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Indonesian firms set to sign pacts on US$13.6b of projects

Nusa Dua, Indonesia

INDONESIAN state-owned companies this week will sign deals pushing ahead about US$13.6 billion in planned infrastructure projects as the country seeks to diversify funding sources, authorities and a brokerage house executive said on Tuesday.

There will be over 20 deals signed by more than 12 state companies, including one by energy firm Pertamina and Taiwan's CPC Corporation for a joint petrochemical business worth US$6.5 billion, Rini Soemarno, a minister overseeing Indonesian state-owned enterprises told reporters in Bali.

Indonesia is hosting an infrastructure forum to coincide with the annual meetings of the International Monetary Fund and the World Bank in Bali this week.

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Silvano Rumantir, chief executive of Mandiri Sekuritas, said most of the agreements due to be signed on Thursday are for strategic partnerships.

The Jakarta securities firm and its parent company, Bank Mandiri, have helped arrange some of the agreements.

Ms Soemarno said that partnerships like some of those to be signed can "reduce our leverage position so we can deleverage and get more equity based financing".

State companies have taken the lion's share in President Joko Widodo's ambitious infrastructure push.

International rating agencies have warned that this has pushed those firms to borrow extensively, causing their balance sheets to deteriorate.

Inability to expand borrowing is making state firms come up with new financing instruments, helping to deepen Indonesia's shallow capital market.

Toll road operator Jasa Marga pioneered asset securitisation last year by offering a share in its future revenue. Construction firm Pembangunan Perumahan raised funds through the sale of the country's first perpetual bonds this year.

In 2017, Jasa Marga also sold the rupiah-denominated offshore bonds, dubbed "Komodo bonds".

On Thursday, Mandiri will launch an infrastructure investment fund, a mutual fund instrument combining debt and equity assets that's offered to the public and aimed at helping finance infrastructure projects, Mr Rumantir said.

He added that the proceeds of the fund, the rupiah equivalent of around US$100 million, will be used by Jasa Marga.

"We are hoping capital market investors like BlackRock, Allianz, AIA, would consider to take part," Mr Rumantir noted.

Other agreements expected to be signed on Thursday involve mining, airport expansion, tourism and transportation. REUTERS