The Role of IIGF in Infrastructure Development in Indonesia

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1 The Role of IIGF in Infrastructure Development in Indonesia September 2017 Armand Hermawan Chief Financial Officer Indonesia Infrastructure Guarantee Fund

2 INFRASTRUCTURE NEEDS ( ) Emerging Opportunity - Substantial Infrastructure Need In line with Indonesia s Medium Term Development Plan FINANCING Sector US$ Bio SOURCE PLAN Road 54.7 Railway Air Transport Sea Transport Water Resources Housing Urban Transport 6.42 Land Transport (incl. Ferry) 3.5 Power 74.6 Energy 37.8 Waste Management ICT 20.9 TOTAL 358 STATE BUDGET $ Bio SOE $ 79.6 Bio PRIVATE $ Bio ,3% 22,2% 36,5% Realized & Allocation: 2015: $ 19.1 Bio 2016: $ 23,7 Bio 2017: $ 28.9 Bio Gap to 2019: $ 76 Bio Include Equity Injection to SOE from Government budget allocation Promoting Public Private Partnership (PPP) Page 1

Investment target 2015-2019 Emerging Opportunity - Substantial Infrastructure Need Various fiscal policy & support to close the Gap using private sectors US$ 131 Bn US$ 358 Bn APBN/ APBD US$ 148 Bn

3 Investment target Emerging Opportunity - Substantial Infrastructure Need Various fiscal policy & support to close the Gap using private sectors US$ 131 Bn US$ 358 Bn APBN/ APBD US$ 148 Bn 22.2% 41.3% SOE US$ 80 Bn Private Sector 36.5% Closing the GAP 225 National Strategic Project 30 National Priority Project Social Infrastructure Project Others Fiscal tools for PPP Scheme 1. Project Development Fund 2. Viability Gap Funding 3. Availability Payment 4. Guarantee 5. Infrastructure Financing 6. Land Acquisition Support Page 2

Investment target 2015-2019 Emerging Opportunity - Substantial Infrastructure Need Potential Source of Funding in PPP Banking Industry as the biggest pool still has its own limitation.

4 Investment target Emerging Opportunity - Substantial Infrastructure Need Potential Source of Funding in PPP Banking Industry as the biggest pool still has its own limitation. APBN/ APBD US$ 148 Bn 22.2% 41.3% SOE US$ 80 Bn Private Sector US$ 131 Bn 36.5% In Indonesia alone there is USD $95 billion in assets under management Indonesia AUM 2015, USD Mn US$ 358 Bn 225 National Strategic Project 30 National Priority Project Social Infrastructure Project Others Bank 81,919 Public pensions 9,800 Insurance 732 Private pensions 556 Investment companies 100 Foundations 19 *) Based on McKinsey Study on IIGF Long-term Strategy Assignment Page 3

IIGF is also valued for its state budget s ring fencing function.

US$ 8.9 Billion Guarantee amount: Rp 29 Tr ~ US$ 2.

5 IIGF Profile PT PII (Persero) IIGF Projects Guaranteed Established on 30 December As a Single Window in providing government guarantee provision for Infrastructure Projects. IIGF is also valued for its state budget s ring fencing function. 13 projects in 4 Sectors: Electricity, ICT, Water & Toll Road ~Project Value: Rp 119 Tr or ~ US$ 8.9 Billion Guarantee amount: Rp 29 Tr ~ US$ 2.1 Billion Gearing Ratio Guarantee Value/ Capital Ratio 3,1 x at max exposure Paid in Capital (CI) ~US$ 525 M Opex Ratio (OER) 22.23% Leveraging Ratio* Project Size/ Capital Ratio *Economic Impact 13,2 x Key Financial Figures (30 June 2017) Retained Earning ~US$ 149 M Income Margin 63.11% Revenue ~US$ 29 M Int l Credit Rating Sovereign rating BBB- By Fitchratings Page 4

IIGF Guaranteed Project Portofolio JALAN TOL SER-PAN 83,9 KM 5,33 PALAPA RING PAKET BARAT 1980 KM 1,29 PALAPA RING PAKET TENGAH 2647 KM 1,38 JALAN TOL MA-BIT 39 KM 5,1 PALAPA RING PAKET TIMUR 8454 KM

6 IIGF Guaranteed Project Portofolio JALAN TOL SER-PAN 83,9 KM 5,33 PALAPA RING PAKET BARAT 1980 KM 1,29 PALAPA RING PAKET TENGAH 2647 KM 1,38 JALAN TOL MA-BIT 39 KM 5,1 PALAPA RING PAKET TIMUR 8454 KM 5,1 JALAN TOL JAK-PEK II 36,4 KM 14,7 JALAN TOL CISUMDAWU 60,27 KM 8,21 JALAN TOL BAT-SEM 77 KM 10 PLTU BATANG 2 x 1000 MW 40,5 JALAN TOL PAN-MAL 38 KM 6 SPAM UMBULAN 4000 Lt/Detik 2,1 JALAN TOL KR-LG-BU-MN 38,2 KM 9,02 JALAN TOL BAL-SAM 99 KM 10 Page 5

7 Extending Cooperation with World Class Institution World Bank Technical Assistance Purposes USD 4,6 juta Stand-by Loan (Guarantee Capacity) USD 25 juta Multilateral Development Agency MIGA IDB - ICIEC Islamic Corporation for the Insurance of Investment & Export Credit MOU Institutional Development Guarantee Capacity MOU knowledge sharing initiative Guarantee Capacity Bilateral Mitra Swasta insurance Page 6

8 IIGF Value Proposition Government Guarantee through IIGF SAFEGUARD Support the continuation of the project through a careful analysis of safeguard. (Mirroring World Bank Safeguard Policy) As written in IIGF Operation Manual RISK Fair risk allocation between government and private investor Clear risk mitigation BANKABILITY Provide more comfort for financier to support the project. Reducing the cost of fund VALUE PROPOSITION TRANSPARENCY Increasing bidding competition resulting the most optimal project investment ACCOUNTABILITY Guarantee provision that can be verified during the bidding process Page 7

9 Keywords for Projects to be eligible for IIGF (Sovereign) Guarantee 1 Viable (financial and technical) 2 Risks (cover government triggered risks) 3 Tender (guarantee covers is attached in RfP) Page 8

Typical Risk Allocation Coverage Political Risk Site Acquisition Design, Construction & Commisioning Sponsor Risk Operating Risk Revenue Network connectivity Public Allocation Currency

10 Typical Risk Allocation Coverage Political Risk Site Acquisition Design, Construction & Commisioning Sponsor Risk Operating Risk Revenue Network connectivity Public Allocation Currency inconvertability Expropriation risk Change in law Fail in obtaining permits Land acquisition delay Complex resettlement N/A VGF disbursement Refund of land acquisition fund (DTT) N/A Failure in AP payment Delay in periodical tariff adjustment Road & transportation connectivity Smoothness of transportation system Competing facilities Private Allocation N/A Contaminati on/pollution to the site Disruption of the community convenience around the project Design faults Failure to maintain security & safety Default of subcontractors Increase in construction cost Default of project company, sponsor, or lender Increase in construction cost Fail to achieve financial close Forex, inflation Failure project management O&M cost operation increase Incompetent of technology & information system Failure in initial tarif determination Misscalculation of tariff estimates N/A *) For complete set, IIGF published Risk Allocation Guidelines Book Page 9

risk Discriminatory change in law (project specific) Delays in necessary

11 IIGF Guarantee Offering Government Guarantee through IIGF Typical Risks Covered Pre-construction Construction Operation Payment risk Tariff adjustment risk Discriminatory change in law (project specific) Delays in necessary approval (Early) termination by government Land acquisition Project Budget approval Page 10

Mitigation Plan Guarantee Agreement Ministry of Finance Regulatory & Capital Injection

12 Proven Business Model for PPP Guarantee PJPK Government Contracting Agency Cooperation Agreement Investor/Sponsor Guarantee Application Package Recourse Agreement Risk Mitigation Plan Guarantee Agreement Ministry of Finance Regulatory & Capital Injection Co guarantor/ Liquidity facility Multilateral Development Agenvy Counter Guarantee Page 11

13 IIGF is extending its reach to support Indonesia s infrastructure projects IIGF Project Finance Corporate Finance PerPres 38/2015 Project Guarantee PerPres 82/2015; 100/2015 Credit Guarantee Under Development PPP Scheme Bank Loan Bond 19 infrastructure sectors Infrastructure company/developer Page 12

IIGF Guaranteed Project Portofolio 1 CJPP Project ASIA AWARD 2 Umbulan Water Supply Project Power

000 l/second through out 5 municipal/city of East Java Rp 40.

(Co-Guarantee Government) Project Finance Deal of the Year 2016 GLOBE ASIA Mei 2016 Rp 1.

1 Tn) Contracting Agency: PLN Power Sector IJGlobal Euromoney AWARD Best Environmental- Concerned

role as a Chairman of the Joint Monitoring Committee until Financial Close was achieved.

14 IIGF Guaranteed Project Portofolio 1 CJPP Project ASIA AWARD 2 Umbulan Water Supply Project Power Plant 2x1000 MW in Batang, Central Java 7 Maret 2017 Bulk Water distribution channel of l/second through out 5 municipal/city of East Java Rp 40.5 Tn GA Effective Guarantee Period 16/21 Years Monthly Payment (Rp 300 Bn) Termination (Co-Guarantee Government) Project Finance Deal of the Year 2016 GLOBE ASIA Mei 2016 Rp 1.9 Tn GA Effective Guarantee Period 15 Years Monthly Payment (Rp 180 Bn) Termination (Rp 1.1 Tn) Contracting Agency: PLN Power Sector IJGlobal Euromoney AWARD Best Environmental- Concerned Project Contracting Agency: East Java Provincial Gov t Water Sector 9 Maret 2017 IIGF had an active role as a Chairman of the Joint Monitoring Committee until Financial Close was achieved. Best Power Deal in Asia Pacific The project delays for 43 years and now start the construction after being supported by the PDF & VGF from the Government and Guarantee facility from IIGF Page 13

IIGF Guaranteed Project Portofolio Palapa Ring Project is the first PPP project with Availability Payment scheme in Indonesia The projects are completed in less than a

Ring Timur Project Backbone network across 5 cities in West region of Indonesia ; 1.

676 Km sea and land Backbone network across 35 cities in East region of Indonesia 5.681 Km sea, land and Mv Rp 1.

15 IIGF Guaranteed Project Portofolio Palapa Ring Project is the first PPP project with Availability Payment scheme in Indonesia The projects are completed in less than a year and with the role of IIGF in facilitating the projects and strong commitment from Contracting Agency 3 Palapa Ring Barat Project 4 Palapa Ring Tengah Project 5 Palapa Ring Timur Project Backbone network across 5 cities in West region of Indonesia ; Km sea and land Backbone network across 17 cities in Central region of Indonesia ; Km sea and land Backbone network across 35 cities in East region of Indonesia Km sea, land and Mv Rp 1.3 Tn GA Effective Guarantee Period 15 Years Availability Payment (Rp 310 Bn) Termination (Rp 1 Tn) Contracting Agency: MoCI Rp 1.4 Tn GA Effective Guarantee Period 15 Years Availability Payment (Rp 336 Bn) Termination (Rp 1.1 Tn) Contracting Agency: MoCI Rp 6.09 Tn GA Effective Guarantee Period 15 Years Availability Payment (Rp 840 Bn) Termination (Rp 4.8 Tn) Contracting Agency: MoCI ICT Sector Page 14

IIGF Guaranteed Project Portofolio 6 Batang Semarang Toll Road 7 Manado-Bitung Toll Road 8 Pandaan-Malang Toll Road 75 Km Toll Road from Batang to Semarang 39 Km Toll Road from Manado to Bitung 38 Km

16 IIGF Guaranteed Project Portofolio 6 Batang Semarang Toll Road 7 Manado-Bitung Toll Road 8 Pandaan-Malang Toll Road 75 Km Toll Road from Batang to Semarang 39 Km Toll Road from Manado to Bitung 38 Km Toll Road from Pandaan to Malang Rp 9.8 Tn GA Effective Rp 5.1 Tn GA Effective Rp 6 Tn GA Effective Guarantee Period 15 Years Land acquistion advance fee (Rp 584 Bn) Land Acquisition (Rp 170 Bn) Limited Liquidity Fund (Rp 200 Bn) Toll fee Adjustment (Rp 200 Bn) Termination (Rp 2.45 Tn) Contracting Agency: MoPublic Work&Housing Guarantee Period 15 Years Land acquisition advance fee (Rp 816 Bn) Land Acquisition (Rp 80 Bn) Limited Liquidity Fund (Rp 375 Bn) Toll fee adjustment (Rp 200 Bn) Termination (Rp 3.2 Tn) Contracting Agency: MoPublic Work&Housing Guarantee Period 15 Years Land acquisition advance fee (Rp 1.35 Tn) Land Acquisition (Rp 134 Bn) Limited Liquidity Fund (Rp 81 Bn) Toll fee adjustment (Rp 200 Bn) Termination (Rp 5.2 Tn) Contracting Agency: MoPublic Work&Housing Toll Roads Sector Km Est Length Toll road build Est. Toll Road Distance 470 Km 25% Part being guaranteed by Government through IIGF Page 15

IIGF Guaranteed Project Portofolio 9 10 Balikpapan-Samarinda Toll Road Jakarta-Cikampek (Elevated) Toll Road 36 Km Toll Road from Jakarta to Cikampek 99 Km Toll Road

acquisition briding fund (Rp 1.9 Tn) Land acquisition (Rp 194 Bn) Limited Liquidity Fund (Rp 241 Bn) Toll fee adjustment (Rp 200 Bn) Termination (Rp 6.

7 Tn GA Effective Guarantee Period 15 Years Toll fee adjustment (Rp 200 Bn) Political Risk (Rp 400 Bn) Termination (Rp 16.

17 IIGF Guaranteed Project Portofolio 9 10 Balikpapan-Samarinda Toll Road Jakarta-Cikampek (Elevated) Toll Road 36 Km Toll Road from Jakarta to Cikampek 99 Km Toll Road from Balikpapan to Samarinda 11 Cisumdawu Toll Road 60 Km Toll Road from Cileunyi to Dawuan through Sumedang Rp 10 T GA Effective Guarantee Period 15 Years Land acquisition briding fund (Rp 1.9 Tn) Land acquisition (Rp 194 Bn) Limited Liquidity Fund (Rp 241 Bn) Toll fee adjustment (Rp 200 Bn) Termination (Rp 6.1 T) Contracting Agency: MoPublic Work&Housing Rp 14.7 Tn GA Effective Guarantee Period 15 Years Toll fee adjustment (Rp 200 Bn) Political Risk (Rp 400 Bn) Termination (Rp 16.4 Tn) (Co-Guarantee Government) Contractng Agency: MoPublic Work&Housing Toll Roads Sector Rp 8.2 Tn GA Signed Guarantee Period 15 Years Land acquisition briding fund (Rp 867 Bn) Land Acquisition (Rp 163 Bn) Toll fee adjustment (Rp 200 Bn) Political Risk (Rp 400 Bn) Termination (Rp 5,8 Tn) (Co-Guarantee Government) Contracting Agency: MoPublic Work&Housing Page 16

18 IIGF Guaranteed Project Portofolio 12 Krian-Legundi-Bunder-Manyar Toll Road 38 Km Toll Road from Krian to Manyar through Lengudi and Bunder 13 Serang-Panimbang Toll Road 84 Km Toll Road from Serang to Panimbang Rp 9.02 Tn GA Signed Rp 5.3 Tn GA Signed Guarantee Period 15 Years Land Acquistion (Rp 249 Bn) Toll fee adjustment (Rp 200 Bn) Political Risk (Rp 400 Bn) Termination (Rp 9 Tn ) (Co-Guarantee Government) Contracting Agency: MoPublic Work&Housing Guarantee Period 15 Years Land acquisition briding fund (Rp 894 Bn) Land Acquisition (Rp 149 Bn) Toll fee adjustment (Rp 200 Bn) Political Risk (Rp 400 Bn) Termination (Rp 5.83 Tn) (Co-Guarantee Government) Contracting Agency: MoPublic Work&Housing Toll Roads Sector Page 17

Disclaimer All information presented were taken from multiple sources and considered as true by the time they were written to the knowledge of PT Penjaminan Infrastruktur

19 Disclaimer All information presented were taken from multiple sources and considered as true by the time they were written to the knowledge of PT Penjaminan Infrastruktur Indonesia (Persero)/Indonesia Infrastructure Guarantee Fund. Any questions can be submitted to: CORPORATE SECRETARY Tel : Fax : info@iigf.co.id

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