PP to sell stakes in port, toll roads to finance new infrastructure projects

 

Riska Rahman

The Jakarta Post

 

 

State-owned construction company PT PP is planning to divest itself of several infrastructure projects next year to fund new infrastructure projects that can boost its recurring income.

Finance director Agus Purbianto said on Tuesday that the company was looking to divest stakes in four of its infrastructure projects to help finance its capital expenditure in 2020.

“We’re planning to divest our stakes in Kuala Tanjung Port and the Medan-Kualanamu-Tebing Tinggi toll road [in North Sumatra], the Pandaan-Malang toll road [in East Java], the Manado-Bitung toll road [in North Sulawesi] and the Balikpapan-Samarina toll road [in East Kalimantan],” he told the press in Jakarta. 

Although he did not mention the amount of money the company plans to raise from the divestment, Agus said the company should receive at least 1.3 times the book value of the projects.

PT PP president director Lukman Hidayat said the proceeds from the divestment would be used to finance the company’s capital expenditure, which would be increased to at least Rp 7.5 trillion next year.

“The rest of the funding will come from our subsidiary’s dividends and debts,” he said.

Agus further explained that the publicly listed firm would spend the funds on projects that would generate recurring income, such as drinking water supply, renewable energy projects and toll roads.

PT PP currently owns five water supply concessions in the country. The most recent one is the Ir H Djuanda drinking water supply system that supplies water to 2.8 million people in Karawang, Bekasi and Bogor in West Java.

In an effort to expand its water supply business, the company is currently in talks to acquire state-owned steelmaker PT Krakatau Steel’s subsidiary PT Krakatau Tirta Industri (KTI), which is engaged in clean water supply. However, the negotiations seem to have stalled, as both parties are seeking a majority stake in KTI.

“We only want to acquire KTI if we can have a majority stake so we can consolidate the earnings to our books,” said Agus, adding that the company would withdraw from the negotiations if Krakatau Steel refused to give up a majority stake in KTI.

He continued that next year’s capital expenditure would also be used to develop a bamboo-based biomass power generation project in East Nusa Tenggara. The power plant is hoped to reduce the region’s heavy dependence on diesel power generation, while also empowering the community.

Agus, however, did not disclose the value of the biomass power plant project.

Meanwhile, Lukman said the company projected low double-digit growth in 2020 due to the new accounting standards that will make the company book less revenue from its property business through its subsidiary, publicly listed PT PP Properti.

The company also announced that it was aiming for its infrastructure construction subsidiary PT PP Infrastruktur to go public through an initial public offering (IPO) in 2021, marking a delay from the initial plan of an IPO in 2020, which Agus said was in response to the unfavorable market conditions.

“The share prices of many state-owned enterprises’ [SOEs] subsidiaries are now below the IPO price, which signals that the market is currently less interested in absorbing SOE subsidiaries’ shares offerings,” he explained.

Should PP Infrastruktur go public in the future, he said, the company aimed for the psoceeds to reach Rp 1 trillion “at the very least”.

As for this year, Lukman said, he projected PT PP’s revenue to grow by about 10 percent to Rp 27 trillion and sees its profit at Rp 1.5 trillion.

The company further lowered its contract target to Rp 42 trillion from Rp 45 trillion, as several infrastructure and construction projects had been pushed back, he said. Despite the seemingly bleak outlook for this year, Lukman said he remains optimistic that the company would still be able to fulfill the targets and achieve growth by the end of this year.