Jakarta. State-owned enterprise Jasa Marga plans to raise Rp 1 trillion to Rp 2 trillion — around $75 million to $150 million — from issuing a collective investment contract backed by the company's toll road revenue in June or July, its finance director Donny Arsal said.
The investment contract will provide longer term funding compared to bank loans.
"We have a long concession period on our [toll roads], so we may offer 5- to 10-year worth of toll road revenues to investors," he said in a recent interview.
Under the scheme, known locally as KIK, Jasa Marga will sell the contract to investors, who will receive periodic payback from the company's toll road revenue.
For Jasa Marga, the scheme will provide immediate funding to pay for new toll roads without having to rely on short-term loans from banks, Donny said.
The company will offer the contract to existing shareholders before selling them on to other domestic or foreign investors.
Jasa Marga is planning to build 667 kilometers of new toll roads in the next few years, more than double the 593 kilometers it operates today.
Donny did not say how much the contract's annual return for investors is worth. As comparison local banks ask an average annual interest of 11.6 percent on loans to the construction sector, according to latest available data from the Financial Services Authority (OJK).
But Donny said Jasa Marga is working with local rating agency Pemeringkat Efek Indonesia (Pefindo) to structure the KIK in such a way so it can secure the highest AAA rating from the agency, allowing the company to pay lower interests to investors.
The government has been pushing local construction and property developer companies to securitize their assets in order to broaden financing sources for the economy.
Global consulting firm McKinsey & Company has argued securitization is one of many reforms Indonesia should undertake to unlock an additional $70 billion annual funding from its capital market.