Govt approves Rp 10t in bonds to fund toll projects

Rendi A. Witular, Jakarta

The government has approved a plan by state-owned toll road builder and operator PT Jasa Marga to issue Rp 10 trillion (US$1.11 billion) worth of bonds to raise funds for the construction of a massive toll road project in Java.

President director of Jasa Marga Syarifuddin Alambai said that the Office of the Coordinating Minister for the Economy had recently approved the bond issue, after the Ministry of Finance rejected a request for a loan guarantee facility for the project.

"The bonds are the first tranche of series of bonds planned by the government to finance the project... We plan to issue the bonds in September this year," said Syarifuddin recently, refusing to disclose the indicative rates for the bonds.

Syarifuddin said that the bonds, which will have a maturing period of between five and seven years, will be issued in the form of asset-backed securities -- a type of bonds that are based on underlying pools of assets. Through such a scheme, the toll road projects run by the company will be used as collateral.

The government plans to appoint state-owned Bank Negara Indonesia and Bahana Securities, which is controlled by Bank Indonesia, as the arranger for the issue.

The bond plan is among three feasible capital-raising options previously considered by the company and the government, apart from an initial public offering (IPO) and offering projects to investors with the government serving as the guarantor of the projects' loans.

However, the last proposal was rejected by the Ministry of Finance over fears that it would disturb the allocation of funds for the state budget.

Syarifuddin said that proceeds from the bonds would be used to fund 14 of Jasa Marga's construction projects this year, which included the completion of the Jakarta Outer Ring Road project, the Padalarang-Bandung project, the Semarang-Solo project and the Cikampek-Cirebon project.

The roads are part of a 1,486-kilometer toll road that will link Merak in Banten to Banyuwangi in East Java, which is expected to cost a total of around Rp 86 trillion with the completion scheduled for 2009.

With the Rp 10 trillion fund, the company expects to build around 330 kilometers of toll road.

The company is also planning to issue the second tranche of bonds in 2006, which will be worth around Rp 36 trillion. Proceeds from the bonds are expected to finance 440 kilometers of toll roads.

"Although we have bonds to finance the projects, we are unlikely to meet the completion schedule in 2009. We estimate that only 770 kilometers of the road will be completed, with the remaining 716 kilometers left hanging," said Syarifuddin.

He explained that the delay would be primarily caused by the lack of contractors available to carry out all the projects.

As for the company's initial public offering (IPO) plan, Syarifuddin said it would be realized later this year.

"The IPO, offering up to 40 percent of our total shares, will hopefully be done in October or November," he said, adding that the IPO would target Rp 1.5 trillion in proceeds.

Jasa Marga currently manages 383 kilometers of the country's 520 kilometers of toll roads. The remainder is managed by private investors.

Despite the company's higher operating revenue in the first half of this year compared to the same period of last year, its net profit slightly declined due to higher operating expenses and soaring interest burden for its debts.

The company recorded an operating revenue of Rp 806 billion, up from Rp 607.8 billion. However, net profit dropped to Rp 121.9 billion from Rp 122.3 billion.