A LEADING CATALYST IN FACILITATING INDONESIA S INFRASTRUCTURE DEVELOPMENT Innovative Financing Scheme to Accelerate the New Urban Agenda s Infrastructure Development Targets Darwin T. Djajawinata Director of Project Development and Advisory The 4 th PlanoCosmo International Conference Bandung, 2 nd April 2018 PT Sarana Multi Infrastruktur (Persero)
Agenda 1 Opportunities in Urban Infrastructure Development 2 Role of PT SMI in Supporting Urban Infrastructure Development 2
Opportunity for Infrastructure Financing in Indonesia Indicative Infrastructure Investment Needs 2015-2019 Indicative Financing Alternatives (Rp trillion) 6,000 5,000 4,000 3,000 2,000 1,000 719 240 576 144 48 96 1,007 528 288 432 384 336 4,796 Private 37% SOE 22% Centra l and Region al Govt Budget 41% 0 (Rp trillion) Central and Regional Govt Budget SOE Private Source: The National Medium Term Development Plan 2015-2019, National Development Planning Agency Electricity, Road, and Port become the most prioritized sectors to be built, the total requirement of funds until 2019 reaches Rp4,796 trillion ~ USD363 Billion 1,978.6 1,066.2 1,751.5 Opportunities for Investors is about 59% (Private sectors 37% and SOE 22%) *1 USD ~ Rp13,200 3
Project Examples Criteria Source of Fund Options Infrastructure Financing Options and Criteria State Budget Local Budget Municipal Financing Public Private Partnership (PPP) Central Government Local Government Local Government PT SMI (Persero) Central Government Private Company Economically feasible but not Financially feasible Economically feasible but not Financially feasible Economically feasible but Financially marginal Economically feasible but Financially marginal Local Road Irrigation Dam Housing Port Local Road Regional Public Hospital Traditional Market Terminal Local Road Regional Public Hospital Traditional Market Terminal Water Supply Umbulan Toll Road Palapa Ring Sidoarjo Public Hospital LRT Medan Notes: Government also support local government to issue Municipal Bond Options to Accelerate Infrastructure Development In Indonesia 4
Fiscal Support from Ministry of Finance (MoF) to Attract More Private Participation through PPP Project Development Facility (PDF) Viability Gap Fund (VGF) Government Guarantee (Directly by MoF or through IIGF) Availability Payment Schemes (AP) Financing from PT SMI and PT IIF Those financial facilities are fiscal tools in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects: IIGF Guarantee PDF VGF IIGF Guarantee PDF AP IIGF Guarantee IIGF Guarantee CJPP Central Java Power Plant 2x 1000 MW Umbulan Water Supply Palapa Ring Optic-Fiber Network Various Toll Roads These Support Has Made PPP is Happening as one of the option for the Acceleration of Infrastructure Development in various sectors across Indonesia Souce: Bappenas 2017 5
Agenda 1 Opportunities in Urban Infrastructure Development 2 Role of PT SMI in Supporting Urban Infrastructure Development 6
PT SMI as a Catalyst in Accelerating Infrastructure Development Status Duties Ownership Year Established : 2009 Type : State-Owned Enterprise Regulation : MoF Regulation No. 100/PMK.010.2009 on Infrastructure Financing Companies Business License : Non-Bank Financial Institutions (NBFI) Supporting Government s infrastructure development agenda through partnerships with private and/or multilateral financial institutions in PPP projects Serve as catalyst in accelerating infrastructure development in Indonesia 100% owned by the Government of Indonesia Vision Mission To serve as catalyst in accelerating national infrastructure development 1. To become a strategic partner that delivers value added contributions to Indonesia s infrastructure development 2. To develop flexible financing products 3. To offer service excellence backed with good corporate governance 7
PT SMI Has a Mandate to Become a Catalyst to Support Infrastructure Development Innovative & Flexible Financing Products To close the gap; e.g. senior loan, mezzanine, shareholder s loan and equity investment Enabler to accelerate infrastructure development Providing advisory services, project development, capacity building Financing facility for regional government to accelerate infrastructure development Regional Government Infrastructure Development Fund Raising Fund Raising Optimization (leveraging) from capital market, conventional & sharia banking, bilateral and multilateral organization Optimization of Strategic Partnership and Technical Assistance from bilateral/multilateral organizations To Support Sustainable Development Goals (SDGs) and Climate Change programs Setting up a special division, Green Climate Fund (GCF) accreditation, ESMF guidelines, renewable energy promotion 8
Sharia Conventional Our Business Model Sources of Funds PT SMI Business Pillars Business Pillar #1 Business Pillar #2 Business Pillar #3 FINANCING & INVESTMENT ADVISORY SERVICES PROJECT DEVELOPMENT Sectoral Focus Capital Injection from GOI Capital Market (Bonds, Notes, Securitization) Loans and Grants Infrastructure Financing Senior loan (Working Capital, Investment Loan) Junior Loan Mezzanine Equity investment Shareholder s loan Arranger & Underwriter Standby Lender PPP Municipal Financing (PIP/RIDF) Public Sector Advisory Training & Capacity Building Investment Advisory Project Development Facility (PDF) PPP Project PDF & Donor Fund Management Renewable Energy Project (Geothermal Exploration) TA & Donor Funds Management Municipal Projects Electricity Transportation & Energy Efficiency Train Rolling Stock Renewable Energy Irrigation Water Supply Telecommunication Oil and Gas Road and Bridge Waste Water & Waste Management Sharia Capital Market BPJS, Sharia Insurance Hajj & Syirkah Funds Sovereign Wealth Fund Sharia Financing IMBT/ Lease with Option to Own Murabahah/Installment Sale with Deferred Pmt. MMQ/Diminishing Partnership Musharakah/Joint Partnership Indent Lease with option to own* MMOB* Financial Advisory Technical Assistance Donor Fund Management Hospital Regional Infrastructure Correctional Infrastructure Market Social Infrastructure Education Infrastructure Tourism Infrastructure IMBT= Ijarah Muntahia Bittamlik MMQ= Musyarakah Mutanaqisah * under development MMOB= Mudharabah Muqayyadah on Balance Sheet 9
Project Financing Structure Quasi-Equity Various Financing and Investment Product of PT SMI Based on Project Financing Structure Based on Project Financing Tenor 70-80% Debt Investment Loan Take-Out Financing Promoter Financing Working Capital Loan Bridging Financing Long-Term (> 5 years) Financing and Investment Product Investment Loan Take-Out Financing Promoter Financing Subordinated Loan Mezzanine Equity Investment 20-30% Equity Subordinated Loan Mezzanine Convertibles Equity Short-term (1-5 years) Financing Product Working Capital Loan Bridging Financing Cash Deficiency Support (CDS) Financing and Investment Product Can be Applied Both in Conventional and Sharia Principle 10
Execution of Mandate as Catalyst of Infrastructure Development Financing and Investment as of February 2018 PT SMI s Mandate Financing Sectors Long-term financing Innovative Financing Product Flexible Financing Scheme Large Multiplier effect Competitive interest rate Multiplier Effect Long-term and Flexible Scheme PT PLN (Ex-PIP) 12.06% Electricity 13.02% Toll Road 44.57% Transportation Oil and Gas Social 8.83% 4.52% Infrastructure Road 3.91% 3.70% Telecommunicati on 3.07% Other 6.30% Renewable Energy 0.15% Project Location Mix Rolling Stock 2.78% Irrigation 2.25% Water 1.13% Total Project Cost IDR 421.8 Trillion Maturity Grace Period Up to 25 Years Up to 15 Years Sumatera 28.57% Sulawesi 7.59% Multiplier Effect 6.1 times to Financing Commitment 13.8 times to Paid-up Capital Example: Toll Road Financing of Palembang - Indralaya Jawa 57.08% Kalimantan 2.73% Bali Nusa Tenggara 2.11% Papua Maluku 1.92% 11
Diversification of Financing Activities as of February 2018 Commitment and Outstanding Financed Project Cost Outstanding 67.874 69.553 257 421.855 Commitment in IDR billion 44.896 197.938 30.442 23.004 17.157 35.873 35.499 77.824 50.084 95.754 3.087 4.477 4.262 5.577 *Including 2013loan to Local 2014Government, 2015IIF Subordination, 2016 and 2017 Equity Investment Feb-18 Investment Loan Working Capital Loan Commitment by Product Working Capital Loan 21.79% Investment Loan 52.46% Subordinated Loan Bridge Loan Subordinated Loan 9.69% Bridge Loan 6.06% Equity Investment 5.87% Promotor Financing 2.63% Equity Investment Sharia Financing 1.48% Promotor Financing Sharia Financing IDR35.4 Tr IDR14.7 Tr IDR6.5 Tr IDR4.1 Tr IDR3.9 Tr IDR1.7 Tr IDR1.0 Tr up to 2014 Investment Loan 2015 Investment Loan 66.46% Subordinated Loan Outstanding by Product Bridge Loan 2016 Subordinated Loan 10.48% Equity Investment 2017 Working Capital Loan Feb-18 Bridge Loan 7.44% Equity Investment 5.09% Working Capital Loan 4.29% Promotor Financing Sharia 3.39% Financing 2.86% Promotor Financing Total Project Cost Sharia Financing IDR23.2 Tr IDR3.6 Tr IDR2.6 Tr IDR1.8 Tr IDR1.5 Tr IDR1.2 Tr IDR1.0 Tr 12
National Priority, National Strategic and RPJMN 2015-2019 Projects Financed by PT SMI as of February 2018 List of Government Projects Financed by PT SMI RPJMN* (Perpres No.2 Year 2015) National Priority Projects (Permenko No.12 Year 2015) 1 2 3 National Strategic Projects (Perpres No. 3 Year 2016) Total Commitment IDR 28,6 trillion Total Project Cost IDR 148,3 trillion Road and Toll Road Trans Jawa Toll Road: Pejagan- Pemalang, Semarang-Solo, Solo-Ngawi, Ngawi-Kertosono Trans Sumatera Toll Road: Medan Binjai, Palembang Indralaya, Bakauheni Terbanggi Besar Pandaan Malang Toll Road Cinere Jagorawi Toll Road Bogor Ring Road Toll Road Serpong Balaraja Toll Road, West Java Entikong Border Road, West Kalimantan Manado Bitung Toll Road Irrigation and Dam Jabung Irrigation, East Lampung Rentang Irrigation, West Java Tebing Tanggul - Tanggul Kritis Citarum River Lolak Dam, Bolaang Mongondow, North Sulawesi Paseloreng Dam, South Sulawesi Logung Dam, Centre Java Bajulmati Dam, East Java Telecommunication Palapa Ring Centre Package Water Umbulan Drinking Water Supply System Power PLTU Kendari 3-2x50 MW PLTU Sumsel - 1x300 MW PLTU Kalteng 1-2x100 MW PLTS Sumba Timur PLTU Sumsel - 1x600 MW PLT Biomass Merauke Transportation Kulonprogo International Airport, Yogyakarta Soekarno Hatta Terminal 3 Ultimate Airport Development LRT Palembang LRT Jabodebek Container Port Palaran, East Kalimantan *National Medium Term Development Plan 13
The Uniqueness of PT SMI s Financing and Investment Products Case Study: Long-Term Investment for Medan-Binjai Toll Road Project Project Profile Project Structure Project Location Project Value Medan-Binjai Toll Road North Sumatera IDR 1.6 trillion Investment needed for Medan- Binjai Toll Road IDR 1.6 trillion State capital injection to PT Hutama Karya IDR 1.1 trillion Funding from PT SMI IDR 481 billion SMI Portion IDR 481 billion Project Description Medan-Binjai Toll Road (16 km) is a Strategic National Project according to Presidential Regulation No. 3/2016 dan National Priority Project according to Permenko No.12/2015. This is a greenfield project with low traffic estimation. Maturity Notes 25 years (15-year grace period) Average daily traffic for Trans Sumatera Toll segment is relatively low compared to average daily traffic toll in Java, hence the funding structure with long maturity is needed. 14
The Uniqueness of PT SMI s Financing and Investment Products Case Study: Cash Deficiency Support (CDS) for Trans Sumatera Toll Road Project Bakauheni-Terbanggi Besar Segment Project Profile Project Structure Project Location Project Value SMI Portion Project Description Bakauheni-Terbanggi Besar Toll Road Lampung IDR 16.8 trillion IDR 7.5 trillion (Cash Deficiency Support) Bakauheni-Terbanggi Besar Toll Road (±140,39 km in length) which located in Lampung is part of Trans Sumatera network that has strategic value for transportation, human, and products and services activities. This will help to reduce congestion along these lines and shorten the travel time. Investment Needed for Bakauheni- Terbanggi Besar Toll Road IDR 16.8 trillion Maturity Notes State capital injection to PT Hutama Karya IDR 2.2 trillion Bank Loan Facilities from PT SMI Bonds PT Hutama Karya IDR 6.49 trillion Tranche A IDR 8.06 trillion Tranche B* IDR 7.52 trillion a) Tranche A : 15 years (7-year grace period) b) Tranche B : 25 years (15-year grace period) *) Tranche B is Standby Facility in the form of Cash Deficiency Support *CDS is one of the innovative solutions to tackle low traffic volume during ramp-up period 15
Advisory and Project Development Business Pillars Play as an "Enabler in Accelerating Infrastructure Development Advisory Project Development Scope of Business Helping the project owner in the readiness of viable investment projects Providing consulting services to identify opportunities and challenges of infrastructure projects Providing services to help obtain or to utilize investment funds Opening access to the project market (investors, lenders, etc.) Improving the quality of the investment package of infrastructure projects Coordinating the required expertise in project management (project management office) Enhancing standards of project governance and execution Managing communication and work strategies between stakeholders (stakeholder management) Public Sector Private Sector Project Development Facility (PDF) Types of Product Financial Advisory Investment Advisory Capacity Building National/ Priority Regional/ Municipal Renewables Energy 16
Assigned by Ministry of Finance, PT SMI Acts as the Enabler in the PPP Project Preparation through PDF* PPP Project Contracting Agency Project Value Government Support Status Palapa Ring West ern Package Central Package Eastern Package Ministry of Communication and Informatics Rp 1.28 Trillion (~USD 96.05 Million) Rp 1.38 Trillion (~USD 103.55 Million) Rp 5.09 Trillion (~USD 381.93 Million) Govt Guarantee through IIGF Construction Water Supply System Umbulan East Java Province Rp 2.05 Trillion (~USD 183.52 Million) Viability Gap Funding (VGF) Govt Guarantee through IIGF Construction Water Supply System Lampung City of Bandar Lampung Rp 700 Billion (~USD 52.52 Million) Potential Viability Gap Funding (VGF) Potential Govt Guarantee through IIGF Financial Closing City Transportation Medan City of Medan Rp 6.40 Trillion (~USD 479.51 Million) Viability Gap Funding (VGF) Potential Govt Guarantee through IIGF Arranging FBC Regional Public Hospital Sidoarjo Sidoarjo District Rp 251,00Billion (~USD19.02 Million) Potential Govt Guarantee through IIGF FBC Drafting Water Supply System Pekanbaru City of Pekanbaru Rp 478,00Billion (~USD36.21 Million) Potential Govt Guarantee through IIGF FBC Drafting Toll Road of Surabaya- Madura Bridge Ministry of Public Works Rp 1.3 Trillion (~USD 1 00 Million) Potential Govt Guarantee through IIGF MOF Principle Approval Sam Ratulangi Teaching Hospital Ministry of Research and Higher Education Rp 387,23Billion (~USD29.01 Million) Potential Govt Guarantee through IIGF MOF Principle Approval 1USD = IDR 13,200 *Project Development Facility 17
Sustainable Urban Transport to Make Cities More Sustainable and Competitive Current Conditions Cities with Urban Transport Projects (Mitigation) Greater Jakarta Outcomes Public transport consumes 1/15 of the Road Space of Cars USD 2.9 billon/year CO 2 78 Millions tons/year USD 210 million/ year Social Cost from Urban Transport GHG Emissions Indonesia is the 6 th Largest GHG Emitter in the World Health Impact in Jakarta due to Air Pollution related to Transport Project Location Project Cost Length Light Rail Transit (LRT) Jabodebek Jakarta Greater Rp 29,9 trillion (~US$ 2.24 Billion) 42,34 Km Palembang City Project Location Project Cost Length Mass Rapid Transit (MRT) Jakarta Jakarta Rp 22,6 trillion (~US$ 1.7 Billion) 23,3 Km Medan City Economic benefits of USD 4.06 billion obtained by LRT users over the past 50 years on efficiency: travel time, vehicle operating costs, and emission reduction costs USD 964 million 2 X Longer Yearly loss in terms of time value, fuel consumption Average commuting time in Jakarta compared to Tokyo Project Location Project Cost Length Light Rail Transit (LRT) Palembang Palembang Rp 10,9 trillion (~US$ 0.82 Billion) 24,5 Km Project Location Project Cost Length Light Rail Transit (LRT) Medan Medan Rp 6,03 trillion (~US$ 0.45 Billion) 22,74 Km Opens 52,145 new workforce opportunities for 50 years Source: World Bank, LRT Jabodebek Feasibility Study 18
PPP Urban Transportation Light Rapid Transit (LRT) and Bus Rapid Transit (BRT) Medan Project Description Project Type Purposes Project Owner Modalities CAPEX (Indicative) Project Scheme Concession Period Government Support Progress Light Rail Transit (LRT) and Bus Rapid Transit (BRT) Medan City Development This project is expected to be one of the solutions to solve traffic jams and to reduce the threat of gridlock in 2024 in Medan City Mayor of Medan City Public Private Partnership (PPP) Rp 6.03 billion (LRT) Rp 413 billion (BRT) Rp 6.44 billion (LRT+BRT) or ~USD 479.51 Million Build-Operate-Transfer (BOT) 35 years Transit Oriented Development (TOD) Government Guarantee Viability Gap Funding (VGF) Final Business Case FBC Role of PT SMI PT SMI is assigned by Ministry of Finance to help Government Contracting Agency (GCA) to prepare the project 19 Source: Bappenas, 2016 Kurs 1US$ = Rp 13.200 19
Innovative Financing Scheme in Infrastructure Projects Light Rail Transit Jabodebek Project Location Construction & COD Length Total Project Cost Jakarta, Bogor, Depok, Bekasi (Java) May 2015 & September 2019 42,34 Km IDR 29,9 trillion (~USD 2.24 Billion) Financing Structure Equity (30%) and Loan (70%) Government Support Cash Fliow Gap Subsidy (USD 1.4 Billion) for 12 years & Credit Guarantee Coordination Social & Economic Benefits 1. Transporting +116,000 passengers/day in 2019 and +464,000 passengers/day by 2030. 2. Economic benefits of +USD 4.07 billion obtained by LRT users within 50 years on efficiency: travel time, vehicle operating costs, and emission reduction costs. 3. Opens +52,145 direct and indirect full-time employment opportunity within 50 years. ~Rp 19.2 trillion for 12y Rp 19.2T trillion facility (Senior Loan Rp 18.1 trillion) 20
National Urban Transport Support Program for Indonesia Proposed by World Bank Institutional framework Inter-Ministry Acceleration Team: CMMA, MoF, Bappenas, MoT, MoHA, MPWH Technical Secretariat : Supported by Project Management, Evaluation and Capacity Building Consultant Pillar 1 Enhanced Financing Mechanism for Mass Transit Based on expansion of existing PPP Instruments of Viability Gap Funding (VGF), Availability Payment (AP) and Provision of additional grants. Pillar 2 Support and Capacity Building to Cities Technical Assistance, Assistance with obtaining Municipal resources such as bond, PPP Structuring, Capacity Building, monitoring and evaluaton. For cities with over 1 million population Core Principles Current Status 1 2 3 Ownership Resources Sustainability Projects proposed and implemented by cities Adequate resources are to be allocated at national level to provide strong technical support to cities Cities provide co-financing for capital costs and cover potential operating subsidies Competitive Bidding Phased implementation. Cities with well prepared and ready project proposals to move ahead quickly. Finetuning of the program in phase 1. Leverage of private and commercial financing will be required Strengthen the concept of the program, especially related to the determination of the minimum contribution of the city in accordance with the borrowing capacity in the region so that the national program can be applied to most cities in Indonesia. Discussions with relevant institutions regarding program. 21
Blended Finance in National Urban Transport Program (World Bank) 22
PT SMI s Participation in Accelerating Regional Infrastructure Development AIIB Soft Loan USD 100 million Municipal Financing Municipal Government World Bank Soft Loan USD 100 million Project Development & Consultation Services SECO Grant USD 3 million 23
Blended Finance in Regional Infrastructure Development Fund (RIDF) 24
A LEADING CATALYST IN FACILITATING INDONESIA S INFRASTRUCTURE DEVELOPMENT Thank You PT Sarana Multi Infrastruktur (Persero) Sahid Sudirman Center, Lantai 47-48 Jl. Jenderal Sudirman No. 86 Jakarta 10220, Indonesia Tel: (62-21) 8082 5288 (hunting) Fax: (62-21) 8082 5258 Website : www.ptsmi.co.id Email : corporatesecretary@ptsmi.co.id @ptsmi ptsmi_id PT Sarana Multi Infrastruktur (Persero) #BaktiuntukNegeri
Focus of Government in Urban Transport Urban transport development to improve interaction between mobility and land use (cross departmental) Mobility improvements for the public transport system and the transport of goods Congestion alleviation - reducing the level of congestion and optimizing Transport Demand Management (TDM) measures Environment impact control, cutting the burden of air and noise pollution, including global CO2 emissions Five principal government strategies (RPJMN 2015-2019) Urban safety and the improvement of all aspect of traffic safety. 26
Urban Transportation Project in RPJMN 2015-2019 New Roads 2,650 Km Toll Roads 1,000 Km Road Maintenance 46,770 Km D e v e l o p m e n t o f 1 5 n e w A i r p o r t s Purchasing of 20 turboprop plane Development of Cargo Airport in 6 cities Development of 3,258 km Railway in Java, Sumatera, Sulawesi, and Kalimantan Development of Mass Rapid Transit in 6 Metropolitan Cities and 17 big cities Development of Bus Rapid Transit in 29 Cities Development of 24 new Ports Purchasing of 20 Pioneer ships Purchasing of 2 Cattle Ships Purchasing of 500 units of passenger ships Development of 49 Water dam and 33 hydropower plants Development of 1 Million Ha Irrigation Increasing the Supply of Electricity up to 35,000 MW Development of Floating storage and regasification units (FSRU) in 5 Locations Development of New Oil Refinery 2 x 300,000 Barrels Source: The National Medium Term Development Plan 2015-2019, National Development Planning Agency 27