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Infrastructure & PPPs in Indonesia - Q12021 Update

INDONESIA has continued to maintain its focus on infrastructure development through PPPs, primarily in the transport sector (roads, bridges, ports and airports). There is minimal activity in the renewable energy sector unlike other neighboring ASEAN countries. However, other infrastructure sectors like water supply and waste management as emerged as attractive opportunities for both local and international developments in Indonesia.


Read more about key developments in Infrastructure and PPPs in Q12021 in Indonesia in our latest insight.


JAN - 21

INDONESIA TO LAUNCH MIXED-USE DEVELOPMENT PPP IN 2021

Indonesia's North Sumatra province is preparing to tender an IDR 13.4 trn (USD 961m) mixed-use development PPP project in 2021. The project, named Deli Sport City, will be developed in a 320-ha site, and will include hotels, shopping centers, residential areas and a theme park.

The project will be located in the provincial capital of Medan, next to a sports stadium that is set to be offered as a different PPP, valued at IDR 763bn.

North Sumatra is preparing to host Indonesia’s National Sports Week jointly with neighboring Aceh in 2024. The provincial government is set to also tender two transportation projects in 2021, including the IDR 12.1trn development of a 64km railway line between the cities of Siantar and Parapat and a 43km light rail transit system in Medan, valued at IDR 27trn.


INDONESIA TO TENDER SECOND PHASE OF PATIMBAN PORT_

Indonesia will tender the second phase of the Patimban deep port, in West Java province, as a PPP. The initial phase of the project will be financed through a loan from Japan’s International Cooperation Agency and the government budget.

This first, IDR 23.5trn (USD 1.5bn) phase is scheduled to be completed in 2023, and the port is expected to then have a total capacity of 3.7 million twenty-foot equivalent units (TEUs). The PPP project will later allow the expansion of the port's capacity to 7 million TEUs. The Patimban port is aiming to compete with the Port of Singapore and Malaysia’s Port Klang as a logistics hub in the region. The port will serve industrial areas in Bekasi, Karawang and Purwakarta . It will occupy a total of 654 hectares, of which 300 hectares will be earmarked for containers and terminals.


MIZUHO BACKS INDONESIAN TOWER OPERATOR

Indonesian tower operator Professional Telekomunikasi Indonesia (Protelindo) and two subsidiaries have signed a USD 34.5m loan agreement with Mizuho Bank. The loan will be partly used to fund capital expenditure. The loan’s tenor ends on 30 December 2021. Protelindo signed the agreement jointly with its subsidiaries Komet Infra Nusantara and fiber optic network operator Iforte Solusi Infotek.

Protelindo, which owns and operates more than 21,000 towers in Indonesia, held 22% of the local market as of the end of March. The company is positioned to lead a market consolidation in the country jointly with Tower Bersama Infrastructure.


Feb - 21

INDONESIA USD 45M ROAD PPP REACHES FINANCIAL CLOSE

A road upgrade public-private partnership project in Indonesia's South Sumatra province reached financial close after securing IDR 644.7 bn (USD 45m) in syndicated loans from local lenders.

Jalintim Adhi-Abipraya - a joint venture between listed construction firm Adhi Karya and state-owned Brantas Abipraya - will upgrade 29.8km of roads and 14 bridges under a 15-year concession.

Construction is set to start in 2021 and last two years. In 2024, the concessionaire will start receiving availability payments from the government for a period of 12 years. State-owned Islamic lender Bank Syariah Indonesia, state-owned financing firm Sarana Multi Infrastructure and Jakarta-listed Bank Panin Dubai Syariah provided debt financing for the project. It will be fully financed using debt.

Adhi Karya aims to bid for several PPP projects in 2021. The company has been awarded a road upgrade PPP in Sumatra’s Riau Province with an estimated investment of IDR 525bn.


INDONESIA SEEKS BIDS FOR USD 169M BRIDGE PROJECT

The Indonesian government started the tender process for an IDR 2.3 trillion (USD 169m) bridge project on the island of Java.

Concessionaires will need to finance, design and build the bridges as well as operate and maintain them for a period of 10 years. The project will have a concession period of 12 years, including a two-year construction period. The concessionaires will recoup their investment through availability payments.

Jakarta-listed developer Bukaka Teknik Utama submitted an unsolicited proposal for the project and will have the right to match the best offer from the tender process. The project will be supported by a government guarantee offered by Ministry of Finance-owned Indonesia Infrastructure Guarantee Fund (IIGF). Indonesia plans to tender a total of 25 infrastructure projects with a total investment of IDR 278.3trn in 2021.


BALI TO TENDER WATER SUPPLY PPP

Indonesia will develop a water supply system on the island of Bali using a public-private partnership. The Ayung I project will provide water to the provincial capital, Denpasar, as well as to the Badung, Gianyar and Tabanan regencies. It will have a total capacity of 1,750 liters per second and source raw water from the Sidan Dam.

Water demand in the region was 4,936 liters per second in 2020. Indonesia has been aiming to attract private capital to several water supply projects. Foreign water management firms, including France's Suez, Manila Water and Kuala Lumpur-based Ranhill Utilities have participated in recent PPP tenders.

The government said earlier in February 2021, that it would look for alternative financing methods, including public-private partnerships, to cover a funding gap of IDR 106trn (USD 7.5bn) to develop water projects planned for the next three years.


Mar-21

METRO PACIFIC INTERESTED IN WASKITA TOLL ROADS SALE

Metro Pacific Tollways Corp (MPTC), a subsidiary of Philippines-based infrastructure conglomerate Metro Pacific Investments Corp, is interested in the possible sale of toll roads owned by Indonesia's Waskita Toll Road (WTR). The company is taking a look at toll roads in Indonesia to expand its presence in the country. MPTC has a 76.31% stake in Indonesia-based PT Nusantara Infrastructure. 

 WTR is also offering the Kayu Agung-Palembang-Betung toll road in South Sumatra to foreign investors.  The Indonesian government plans to auction 17 toll road projects estimated to be worth IDR 260trn (USD 18.4bn) in 2021.


ENERGY COMPANIES SET UP RENEWABLES JV IN INDONESIA

Coal mining and oil and gas company Indika Energy has set up a joint venture (JV) with India's Fourth Partner Energy for businesses such as solar power, storage and charging infrastructure for electric vehicles (EV) in Indonesia.

The JV - called Empat Mitra Indika Tenaga Surya (EMITS) - will be 51%-owned by Indika, while the remaining will be held by Fourth Partner. EMITS expects to bring in at least USD 500m in investments into Indonesia in the next five years. The venture will currently mainly focus on rooftop solar projects for commercial and industrial consumers. Indika is looking to increase its non-coal revenue by 50% by 2025 through the JV,

Indonesia aims to double its renewable energy capacity to comprise about a quarter of its energy needs by 2025. The country projects total investment of more than USD 36bn in the sector in the next five years to achieve the target. Fourth Partner, which is majority-owned by private equity firm TPG's The Rise Fund, is looking to expand overseas into countries including Indonesia, Sri Lanka, Bangladesh, Vietnam, Myanmar and Singapore.


HONG KONG COMPANY TO BUY STAKE IN INDONESIAN TOLL ROAD

Hong Kong-based transport-to-property group Road King Infrastructure will sign a sale and purchase agreement to acquire a stake in an Indonesian toll road for IDR 1.23bn (USD 86m). The company, through its subsidiary Kings Ring, will buy a combined 45% interest in the Medan-Kualanamu-Tebing Tinggi Expressway in Sumatra, an island in the northwest of Indonesia.

The company will acquire a 15% stake from Indonesian-state-owned builder PT Pembangunan Perumahan (Persero) for IDR 412bn and another 30% from infrastructure conglomerate PT Waskita Karya-backed PT Waskita Toll Road for IDR 824bn.

The remaining interest will be held by PTJM, a toll road company that is 70%-owned by the Indonesian government. The 61.7km Medan-Kualanamu-Tebing Tinggi asset, which is part of the Trans Sumatra toll expressway network, has a concession period of 40 years. The road commenced operations in 2017. As the expressway is already operating, Road King will be immediately entitled to the share of the revenue from the asset following the deal.


INDONESIA'S MEDCO NEARS PAITON PURCHASES

Indonesia's Medco Power is negotiating to buy 14% of the 2,045 MW Paiton Energy coal-fired power plant from Qatar's Nebras, and a further 10% from Japan's JERA. Mitsui, Nebras and JERA all launched sales of stakes in Paiton in 2020. Rothschild is advising JERA, and HSBC is advising Nebras. The Mitsui sale, which is the largest of the three, is no closer to a conclusion.

Mitsui holds a 36% stake in the Paiton Energy power plant directly and a further 13% through a holding company. Nebras owns 35.5%, while JERA and local company Toba Bara hold the rest. A local partner has to have at least 5% of Paiton. Nebras will retain a 21.5% stake in the plant after the sale to Medco. Toba Bara and Malaysia's YTL teamed upIN 2020 and were planning to exercise Toba Bara's pre-emptive rights as a minority shareholder to buy a stake in Paiton.

The initial 1.2 GW of Paiton Energy was commissioned in 1999 with a further 800 MW added in 2012.Historically, Medco has invested in gas and geothermal power assets. In 2020 Japan's Kansai Electric acquired a portfolio of gas assets from Medco Power.



SOJITZ SEEKS TO DEVELOP USD 5BN INDONESIAN PETROCHEMICAL PROJECT

Japanese conglomerate Sojitz Corporation is looking to develop a USD 5bn petrochemical project in Indonesia. The project, which will produce methanol and ammonia, will be located in the Bintuni Bay Industrial Zone in the province of West Papua.

The project is set to occupy an area of 2,000 ha and will receive facilities and incentives from the government. Methanol consumption in the country stands at 2 million tonnes per year and that a new petrochemical plant is needed to cover demand. Kaltim Methanol Industry, a subsidiary of Sojitz, operates the only methanol petrochemical plant in the country. The plant, located in Bontang, in East Kalimantan province, has a total production capacity of 660,000 metric tons per year.

LNG Japan, a subsidiary of Sojitz Corporation, owns a 7.35% stake in the Tangguh LNG project, located in West Papua province, with a total production capacity of 7.6 million tons per year.

Oil and gas major BP own a 40% interest in the project and is the operator.



INDONESIAN COMPANY RELAUNCHES TENDER FOR WASTE TREATMENT FACILITIES

Construction company Sarana Jaya relaunched a prequalification to seek partners to develop two waste treatment facilities in Indonesia's capital.

The bid is open to international and domestic companies and potential investors can participate on their own or as a consortium. They must have proven expertise in waste management, be able to provide suitable land to develop the project and offer effective and environment-friendly technology, Potential investors must also have the capability to fund a minimum of IDR 3.65trn (USD 253m) of the total cost of the project.

The first facility, serving the eastern part of Jakarta, will have a processing capacity of 1,700 tons of waste per day, while the second, serving the southern part of the city, will have a total handling capacity of 1,500 tons of waste per day. The projects are part of a portfolio of three waste treatment facilities in Jakarta.



List of Key Transactions - Indonesia Q1-2021


Source: Inframation, YOG INFRA analysis

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