SMI AS A LOCAL PARTNER FOR FOREIGN INVESTORS...

| 17 April 2013, Munich

a leading catalyst in the acceleration

of the national infrastructure

development program.

SMI AS A LOCAL PARTNER FOR FOREIGN INVESTORS

IN INFRASTRUCTURE PROJECT INVESTMENT IN INDONESIA

Emma Sri Martini, President Director

PT Sarana Multi Infrastruktur (Persero)

AGENDA

I. SMI’s Participation on Infrastructure

Development in Indonesia

II. Umbulan Water Supply Project Preparation

III. SHIA Rail Link Project: International Airport

to Manggarai

IV. City of Batam Solid Waste Management

Project

V. Challenges and Opportunities

PT SARANA MULTI INFRASTRUKTUR (PERSERO) - INDONESIA

What’s PT Sarana Multi Infrastruktur (Persero) (”SMI”)?

THREE BUSINESS PILLARS OF SMI

Government Of Indonesia

through Ministry of Finance

• Government/

SOE

• Private/ Bank

• Bilateral/

Multilateral

Institutions

JV JV PT IIF

Shareholders:

PT SMI, ADB,

IFC, DEG,

SMBC

Third Parties

Investment in Infrastructure Projects

SMI SHAREHOLDING STRUCTURE

Ownership: 100%

“Products of SMI are complimentary to the Banking Sector”

SMI was established on February 26, 2009 as a Non Bank

Financial Institution with a purpose to become a leading

catalyst in facilitating Indonesia’s infrastructure

development.

COMMERCIAL

FINANCING

ADVISORY

PROJECT

PREPARATION

(PDF)

• Flexible

financing

• Complemen-

tary to banks

• Syndication

Loan or club

deal

arrangement

• Financial Advisory

Services

• Investment

Advisory Services

• Transaction

Advisory Services

• Training &

Capacity Building

• Project

Development

Financing

• Advisory to

contracting/

tendering

agencies

• Limited capacity

building

ELIGIBLE

SECTORS

• Electricity

• Water Supply

• Transportation

• Telecommunication

• Irrigation & Water Way

• Toll Road & Bridge

• Oil & Gas

• Waste Water & Waste Management

PRODUCT

FINANCING

• Senior Loan

• Convertible Loan

• Subordinated Loan/ Mezzanine

• Equity Financing


SMI’s experiences in scaling up infra finance from official and private sources

Asset

Senior

Loan

Mezz

Loan

Equity

SMI

Private

Equity

Project

sponsor

Asset

Senior

Loan

Junior

Loan

Equity

Foreign

Bank

SMI

Project

sponsor

Asset

Senior

Loan

Mezz

Loan

Equity

•Int.

Agency

•SMI

•Private

Equity

•SMI

Project

sponsor

PROJECT FINANCE:

MINI-HYDRO POWER PLANT

OPERATIONAL FINANCE:

LPG TERMINAL

PROJECT FINANCE:

MINI-HYDRO POWER PLANT

HIGH LOW SMI evolution on debt payment priority

• SMI as Senior Lender

• Overseas Private Equity as co-

financier in Mezzanine Loan

• SMI and Foreign Bank (Co-

financier) as Senior Lender

• In the higher level: SMI also as

Junior Lender

• SMI and International Agency

(Co-financier) as Senior Lender

• In the higher level: Overseas

Private Equity and SMI as

Mezzanine Lender

RECENT PROJECT : CIKAMPEK PALIMANAN TOLL ROAD

• Project Size : USD 1,4 bio Tenor : 15 years Project Finance Limited Recourse

• Syndication member : 20 local banks/NBFI Interest : ATD = margin


SMI financing commitment up to March 30, 2013

• In 2011, the financing commitment growth

is about 190% and its outstanding growth

is about 200% from 2010.

• In 2012, the financing commitment growth

is about 92% and its outstanding growth

is about 128% from 2011.

ELECTRICITY OIL & GAS ROADS

WATER SUPPLY TELE-

COMUNICATION IRRIGATION

45% 19% 17%

7% 7% 3%

1%

SECTOR PORTFOLIO

YTD MARCH 30, 2013

“As a catalyst of infrastructure

development in Indonesia, Multiplier

effect of SMI’s financing is about 8,7x

of its capital in accelarating

infrastructure development in

Indonesia”

TRANSPORTATION

(in IDR bio)

49 175

525

1196

1.663

125 400

1158

2221

2.641

2009 2010 2011 2012 30-Mrz-13

Outstanding Commitment


SMI Financing Distribution


SMI as a Catalyst

Financier/ Investor

Project Socialization

Project Marketing (Investor Forum)

Feasibility Studies

Financing Scheme

Execution

Project Identification

Project Preparation

Identification of Government Support

Coordination Among Related Parties

Project Marketing

Project Socialization

Project Financing Scheme

Project Sponsor

F

A

C

I

L

I

T

A

T

O

R

C

A

T

A

L

Y

S

T


SMI Involvement in 3 (three) PPP Project Preparation

THE UMBULAN WATER SUPPLY PROJECT

The Umbulan Water Supply project is a water supply project that utilizes Umbulan

Spring. The objective is to distribute 4.000 liter/ second of bulk water from Umbulan

spring to Pasuruan, Sidoarjo, Surabaya and Gresik (East Java) through the

development of pumping system and a 102.3 km transmission system.

Status : tender process

Estimated project cost : + USD 207 mio

THE SOEKARNO HATTA INTERNATIOANL AIRPORT (SHIA) RAILWAY

The SHIA Railway PPP project aims to provide a railway transportation facility

connecting Manggarai and Soekarno Hatta Airport. It is dedicated to be an express rail

with premium service, targeted at air passengers.

Status: preparing Pre-FS

Estimated project cost: +USD2 bn

Target: tender process in Q4 2013

BATAM MUNICIPAL SOLID WASTE MANAGEMENT (MSWM)

Batam MSWM PPP Project aims to give solution in handling the issue of solid waste

in City of Batam, as an implication of pupulation growth and industrial centralization in

Batam Island.

Status: has finished the stage of outline business case and currently in the

process of final business case & transaction

Estimated project cost: +USD120 mio


PPP Project Preparation: Umbulan Water Supply

WHAT DOES THE PROJECT NEED?

Local context and environmental factors give strong drivers for Project • Significant need for additional secure supply of potable water in the service areas managed by all five (5) PDAMs,

4 PDAMs have no significant / unpolluted alternative surface raw water sources

• Insufficient availability of raw water resources, degraded surface water resources & deterioration in ground water

resources

Increased service coverage gives strong economic driver for Project • All PDAMs have sufficient numbers of potential new consumers to supplement demand for the Project.

SMI INVOLVEMENT SCHEME

IN UMBULAN WATER SUPPLY PROJECT

Ministry of

Finance

SMI East Java Provincial

Government (EJPG)

IFC as

Transaction

Advisor

Mott MacDonald

as Technical

Advisor

Norton Rose as

Int’l Legal

Advisor

ABNR as

National Legal

Advisor

IFC External Consultants

Project Prep Facilitation Agreement Cooperation Agreement

SMI Assignment


PPP Project Preparation: SHIA Rail Link to the Airport

AIRPORT RAIL IS “AN EXTENSION OF THE AIRPORT INTO THE CITY”

Dedicated, express rail targeted at air passengers

Premium service with higher standards of comfort and convenience, higher fares

3-5 in-town stations with good vehicular and public transport access

Integrated with future SHIA master plan

Airline style comfort and convenience

SMI INVOLVEMENT SCHEME IN SHIA RAIL LINK PROJECT

Ministry of

Finance

SMI Ministry of

Transportaion

(GCA)

AECOM

Consortium

(AECOM, KPMG,

Hogan Lovells)

Project Prep

Facilitation Agreement Cooperation Agreement

SMI Assignment

IMPLEMENTATION PROCESS

Ellected as one of the five “show case” PPP projects for Indonesia

PT SMI (state-owned infrastructure financing company) is managing the project preparation and

implementation

AECOM consortium is appointed to undertake Pre-Feasibility staged studies

Target commencement of construction by 2014


PPP Project Preparation: Batam Municipal Solid Waster Management (MSWM)

BATAM

• The city of Batam currently has a population over 1.1 million people with a total area of and estimated

to reach 2.8 million people by 2037.

• Batam Kota Sub-district was observed to have the highest waste generation rate (0.84 kg/capita/day),

currently it only has one Final Disposal Site (FDS) in Telaga Punggur

• FDS in Telaga Punggur consists of 47 ha of land made available by BP Batam. It has been in operation

since 1997 and approximately 20 ha have been used, leaving potentially 27 ha for future use. Based on

this and an assumed average waste disposal depth of 15 m, the remaining landfill life is about 8 years.

Expected Growth of Waste in Batam

Source: Consultant Analysis


Challenges: In Indonesia cases, what were holding back Infrastructure investment?

Funding issues

Land acquisition & land financing

issues

Risk management

and government

support

Project preparation

The long payback period for infrastructure investment means that long-term

financing is required.

Solution: Establishment SMI & IIF

Land acquisition issues

affect infrastructure

sectors.

Solution: New Land

Acquisition Law just

enacted

• Project risks such as from escalation of land acquisition costs & delay in approval to start operations,

demand risks from actual revenue falling below minimum guaranteed revenue

• Political risks such as from change in regulation, reduce the bankability of infrastructure projects in the

absence of government guarantees.

Solution: VGF Policy & Government Guarantee

Inadequate project

preparation and feasibility

studies have also been

key impediments to

attracting private investors

into the infrastructure

space

Solution: Capacity

Building

“There are also sector specific –infrastructure challenges”


Opportunities: Indonesia has the

prerequisites for a successful project

financing market on infrastructure

Long term attractiveness for project financing in this emerging market is dependent upon: A sound banking system with low private sector debt Strong demographics : over 50% of the population is under

30 with a growing middle class Natural resource wealth Commitment to market friendly policy and regulatory

frameworks

Indonesia is the world’s largest exporter of coal for power generation and palm oil

Indonesia is the third largest producer of natural gas Indonesia is the region’s largest producer of crude oil Indonesia is one of the biggest countries having reserved

geothermal

Indonesia’s strategic geographic location between China and India provides opportunity to service the increasing resources needs of these two countries

Conducive investment climate- Investment grade rating

LONG TERM ATTRACTIVENESS FOR PROJECT FINANCING

RESOURCES AREA MASSIVE BONUS

STRATEGIC GEOGRAPHIC LOCATION & INVESTMENT CONDITION


Summary of Project Pipeline

Electricity

15.204 20

Investment (IDR Bio)

Projects (Unit)

Water Supply

2.794 5


Projects (Unit)

1.150 2


Projects (Unit)

Oil & Gas Roads

8.000 3


Projects (Unit)

Telecom

500 1


Projects (Unit)

Transportation

23.454 10


Projects (Unit)

Sources: MP3EI, PPP Book & others private project


What has Government provided in supporting infrastructure financing

1. REGULATORY FRAMEWORK

• President Regulation No.67/2005 as amended by President Regulation No.13/2010 and President Regulation No.56/2011 concerning the Infrastructure Provision through Public-Private Partnership allowing Government to provide Government support and guarantee.

• Law No. 2/12 on Land Procurement for Public Interests and President Regulation No. 71/2012 on Facilitating Land Acquisition for Public Project Purposes.

• Adjusted sectoral laws.

2. GOVERNMENT SUPPORT

• Government may provide support in the form of licensing, land acquisition, part of construction, and/or in other form in accordance with prevailing law and regulation.

• Moving forward: - Viability Gap Fund (“VGF”)

o Government support in the form of fund as part of Construction Cost of the PPP Projects

o Objective: to increase the viability of the PPP Project

3. GOVERNMENT GUARANTEE • Government Guarantee is provided by

Minister of Finance (MoF) through Indonesia Infrastructure Guarantee Fund (IIGF).

4. PROJECT DEVELOPMENT FUND

• MoF will establish the fund for project preparation cost.

5. GEOTHERMAL EXPLORATION FUND

• MoF already established Exploration Fund for geothermal projects.

6. TAX INCENTIVE

• Tax Incentive is given to the renewable energy projects.

Key success factors of Infratructure

development with PPP scheme & PDF

Initiatives

INVESTOR’S TRACK RECORD & CAPABILITY

• Transparent tender process

• Strong pre-qualification criteria

• High level of competition

FEASIBILITY PROJECT & APRROPRIATE RISK ALLOCATION

• Appropriate project screening and selection

• Adequate project preparation

• Market sounding

• Reputable consultant (combination of international and local

consultants)

• Government Support Provision, including land acquisition and

Viability Gap Fund (VGF)

• Good PPP knowledge of Government Contracting Agency

• Strong Multi-Stakeholders Coordination

CERTAINTY OF THE PROJECT IMPLEMENTATION

• Infrastructure Guarantee from IIGF

• Certainty of PPP Related Policy

• Strong commitment from Government Contrating Agency

• Minimum Political Interference

PDF INITIATIVES

To provide best quality project preparation, GOI has to tackle

issues of:

• Timely consultant procurement process, indefinite delivery

contract are recommended

• Revolving fund mechanism, separation from state budget

mechanism are recommended

D A N K E

D A N K E

D A N K E D A N K E

D A N K E

PT SARANA MULTI INFRASTRUKTUR (PERSERO) GKBI BUILDING, 8TH FLOOR JL. JEND. SUDIRMAN NO. 28 JAKARTA 10210, INDONESIA Ph.: +6221-5785 1499 Fx.: +6221-5785 4298 www.ptsmi.co.id

Disclaimer

All information presented were taken from

multiple sources and considered as true by the

time they were written to the knowledge of PT

Sarana Multi Infrastruktur (Persero). PT Sarana

Multi Infrastruktur (Persero) can not be held

responsible from any inacuracy contained in the

material. PT SMI follows all internal and

external guidelines and regulations that govern

the evaluation process on determining the

financing feasibility of an infrastructure project.

Every decision to finance or not to finance a

project is therefore based on a responsible and

thorough due diligence process.

Any complaint in the process of financing

irregularities can be submitted to:

Ms. Astried Swastika

Corporate Secretary PT SMI

Tel : +62 21 5785 1499 Fax : +62 21 5785

4298 Email : [email protected]

Public complaints on PT SMI service will be

kept strictly confidential and handled by a

special committee to ensure that complaints are

addressed appropriately.

SMI AS A LOCAL PARTNER FOR FOREIGN INVESTORS...

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