Every infrastructure company is different in scope – how would you explain the main development steps for your company?
Jasa Marga was established in 1978 as a developer and operator of toll roads, but also as the regulator. The company maintained this special position for 26 years until the Government took back its authority function. 2004 was therefore a special milestone for the company as a state owned company: required to take part in bidding processes for any new segment it would like to operate. Then, in 2007 Jasa Marga went public, adhering to stricter regulations, changing the work rhythm and improving operational processes. Until last year, Jasa Marga operated 680km of toll roads, whereas now we have the target of operating 1497km by 2020. This is another major step for us; we have to
complete over 200KM per year as opposed to the 593km completed in the previous 38 years.
How do you work in tandem with the Government and other state-owned companies in terms of offtake of their segments?
As a company that is both publicly listed and state-owned, we have to satisfy our 30% shareholders. That is why when the President and the Government wanted to build the Trans-Sumatra toll road, we did not participate, as we have no means of calculating profitability. This is why a 100% Government owned company took on the task of building and operating the Trans-Sumatra road.
How is Jasa Marga managing the financing of its new projects light of the Government’s infrastructure financing gap?
We are not using Government budgets: projects are funded through 30% equity injection and 70% bank funding. We have 33 toll road segments, 20 of which are still in progress. Of these 20 segments three are operational, five semi-operational and the rest under construction.
Our equity is currently 18,4 Trillion: not enough to finance the full amount. If we keep borrowing from the bank, we will have our debt to equity ratio to consider, so besides borrowing from the banks, we will use our mature assets as securities. To formalize this it’s important to evaluate what is safe to securitize, because some of our assets have been completely funded by the Government. The question came up, whether these assets could be sold? We therefore decided to sell the future income of the toll roads: because we have a stable income, the investor can evaluate all the data and make his own projections. We decided that we cannot sell our concession, which is why we chose to sell our future income, and in the end were oversubscribed.
A second financing scheme is our brown field projects. Here we will be bond issuing bonds as Jasa Marga subsidiaries. The project is issuing bonds from independent of Jasa Marga as a parent company, which is why we call them project bonds. We have received a AAA rating for both these bonds and our securitization.
“We have to maintain pole position through adding more segments, which also lets us support the Government in enhancing connectivity.”
You have now been the President Director for a year now, what is your vision for Jasa Marga?
We have to maintain pole position through adding more segments, which also lets us support the Government in enhancing connectivity. This will boost our economy by lowering logistical costs, reducing congestion in Jakarta and all over Java, moving to Sumatra and Kalimantan.
We are completing the Trans Java toll road at the end of next year, which will make it fully connected. For Jakarta, the main goal is to reduce daily congestion. We’re working on the completion of the Jakarta outer ring road in 2019 in order to alleviate congestion in Jakarta and its surrounding regions.
Is land acquisition still what makes infrastructure development difficult?
Previously the banks would only disburse the project loan once the land acquisition reached 70%. This progress took a lot of time, which is why the development of Indonesia stagnated. Now with the new land acquisition law released and fully implemented in 2016, the process is streamlined tremendously, and we expect investor confidence to improve with the positive results.
What would be your message to investors and an international readership?
Indonesia needs connectivity to function as thousands of islands, through toll road, sea port, or airport. The government is supporting the acceleration of infrastructure development to connect Indonesia. Jasa Marga and other SOE companies are inviting investors, not only local but also global, to participate in investment opportunities that could benefit for both parties.