-Juergen Hertel Board of Directors President Director : Kartika Wirjoatmodjo Director : Harold Tjiptadjaja Director : Wito Krisnahadi Director : Haruhiko Takamoto
Board of Commissioners & Board of Directors
Vision & Mission
To provide capital for infrastructure in Indonesia and to work closely with Infrastructure sponsors, the financial sector, and the Government of Indonesia to accelerate the construction of well – conceived, commercially viable infrastructure projects.
Shareholders
• To ensure investors’ needs are reflected in contractual structures and concessions.
• To lead in offering a mix of long term financing instruments appropriate for infrastructure.
• To work with Indonesia’s financial institutions and other institutional investors to channel the nation’s saving into the long term development of Indonesia’s Infrastructure.
About Us
Representative −
Gov’t of Indonesia
IFC ADB
SMBC DEG
No Shareholders %
1 Government of Republic of Indonesia via PT Sarana Multi Infrastruktur (Persero) 34.29%
2 Asian Development Bank (ADB) 16.94%
3 International Finance Corporation (IFC) 16.94%
4 Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG) 16.94%
5 Sumitomo Mitsui Banking Corporation (SMBC) 14.89%
Total 100.00%
IIF PROFILE (2)
Transportation infrastructure, covering airports services, provision and/or ports services, railways facilities and infrastructure
Waste water infrastructure, covering waste water processing plants, collection networks and mains networks, and garbage facilities covering transportation and disposal
Road infrastructure, covering toll roads and toll bridges
Telecommunication and information infrastructure, covering telecommunication networks
Irrigation infrastructure, covering raw water channels Electricity infrastructure, covering power generation, including geothermal electric power development, transmission and distribution
Drinking water infrastructure, covering intake building for raw water, transmission networks, distribution networks, drinking water processing plants
Oil and gas infrastructure, covering oil and gas processing, storage, transportation, transmission or distribution;
Other infrastructure projects which are approved by the Minister of Finance
SECTORS
4
SCOPE PROJECT INITIATIVES
GOVERNMENT OF INDONESIA INITIATIVES
PRIVATE SECTOR INITIATIVES
PROJECT TYPES
• PPP under Presidential Regulation No.67/2005 jo Presidential Regulation No.13/2010 and No.56/2011
• Private Project under “Izin Pengusahaan”
• Private to private
IIF PROFILE (3)
5
• Senior Loan • Subordinated Finance
(Mezzanine)
• Guarantees
INVESTMENTPRODUCTS
FUND - BASED
NON FUND - BASED
End of Financing Period
• Refinancing
• Equity Investment
• Stand-by Finance
FIN
AN
CIN
G P
ROD
UCT
S
Project Life Cycle
Project Preparation Project Construction
Project Operation
End of
Con-cession
Tender
IIF PROFILE (4)
6
End of Financing Period
Loan Syndication
Arranger
ADVISORY
SERVICES Transaction
Advisor
Financial Advisor
Project Life Cycle
PROJECT TYPES
• PPP under Presidential Regulation No.67/2005 jo Presidential Regulation No.13/2010 and No.56/2011
• Private Project under “Izin Pengusahaan”
• Projects funded by state budget
• Private to private
Project Construction
Project Operation
End of
Con-cession
Tender Project Preparation
State Minister of Stated Owned
Agencies
Chairman: Coordinating Minister of Economic Affairs
Co-chair: Minister of Planning/ BAPPENAS
Secretary 1: Deputy Min.Infrastructure, CMEA Depity 2: Deputy Min. Infrastructure, BAPPENAS
Line Ministers (sectors) MPW,
MOT
Ministers of Home Affairs Ministry of Finance
PPP central Unit (P3CU) Policy Coordination, Project Planning,
Coordination Analysis, Coordination on the need of government support, cross sector
facilitation, Transaction and Advisory Support
PPP Nodes Project identification and preparation, Monitoring and
Quality Control, ie: -Project Identification
-Preparation tender documentation -Transaction and post transaction process
Line Ministry Project devt. and
Monitoring
SOE Poject Project devt.
and Monitoring
Local Govt.Project Project devt. and
Monitoring
Project Development
Facility
IIGF Assesing and
Managing Govt Support
SMI/IIF Financing
Government Contracting Agency (GCA) Project Facilitation
Risk Management
Unit Devt Govt.
Support, Policy, and Monitoring
National Committee of Policy for Infrastructure Acceleration (KKP)
CURRENT STATUS (1)
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Source : World Bank
3,339 3,950 4,948 5,606 6,436 7,427 8,543 9,270
14.9 17.4 21.4 23.1 26.3 29.9
5.5%
6.3% 6.0%
4.6%
6.2% 6.5% 6.5%
6.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1
10
100
1,000
10,000
2006 2007 2008 2009 2010 2011 2012 2013
GDP (IDR Trillion) GDP per capita (IDR million)
Economic Growth
99 129
174 188
0
0.005
0.01
0.015
0.02
0.025
0
50
100
150
200
250
300
Gov't Spending on Infrastructure (IDR Tn)
Gov't Spending on Infrastructure (% of GDP)
Government increases infrastructure spending allocation..
55 64 73 76 80
118
169 194 8.2% 8.5%
7.4% 8.1% 7.7%
9.1%
10.9% 11.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
100
200
300
400
500
2006 2007 2008 2009 2010 2011 2012 2013
Gov't Capital Expenditure (IDR Trillion)
Gov't Capital Expenditure (% of Total Gov't Spending)
55 64 73 76 80
118
169 194 8.2% 8.5%
7.4% 8.1% 7.7%
9.1%
10.9% 11.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
100
200
300
400
500
2006 2007 2008 2009 2010 2011 2012 2013
Gov't Capital Expenditure (IDR Trillion)
Gov't Capital Expenditure (% of Total Gov't Spending)
APBN-P RAPBN
…in order to maximize economic growth
APBN-P RAPBN Source: Ministry of Finance, RAPBN Source: Central Bureau of Statistics & RAPBN, Bank Indonesia
Revised to 5.9%
CURRENT STATUS (2)
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MP3EI (1)
Source: Master Plan Accelera1on & Expansion of Indonesian Economic Development (MP3EI) 2011-‐2025, IIF Analysis
• Government’s MP3EI has iden.fied poten.al investment requirement in Indonesia of approximately IDR 4,000 Trillion (~USD 444 billion), of which around 41% will be allocated to the infrastructure sector, i.e. in the amount of IDR 1,653 Trillion (~USD 184
billion), broken down as follows:
Power & Energy IDR 393 tn
24%
Toll Roads & Roads IDR 387 tn
23%
Water Utilities IDR 27 tn
2%
Ports IDR 129 tn
8%
Airports IDR 24 tn
2%
Rail IDR 222 tn
13%
ICT IDR 170 tn
10% Other
IDR 301 tn 18%
Huge investment requirement for infrastructure development
• Using minimum 5% of GDP as a method to esAmate infrastructure investment requirement for Indonesia, it is esAmated that Indonesia requires approximately USD 353 billion for the next 5 years based on IMF’s forecast on Indonesia’s GDP.
(in USD billion) 2013 2014 2015 2016 2017
Forecast on Indonesia's GDP (World Economic Outlook Apr-12, IMF) 1,055 1,214 1,394 1,593 1,812
Total
Est. infrastructure investment requirement, assuming 5% of GDP (the level before 1998 crisis) 53 61 70 80 91 353
9
Transport Sector 46%
▪ To support the development of the main economic activities within the corridors (MP3EI), the total investment value has been identified at about IDR 4,000 Trillion (~US$ 444 billion)
▪ From that total investment, 41% will be needed in infrastructure sector IDR 1,653 Trillion (~US$184 billion) and the private sector is expected to contribute 51% of the total investment needed.
Infrastructure Sector requires significant funding that is suitable for its characteristics
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Investment Indication in Main
Activity
1,653
Infrastructure
Indication of Investment in Main Economic Activities (IDR Trillion)
Investment Indication Value
Based on Investor
Private
Government
SOE
Mix
SOURCE: Master Plan Acceleration & Expansion of INA Economic Development_2011-2025 (MP3EI)
MP3EI (2)
10
2,347
• Indonesia Infrastructure Guarantee Fund (IIGF): New entity under MoF to provide performance guarantees for government –related contracting agencies in PPP project. Only guarantee issued to date for Central Java Power Project (to close 4Q13?). Guarantees in process for Umbulan, Lampung, W Semarang, Sumsel 9/10, etc.
• Land Acquisition Law (2012): Streamlines process for acquisition for “eminent domain” purposes, but does not apply to existing Trans-Java toll roads
• Viability Gap Funding (VGF): For certain PPPs which are economically feasible, but not financially viable, up to 50% of project cost can be funded by Government during the construction period. Tenders awarded on basis of lowest NPV of VGF amount. Proposed for water projects, but roads/rail also possible
• Central PPP Unit: To be established by Risk Management Unit of MoF, but may be limited in scope/authority
• Performance-Based Annuity Scheme (PBAS): Proposed alternative to VGF whereby Government pays for asset over concession life on availability basis. No market risk for private sector – may be applicable to less bankable roads outside Java
RECENT DEVELOPMENTS
11
Roads:
Trans-Java roads have struggled due to weakness of some sponsors and land acquisition issues
Trans-Sumatra 2,700 km still unclear structure (Hutama Karya?);
New roads being tendered: Serpong-Balaraja, Medan-Kuala Namu
Jakarta awarded 6 inner city toll roads to companies largely under the regional government
Ambitious schemes: Sunda Straits Bridge, Sea-based Jakarta/Surabaya road?
Ports:
Sector dominated by the Pelindos
Kalibaru North PQ process dropped to award to Pelindo II
Terminal 1 will be a JV with Mitsui & Co
Cilamaya, W Java, to be tendered, but resistance from Pelindo II
Separation between regulation/operation not established
TRANSPORT SECTOR OVERVIEW (1)
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Airports:
Also dominated by Angkasa Pura I & II
Kertajati in W Java may be a PPP
Private investment in Batam, N Bali, Yogya plus 10 new PPPs (eg Palu, Jayapura, Lampung)
Separation regulation/operation again not effective
Rail:
C Kalimantan Rail PPP – structural issues
E Kalimantan Rail proposed by Russian Railways
Express rail line to Soekarno-Hatta planned as PPP - PQ to be launched this year?
Projects usually on state budget via Kereta Api – e.g. double tracking Jakarta/Surabaya
New DKI Governor relaunching Jakarta MRT and Monorail projects – no private funding
TRANSPORT SECTOR OVERVIEW (2)
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• Liquidity: For Rupiah, market quite liquid. US$ fluctuates for local banks
• Tenors: Up to 15 years provided by local banks. Offshore up to 20 years
• Pricing: For Rupiah, based on Jibor, time deposits. Spreads narrowing in recent years
• Main Players: State-owned banks (BNI, Mandiri, BRI), large locals (BCA, BII, CIMB Niaga), branches of foreign banks (HSBC, SMBC, StanChart, ANZ, DBS, ICBC), offshore players, multilaterals (IFC, ADB)
• Risk Appetite: Few genuine limited-recourse deals by local players (name lending still prevalent), but moving towards international standard
PROJECT FINANCE MARKET (1)
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PROJECT FINANCE MARKET (2) Sponsors need more and more stronger competitive edge which can be achieved by establishing greater access to achieve optimum mix of available financing in the market
Multilaterals
70% - 80%
Debt
20% -
30%
Equity
Typical Financing Mix
Financing Institutions
Source of Funds
Banks • International Banks • Large Domestic Banks • Local Branch of Foreign Banks • Small-to-medium Domestic Banks
Convertibles
Equity
Subordinated Loan
Mezzanine
e.g. deposits (mostly short term for domestic banks) & capital markets
• Strategic Investors • Private Equity / Hedge Funds • Infrastructure Financing Institutions
(SMI/IIF)
e.g. multilateral member countries, capital markets
Infr
astr
uctu
re P
roje
ct In
vest
men
t
e.g. private investors, multilaterals, capital markets
Infrastructure Financing Institutions (SMI/IIF)
e.g. Government, multilaterals, private investors & capital markets
Qua
si-
Equi
ty
ECAs e.g. government, private investors
15
PROJECT FINANCE MARKET (3)
Type of Institutions
Characteristics of Major Financing Institutions in Indonesia
Mezzanine Facilities Debt Facilities
Pure Project Finance as Acceptable Structure
Strong Long-Term IDR Currency Funding
Require Gov’t Guarantee Tenor
ECAs ✔ ✔ ✔ can be very long
Multilaterals ✔ ✔ ✔ ✔ long
International Banks ✔ ✔ ✔ medium
Large Domestic Banks ✔ long-to-
medium
Local Branch of Foreign Banks ✔ medium-to-
short
Small to Medium Domestic Banks ✔ medium-to-
short
PE Funds ✔ ✔ medium
✔ ✔ ✔ ✔ long-to-medium
16
• Key part of Trans-Java toll road network; 116km linking existing Jakarta-Cikampek and Kanci-Palimanan toll roads
• Sponsored by PLUS/UEM of Malaysia (55%) and Saratoga/NRC (45%)
• Concession Agreement signed 2006 for 35 years with regulator BPJT; lenders negotiated a Tripartite Agreement with Sponsors/BPJT in late 2011
• Total cost Rp 12.5 trillion, funded on a 70:30 debt:equity basis
• Financial close was in September 2012 and first drawdown achieved June 2013
• Financing with 15-year tenor of Rp 8.8 trillion provided by 22 banks
• Combination of local banks (BCA, Bank DKI, Bank BJB, Panin, ICBC), IIF and Malaysian Exim
• First operational section due to open 1Q2015
CASE STUDY 1: CIKAMPEK-PALIMANAN TOLL ROAD (1)
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CASE STUDY 1: CIKAMPEK-PALIMANAN TOLL ROAD (2)
18
CASE STUDY 1: CIKAMPEK-PALIMANAN TOLL ROAD (3)
19
• Not transport, but an example of a B2B alternative to PPP model
• BOT water project under a Cooperation Agreement signed in February 2012
• Delivery of 1,950 lps treated water to 1.8 million population of Tangerang City
• Sponsored by Moya Asia Limited
• PDAM Tirta Benteng offtaker of bulk water and responsible for delivery to end users
• Total cost of Rp 1.4 trillion, financed on 53:47 debt:equity basis
• Funding of Rp 751 billion with a 12-year tenor
• Arranged by IFC, IIF and SMI and signed in June 2013
• First water project to be financed under new Ministry of Public Works B2B regulation for water sector. May be applied to other sectors, including transport?
CASE STUDY 2: TANGERANG CITY WATER BOT
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T H A N K Y O U
21
PT Indonesia Infrastructure Finance The Energy Building, 15th Floor
Sudirman Central Business District, Lot.11A Jl. Jend. Sudirman Kav.52-53, Jakarta 12190 - Indonesia
Phone 62-21-29915060 Fax. 62-21-29915061