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Infrastructure & PPPs in Indonesia - Q1 2022 Update

YOG INFRA Q1 2022 insight series

INDONESIA is developing multiple infra sector projects in 2022. We see developments to build a number of economic infra projects, primarily transport PPPs and social infra projects, with a slew of 7 housing PPP projects announced in the country. There is also an increase in international activity in renewables sector across solar and geothermal projects with a number of partnerships being announced between local and international players to jointly develop such projects.

Read more about key developments in Infrastructure and PPPs in Indonesia in our latest insight.

 

January 2022

INDONESIA TO CONSIDER PPP SCHEME FOR NEW BATAM PORT

Indonesia will consider using private capital to finance a new port development on Batam island, 30km south of Singapore.

The Ministry of Transport is completing a study to determine the location of the Batam New International Port Tanjung Pinggir. It is also set to finalize a feasibility study for the project in 2022 and will subsequently decide on whether to use a public-private partnership (PPP).

A decision on the possible method to finance an upgrade of the existing Batu Ampar Port in Batam will be taken simultaneously, as both facilities will be complementary, adding that a PPP scheme will also be considered for the expansion.

The Tanjung Pinggir port is set to become an international logistics hub. Batu Ampar's annual capacity of 520,000 twenty-foot equivalent units is not sufficient to accommodate the projected increase in container traffic.


INDONESIA DEVELOPER PARTNERS SOJITZ FOR RENEWABLES IN WEST JAVA

Indonesian solar power developer SUN Energy and a unit of Japan's Sojitz Corporation have signed a memorandum of understanding to jointly develop renewable energy projects at an industrial estate in West Java.

The potential reduction in carbon emissions in the industrial area could reach 83 million tonnes. The Greenland International Industrial Center, which covers 1,500ha in the

Kota Deltamas area in Bekasi Regency, was developed by Sojitz's local arm and Indonesian property major Sinar Mas Land. It houses about 130 companies as well as data centres.


INDONESIA TO LAUNCH HOUSING PPP TENDER THIS YEAR

Indonesia plans to launch a Java island housing PPP tender before the end of 2022.

The final business case for the Bina Harapan Cisaranten social housing project is set to be completed in November 2022. Its final cost will be determined once the study is completed.

The development was valued at USD 73.5 Mn in the country’s annual list of PPP projects for 2021. The concessionaire will build eleven towers with approximately 2,700 units of affordable housing in a 5ha site in the city of Bandung.

The project will include availability payments for the investor and allow partial commercial exploitation of the site.


INDONESIA REVIEWING PPP OPTIONS FOR NORTHERN BALI AIRPORT

Indonesia’s Ministry of Transportation has not decided yet whether to use the solicited or unsolicited public-private partnership (PPP) route to develop a new airport in the northern part of Bali island.

The government has received a proposal by project company Bandara Internasional Bali Utara (BIBU) which it will review. If BIBU’s proposal is accepted, the Indonesian government will hold a Swiss Challenge to allow other investors to participate. Authorities are yet to decide on a suitable location for the proposed aerodrome.

BIBU submitted a feasibility study for the project in January 2022. The cost is estimated at IDR 50 Trn (USD 3.4 Bn).


INDONESIAN CONSORTIUM REVIEWING FINANCING OPTIONS FOR 206KM ROAD PPP

A consortium led by Indonesia state-owned Jasa Marga is considering options to finance the construction of a 206.5km toll road, including raising project debt or asking subcontractors to assume the initial expenses.

The financing will be linked to the construction of the IDR 56 Trn (USD 3.9 Trn) Gedebage-Tasikmalaya-Cilacap road.

The consortium announced last week in January 2022, had been awarded the public-private partnership (PPP) on Java island. Jasa Marga owns 32.5% of the project. Private developers Daya Mulia Turangga and Gama Group, along with government-owned Jasa Sarana cumulatively hold 27.5%. State-backed Waskita Karya has 20% interest while PT PP and Wijaya Karya hold 10% each.

The project will link the Gedebage district in the city of Bandung with the Cilacap Regency and is set to be completed in 2029.


MIDDLE EAST FIRM NEGOTIATING INDONESIA ROAD STAKE ACQUISITION

Several investors, including a Middle East firm, are currently in talks to acquire a stake in an IDR 26.6 Trn (USD 1.8 Bn) toll road PPP on Indonesia's Java island.

The concessionaire aims to finalize the deal during the first quarter of 2022, the joint venture building the 96km Solo-Yogyakarta-Yogyakarta International Airport project.

State-backed developer Adhi Karya has a 24% share in the JV, local developers Daya Mulia Turangga and the GAMA Group hold a combined 51% interest, and government-owned Jasa Marga has the remainder.

The toll road will connect the cities of Yogyakarta and Solo, passing tourist destinations such as the Prambanan Temple. The project was awarded in September 2020 and has a 40-year concession period.

The consortium is in talks with banks to raise debt financing for an IDR 10 Trn shovel-ready segment of the road, with a total length of 42.3km. It will have a 70:30 debt-to-equity ratio. Land acquisition for the two remaining stages of the project is ongoing.


JASA MARGA-LED CONSORTIUM BAGS USD 3.8 BN ROAD PPP

An Indonesian consortium led by state-backed developer Jasa Marga has won an IDR 56 Trn (USD 3.8 Bn) toll road PPP project on Java island.

The construction of the 206.5km Gedebage-Tasikmalaya-Cilacap road will be divided into two stages. The first part, linking Bandung's district of Gedebage with the city of Tasikmalaya, will begin construction works in 2022 and start operations in 2024. The road will be expanded to reach the Cilacap Regency between 2027 and 2029.

Jasa Marga owns 32.5% of the project; a partnership between private developers Daya Mulia Turangga, Gama Group and government-owned Jasa Sarana hold 27.5%; state-backed Waskita Karya has 20% interest; and PT PP and Wijaya Karya hold 10% each.

The consortium was named as the sole pre-qualified bidder for the PPP in October 2020.


INDONESIAN FIRM FILES INTEREST FOR WEST JAVA WATER PPP

Indonesian investment company PT Kaifa Performa Kapital has submitted its expression of interest for an IDR 828 Bn (USD 57 Mn) water supply PPP in West Java province.

The provincial authorities are currently coordinating with local governments in the region, which will act as offtakers.

Private concessionaires in Indonesia are not allowed to sell water directly to end-users in the country, and projects are structured around long-term offtake agreements with regional- and local-owned utilities. State-run developer Waskita Karya is developing the feasibility study.


February 2022

JAPAN'S MARUBENI PARTNERS WITH PERTAMINA FOR INDONESIAN DECARBONIZATION PROJECTS

Japanese trading house Marubeni has reached a deal with Jakarta-based energy company Pertamina to jointly develop decarbonization projects in Indonesia.

One of these is a project on bioenergy with carbon capture and storage at Marubeni's pulp mill in Indonesia, which will produce biomass fuel and create carbon credits.

State-owned Pertamina aims to develop 10.2 GW of renewables by 2026 and help the Indonesian government reach its goal to be carbon neutral by 2060.


INDONESIAN AIRPORT CONCESSIONAIRE TALKING WITH LOCAL AND INTERNATIONAL LENDERS

The consortium seeking to upgrade Indonesia’s Hang Nadim International Airport on Batam island has approached several local and international banks to finance the IDR 6.3 Trn (USD 439 Mn) project.

The concessionaire is in discussions with Sumitomo Mitsui Banking Corporation (SMBC), Indonesia’s BTPN Syariah, Indonesia Infrastructure Finance (IIF) and government-owned Sarana Multi Infrastruktur (SMI).

State-owned airport operator Angkasa Pura I owns 51% of the project, while South Korea’s Incheon Airport has a 30% stake. Local developer Wijaya Karya holds the balance. The project was awarded in March 2021 by the Batam Free Trade Zone Authority BP Batam, a government agency that promotes investment on the island.

Construction works will include the building of a new terminal and the upgrade of the existing one. It will also involve operating the airport, the runway facilities and the cargo building for a concession period of 25 years.

The airport is located on Batam island, 12km south of Singapore, and its redevelopment is part of Indonesia's plans to revive the island as an investment and industrial hub.


INDONESIAN CITY LAUNCHES INITIAL STUDY FOR TRANSPORT TERMINAL PPP

Medan city, the capital of Indonesia's North Sumatra province, has launched a preparatory study to ascertain the feasibility for a new transport terminal using private capital.

An initial business case for the project is set to be completed in the third quarter 2022. The World Bank is financing the study.

The facility is proposed to be built between the Pinang Baris and Amplas interprovincial bus terminals and the advisors will need to identify its exact location. They will also need to evaluate the feasibility of a public-private partnership model and suggest potential commercial opportunities such as retail, housing, and office spaces.


CHINESE MANUFACTURER BUYS 990 MW INDONESIA GEOTHERMAL PROJECTS

Chinese air compressor manufacturer Kaishan Group will acquire seven Indonesian geothermal projects through its Singapore subsidiary KS Orka Renewables.

The Zheijang province-headquartered company signed a USD 60 Mn purchase agreement with Turkish businessman owner Mehmet Emin Hitay. Kaishan will get full ownership of Hitay’s Inter Investment, which has exclusive development rights for the plants totaling 990 MW. It will mainly use its internal funds for the acquisition.

The seven special purpose vehicles are HitayDaya Energy and Hitay Panas Energy, both of which have a capacity of 330 MW. The Hitay Bumi Energy plant will generate 220 MW while the Hitay Balai Kaba Energy facility will be capable of 90 MW. The Hitay Lawang Energy project is for 80 MW while Hitay Tanjungsakti Energy and Hitay Renewable Energy are of 50 MW and 40 MW respectively.

The assets are valued at USD 27 Mn and also carry debt of a similar amount. Most of the projects are in Sumatra and are included in Indonesia’s national electricity purchase plan.

The Southeast Asian island country has a target to achieve carbon neutrality by 2060 and has pledged to source more than half its electricity from renewable power. It aims to add about 21 GW of renewables of which a little more than 3 GW will be from geothermal.

The Chinese private sector company, now one of Indonesia's largest geothermal developers by assets, expects to complete the acquisition by 2022 and aims to start site preparation later in 2022.


March 2022

CHINESE-KOREAN ALLIANCE SHOWS INTEREST IN INDONESIA'S LONGEST BRIDGE

The China Road and Bridge Corporation (CRBC), owned by China Communications Construction Company, is looking to co-develop a USD 950 Mn oversea bridge in Indonesia with local and South Korean peers.

The Chinese infrastructure company signed an MoU with Indonesia’s HK Corporation and Daelim Industrial - one of the largest engineering and construction companies in South Korea - to co-invest in the Batam-Bintan Bridge PPP. The three have expressed a strong interest in the toll road project, and they will closely collaborate in the technical, economic and financial aspects.

The PPP tender is likely to be issued in May by the National Development Planning (PPN) Ministry, while construction is expected to commence in 2022, with a targeted commissioning date of 2024. The 14km project will include a 7km bridge and access roads. Slated to be the Southeast Asian country’s longest bridge, the cable-stay structure will cross the Riau Strait between the islands of Batam and Bintan near Singapore.

The Riau Islands Provincial Government is in the process of completing land acquisition documents.

This project will require an investment of IDR 13.66 Trn (USD 950 Mn) with a construction cost of IDR 9.78 Trn. The Indonesian government has put it onto a list of priority projects for seeking foreign loans.


SOLAR PHILIPPINES SIGNS PPA FOR 50 MW SOLAR IN BALI

Solar Philippines (SP), through a joint venture (JV) with Medco Energi (Medco), has signed a 20-year power purchase agreement (PPA) with Indonesian state utility PLN. The PPA, signed on March 2022, is for a 25 MW solar farm each in East and West Bali.

SP has granted its subsidiary, Solar Philippines Nueva Ecija Corporation, the option to subscribe for SP’s share in the JV, in which it holds 49%, subject to regulations including securing approval from PLN.

SP began developing the 50 MW Bali solar projects in 2017, and formed its JV with Medco to submit a bid in PLN’s auction for utility-scale solar in 2019. Construction is scheduled to begin by 2023.


INDONESIAN WASTE-TO-ENERGY PROJECT TARGETS FINANCIAL CLOSE NEXT YEAR

Indonesian investor Oligo Infrastructure Group expects to reach financial close on an IDR 2.5 Trn (USD 174 Mn) waste-to-energy project in the second quarter of 2023. Oligo aims to raise debt from international lenders to finance the construction of the Rawa Kucing Integrated Waste Treatment Facility in Tangerang city, in the Greater Jakarta area.

The project will have a debt-to-equity ratio of 70:30, and is set to sign a power purchase agreement with state-owned utility Perusahaan Listrik Negara (PLN) in the first quarter of 2023.

The waste-to-energy site will have a power capacity of 36 MW and will be able to process up to 2,160 tons of waste per day. It is slated to become operational in 2025.

The firm is backed by private equity fund manager The Asian Entrepreneur Legacy Partners and several local investors.

The project is part of a push by the Indonesian government to develop waste-to-energy projects across the country.


INDONESIA PLANS USD 100M WASTEWATER PROJECT ON BATAM ISLAND

Indonesia is preparing a USD 100Mn wastewater project to be built in a public-private partnership (PPP) on Batam island, 30km south of Singapore.

The project will have a capacity of 33,000 cubic meters of water per day, and involves a mixed-use development with retail, residential areas and transportation facilities. Indonesia aims to revitalize Batam island as a major industrial hub.


ADB TO HELP INDONESIA’S NEW CAPITAL NUSANTARA

The Asian Development Bank (ADB) has pledged to help Indonesia plan its new capital Nusantara as a carbon-neutral city.

ADB will help the Nusantara National Capital Authority (NNCA) design the city, assess its potential environmental and social impacts, and mobilize financing from the public and private sectors.

NNCA, the government agency in charge of planning and constructing the new capital, will oversee the transition to Nusantara and eventually become the city’s administrator.

ADB will support NNCA’s effort to organize an international conference to learn how other countries have handled the development of carbon-neutral and inclusive cities.


JAKARTA FLAGS TRANSPORT-ORIENTED DEVELOPMENT OPPORTUNITIES

Two companies owned by the government of Jakarta offered transport-oriented development (TOD) projects. Rail operator MRT Jakarta is seeking partners to develop a IDR 2.7 Trn (USD 188 Mn) project near Fatmawati station, in southern Jakarta, with a total land area of 16,769 Sqm.

MRT Jakarta has not decided yet what scheme will be used to structure the project ownership and the site, which will include residential units and office and retail space, is set to be built between 2023 and 2025.

Developer Sarana Jaya is also looking for investors to construct a IDR 1 Trn project in central Jakarta. The Sentra Primer Tanah Abang development will include residential, office and commercial space on an 11.2ha site. The company will also partner with private firms to construct a IDR 310Bn TOD in the southern part of Jakarta, with a total extension of 1.9ha.


INITIAL BIDS FOR INDONESIA AIRPORT PROJECT DUE THIS MONTH

Indonesia state-owned operator Angkasa Pura I has set 31 March 2022 as the deadline to accept initial bids for a IDR 10.3 Trn (USD 718 Mn) project to upgrade one of its airports. Final bids for the Lombok International Airport expansion need to be filed during the third quarter of 2022 and the winner will be announced in November 2022.

The company said in 2021 that India's GMR Airports and South Korea’s Incheon International Airport Corporation are the two pre-qualified bidders.

The concession will involve the development of the airport, the operations of both aeronautical and non-aeronautical components as well as the construction of an airport city. The city will cost approximately IDR 1.9Trn, while the remainder will be used to expand airport facilities.

The project, which is located in West Nusa Tenggara province, will include the upgrade of the passenger terminal building, the runway, taxiways and aircraft stands. KPMG, Surbana Jurong and Jakarta-based law firm UMBRA are acting as advisors to Angkasa Pura I.


INDONESIA PREPARES SEVEN HOUSING PPPS VALUED AT USD 1.1BN

Indonesia’s Ministry of Public Works and Housing is preparing seven social housing projects in the public-private partnership system, including one in the country’s new capital. Preparatory studies for the projects, which have a combined value of IDR 16.4 Trn (USD 1.1 Bn), are slated for completion this year.

The projects include:

1. The IDR 1 Trn Cisaranten Bina Harapan Vertical Housing PPP, in the city of Bandung;

2. The IDR 498 Bn Desa Besear Medan Vertical Housing PPP, in North Sumatra province;

3. The IDR 403 Bn Karawang Spuur Vertical Housing PPP, in Karawang Regency;

4. The IDR 12.2 Trn New Capital City Housing PPP, to be located in Nusantara, the new capital;

5. The IDR 480 Bn Paldam Siliwangi Apartment PPP project, in West Java province;

6. The IDR 717 Bn Daan Mogot Vertical Housing PPP in Jakarta; and

7. The IDR 1.1 Trn Integrated Rented Vertical Housing Sei Mangkei PPP.

The new capital project is set to initially provide housing to state officials and civil servants, the Indonesian armed forces and police. It will be supported by an availability payment scheme throughout a 20-year concession period and it will involve the construction of 65 residential blocks with a total of 2,730 units.


CENTRAL JAVA GOVERNMENT FIRM SEEKS INVESTOR FOR ROAD PROJECT

A government-owned company in Indonesia’s Central Java province is seeking an investor to jointly develop a 20km road.

The road will connect the city of Purwokerto in Banyumas Regency with the Cilacap Regency. It will cost between USD 70 Mn and USD 80 Mn. The firm is owned by the Banyumas Regency government.

BIJ is currently preparing to submit an unsolicited proposal for the development to Indonesia’s Ministry of Public Works and Housing. In Indonesia, unsolicited infrastructure projects undergo a Swiss Challenge once they are approved by the procuring authority.

The proposed road will be connected to the IDR 56 Trn (USD 3.9 Bn) Gedebage-Tasikmalaya-Cilacap road, which will link the city of Bandung with Cilacap Regency.

Indonesia is planning to tender a total of six toll roads with a total value of IDR 147.2 Trn.


INDONESIA MIXED-USE PROJECT SEEKS EQUITY PARTNERS

A group of Indonesian investors is seeking equity partners to jointly build a IDR 390.5 Bn (USD 27 Mn) mixed-used project in Central Java province. The developers plan to start construction as soon as possible. The stake to be acquired by new investors will be directly negotiated with Lationo and Anggara.

The development will include the construction of an 18-floor apartment block, a commercial building and a 10-storey hotel within a 12,000 sqm area in Purwokerto, the capital of Banyumas Regency.

The internal rate of return (IRR) for the residential block is estimated at 33.6%, while the IRR for the retail space and hotel are 15.5% and 16.2%, respectively.

 

List of Key Transactions - Indonesia Q1-2022



Source: YOG INFRA analysis, Subscription databases

 

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