IIGF Role and Government Support in Indonesian PPP Infrastructure Project

Dr Armand Hermawan CFO, Director of Finance and Risk management, Indonesia Infrastructure Guarantee Fund (IIGF)
November 2011

Outline

1. 2. 3.

Indonesian PPP Context IIGF Profile CJPP Case Study

Indonesian PPP Context

Infrastructure investment estimate shows huge needs of contribution from the private sector
Government estimates investment needs for infrastructure within 2010-2014 reach ~ USD 214 billion Funding Gap is about USD 74 billion: expected to come from Private Sector

Indonesia Infrastructure Investment Requirement 2010-2014

(in US$ billion)
$ 214 $ 140

It is expected that part of this will utilize PPP scheme

$ 74

$ 74

Investment Needs

State Budget / SOE

Funding Gap

Private

Source: Bappenas

PPP Development in Indonesia

PPP Book 2010-2014

91 projects

100 projects Ready to Offer =1

PPP Book 2011-2015 79 projects

Priority = 27

Ready to Offer =13 Priority = 21

Planned
10 projects

Potential = 72 5 PPP Showcase 2010 Infra Summit 3 Aug 2010 Potential = 45

Model Project 2005 Infra Summit 1 2006 Infra Summit 2

Jun 2011

Realized

CJPP

Note: - Model Project: Feasibility assessment stage - Potential Project: Preliminary study - Priority Project: Pre-FS stage - Ready to Offer Project: Bidding document completion

Source: Bappenas

Some of Key Challenges to accelerate Indonesias PPP - which are not unique to Indonesia only

Sectors
Transport

Key Challenges
1. Public Sector Capacity & Commitment Comprehension of PPP Execution Project Preparation Transaction 2. Government Support Direct Land Acquisition Investment / Operations Subsidy Contingent 3. Regulatory Framework

Toll Road

Electricity

Water Supply

Waste

Various measures have been taken by GoI, one of which is establishing IIGF

Selected Oil & Gas

Selected Telco

4. Institutional Issue / Coordination Project Planning and Preparation

Irrigation

IIGF Profile

GOI establishes IIGF to provide guarantees to accelerate infrastructure development through PPP

Presidential Regulation 67/2005*

Presidential Regulation 78/2010

MOF Regulation 260/2010

Single Window Mechanism for Guarantee Provision

1. Improve creditworthiness bankability of PPP projects 2. Provide guarantees to well structured PPPs 3. Improve governance, transparency and consistency of guarantee provision process 4. Ring-fence GOI Contingent Liabilities and minimize Sudden Shock to RoI State Budget

Primary Objective of IIGF

*as has been ammended by Presidential Regulatian No. 13/2010 and No. 56/2011

IIGF serves as Governments Single Window for Appraising, Structuring of Guarantees & Processing Claims

Project Project Project Project Project

Appraising, Structuring of Guarantees & Processing Claims

A single window is important for: A consistent policy on appraising guarantees A single process for claims Introducing transparency and consistency to the process

IIGF may provide coverage of various CAs Obligations which have been allocated to CA under PPP/Cooperation Agreement
Pre-construction Construction Operation Transport

Delay or failure in obtaining licenses, permits, and approvals Financial close delay/failure Change in law/regulations Breach of contract Integration with network Competing facility

Sectors: As per Presidential Regulation No. 67/2005

Toll Roads

Electircity

Water Supply

Risks

Revenue Demand Tariff Expropriation Currency inconvertibility & non-transfer Sub-sovereign Force majeure affecting the CA Interface Selected Telecom Waste Water

Irrigation

Selected Oil & Gas

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IIGFs Business Model is designed to make the Government Guarantees provision Consistent, Transparent, and Efficient
Sectors as Regulations Note: Counter Guarantee for MDA Guarantee Facility Ministry of Finance
B

will exist only if

exist, i.e. when

become part

of guarantee structure provided to investor Equity Injection & Guarantee Policy

1 Proposal for Guarantee

Contracting Agency
3a

MOF

Recourse Agreement

(Ministries, Regional Governments, SOEs)

PPP Agreement
2

Credit & Guarantee Facility

3b

Investor

Multilateral Development Agency / Others Sectors as Allowed

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Project eligibility criteria for IIGF Guarantees

Sector

As per Presidential Regulation No. 67/2005 juncto PR No. 56/2011 and PR No. 13/2010

PPP Contract

Awarded through a competitive bidding process

Project Viability

Economically, financially, technically & environmentally viable, socially desirable

Regulations

Comply with related sector regulations

Feasibility Study

Conducted by credible experts/consultant

Arbitration Clause

Binding arbitration provision in the Concession/PPP Agreement

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Central Java Power Plant Project

(2 x 1000 MW; ~US$ 4 billion project)

The 1st PPP Project under IIGF Scheme

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Central Java Power Plant (CJPP) as the 1st IIGF deal

Project Location COD

Ultra super critical coal fired power plant Batang Regency, Central Java Province End of 2016

PPA Tenor

25 years Build, Operate, Transfer (BOT)

Guarantee Agreement Gurarantee Agreement ofIDR for Bio 300

2x1000 MW; ~US$ 4 bio

PPP Structure

Central Java Power Project

PT Bhimasena Power Indonesia , an SPV of consortium: J-POWER: 34% ADARO: 34% ITOCHU: 32%

Developer

6 October 2011

Guarantee Structure

Guarantee Agreement : IPP with IIGF and GOI Coverage: political risk, force majeure affecting PLN and PLN EOD Guarantee Tenor: Equity : 16 years Debt : 21 years

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CJPP Overall Transaction Scheme

State-owned electric utility

Recourse Agreement

Guarantors

PPA

Guarantee Agreement

Project Company
Equity Project-Finance Debt

Sponsors

Sponsor Agreement
Profit Distribution

Loan Agreement
Debt Service

Lenders

EPC, O&M, Fuel Supply Agreements

Engineering, Procurement and Construction Contract Fuel Supply Contract Operation and Maintenance Contract

EPC Contractor

Fuel Supplier

O&M Contractor

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Key Terms and Conditions of CJPP Guarantee Agreement

No

Item

Position

Guarantee Coverage

Itemized and detailed clauses of PLNs financial obligation in the PPA - Equity : 16 years post COD - Debt : 21 years post COD Applicable to IIGF, and also to Government once the necessary regulation to allow it is in place Co- guarantee structure between IIGF and GOI with Amount Sharing concept. No back- up ; Except when IIGFs insolvency is a result of Government action/inaction. First Loss basis on IIGF Amount One Guarantee Agreement . However, the two guarantees are several, and not joint and several.

Guarantee Tenor

Guarantee Fee

Structure of Guarantee

Back-up on IIGF Amount

Commercial Structure of Co-Guarantee

Legal Structure of Co-Guarantee

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Guarantee Cover for CJPP

Covered:
1. Obligation to purchase electricity Monthly payment (Capacity and Energy payment)
2. Deemed Dispatch Due to PLN not being able to receive Sellers output Buyout obligation due to PPA Termination triggered by PFM, NFM Obligation to pay due to PLN EOD: Non payment Material Breach Merger, Consolidation GOI EOD under GA

3.

4.

PLN Financial Obligation under the PPA

Not covered:

1. Sellers EOD 2. Tax for Special Facilites 3. Indemnity

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Thank You

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