Private Sector Participation (PSP)

in Indonesian Regional Airports Development

EU-Indonesia Business Dialogue Shangri-La, Jakarta 19 November 2014

FOR DISCUSSION PURPOSES ONLY

1

Establishment of IIF

Shareholders

PT Indonesia Infrastructure (IIF) is a private non-bank financial institution formed by and under the Ministry of Finance of the Republic of Indonesia. Licensed under the Minister of Finance Regulation (PMK) No. 100/2009, IIF is professionally managed and focused on supporting and investing in commercially feasible infrastructure projects. The establishment of IIF is a key element of strategic development by Government of Indonesia and development partners among international financial institutions to address the constraints on the flow of private investment in Infrastructure.

Target Sectors

33.88%

19.99% 19.99% 11.24% 14.90%

Transportation infrastructure

Waste / waste-water infrastructure

Road infrastructure

Telecommunication and information infrastructure

Irrigation infrastructure

Electricity infrastructure

Drinking water infrastructure

Oil and gas infrastructure

IIF’s Vision & Mission To provide capital for infrastructure in Indonesia and to work closely with Infrastructure sponsors, the financial sector, and the Government of Indonesia to accelerate the construction of well-conceived, commercially viable infrastructure projects.

•  To ensure investors’ needs are reflected in contractual structures and concessions.

•  To lead in offering a mix of long term financing instruments appropriate for infrastructure.

•  To work with Indonesia’s financial institutions and other institutional investors to channel the nation’s saving into the long term development of Indonesia’s Infrastructure.

2

IIF Investment Products

INVESTMENTPRODUCTS

FUND - BASED

NON FUND - BASED

FIN

AN

CIN

G P

ROD

UCT

S Project

Life Cycle

•  Senior Loan •  Subordinated

Finance (Mezzanine)

•  Guarantee

End of Financing Period

•  Refinancing

•  Share Investment

•  Stand-by Finance

Project Preparation

Project Construction

Project Operation

End of

Con-cession

Tender Investment Projects

Syndicated Financing for Cikampek-Palimanan 116-Km

Toll Road in West Java (Project Cost: IDR12.56tn)

Mandated Lead Arranger syndication for Telecom Tower

Company (Total issuance: USD475mn)

Lead Arranger for 2x35MW Gas-Fired Power Plant

in Batam

Syndicated Financing for 180MW Hydro Power Plant in North Sumatra

Syndicated Financing for Mobile Telecommunication Service

Provider

Syndicated Financing for Power Platform Company with 300MW

Installed Capacity

Syndicated Financing for Gresik LPG Plant

Corporate Credit Facility for Air Transport Maintenance Facility

3

IIF Advisory Services

ADVISORY  

SERVICES  

Project Life

Cycle

PROJECT TYPES

Syndica2on  

TransactionAdvisor

Financial Advisor

•  PPP under Presidential Regulation No.67/2005 jo Presidential Regulation No.13/2010 and No.56/2011

•  Private Project under “Izin Pengusahaan”

•  Projects funded by state budget

•  Private to private

Project Construction

Project Operation

End of

Con-cession

Tender Project Preparation

Public Sector Advisory

On-Going Projects

West Semarang Water Supply PPP Transaction

Advisor

Borapulu Geothermal Power Plant PPP Transaction

Advisor

Private Sector Advisory

On-Going Project

PPP Project

G. Kromong Geothermal Power Plant PPP Transaction

Advisor

Government Motives for PSP in Airports

4

Allocated Budget 2010-2014 (233 Airports)

Actual Funding Requirement (233 airports)

USD  5  billion/  5  years  

USD  2  billion/  5  years  

Investment Service Quality

Inadequate capacity expansion to meet growing demand

Low quality of service and asset management

Government motives for PSP:

Principles: •  Competitive award •  Transparent process •  Performance based

•  Improve service quality •  Capacity expansion •  Risk sharing

The Selected 10 Airports

5

Fatmawati - Bengkulu Hanandjoeddin – Tj. Pandan

Radin Inten II - Lampung

Juwata –Tarakan

Komodo – Labuan Bajo

Mutiara – Palu Sentani – Jayapura

Tjilik Riwut – Palangkaraya

Matahora – Wakatobi

Sultan Babullah – Ternate

Ref.  :  Studi  RINBU,  MOT  

Public  Airport    =  299  airports    (excl.  reloca1on)  -­‐   UPT    DGCA  :  273  airports  -­‐   PT.  AP  I            :  13  airports  -­‐   PT.  AP  II          :  13  airports    

Scope of service area : - Sumatera & Java : 100 km (radius) - Kalimantan & Sulawesi : 60 km (radius) -  NTB, NTT, Maluku & Papua : 30 km (radius)

International Airport : - Main : 5 airports - International : 24 airports

Hierarchy : - Main Hub : 17 airports - Secondary Hub : 27 airports - Tertiary Hub : 28 airports - Spoke : 227 airports

Criteria for airport PSP (brownfield projects) •  Passanger volume > 500.000/year •  Traffic growth > 5% per annum •  Potential to support economic growth •  Clear status on land/asset ownerships

No Brownfield 1 Fatmawati - Bengkulu 2 Radin Inten II - Lampung 3 Hananjoeddin - Tj. Pandan 4 Tjilik Riwut - Palangkaraya 5 Juwata - Tarakan 6 Mutiara - Palu 7 Sultan Babullah - Ternate 8 Sentani - Jayapura 9 Komodo - Labuhan Bajo *

10 Matahora - Wakatobi *

Existing Airports in Indonesia Potential Airports for PSP

8 bandar udara UPBU + 2 bandar udara pariwisata (*)

The Selected 10 Airports

No Airport Name MoT Score

Revenue 2012

(IDR mn)

Aircraft Mov’mts

2011

Passenger 2011

(‘000 pax)

Cargo Traffic 2011

(‘000 kg)

Terminal Area (m2)

Regional Development

Potential

1 Sentani, Jayapura 7.39 18,542 47,494 1,124 63,329 2,910 Eastern Indonesia

Cargo Hub

2 Juwata, Tarakan 6.71 18,200 13,668 770 8,453 6,757 Trade and

Agribusiness

3 Fatmawati Soekarno, Bengkulu

6.22 6,313 5,545 577 2,246 2,807 Agribusiness & Mining

4 S. Babullah, Ternate 6.00 6,627 8,562 477 40 751 Agribusiness

5 Radin Inten II, Lampung 5.92 7,968 15,464 1,034 2,469 2,016 Agribusiness and

fisheries

6 Tjilik Riwut, Palangka Raya 5.79 7,300 6,320 606 3,643 5,734 Mining & Plantation

7 Mutiara, Palu 5.24 7,960 7,234 783 8,413 n.a. Airport Hub

8 H.AS. Hananjoeddin, Tanjung Pandan

4.86 3,218 17,509 512 1,578 1,668 Mining & Tourism

9 Matahora, Wakatobi n.a. n.a. 112 3.2 n.a. n.a. Tourism

10 Labuan Bajo, Komodo n.a. 1,132 3,144 131 161 795 Tourism

Source: Ministry of Transportation

6

10 Airport Candidates

8 Priority Airports

MOT selected airports based on the following aspects: • Regional Economy Condition

• Market • Consistency with Government’s Program

• Accessibility

2 Tourism Airports

Source of Revenue Streams & Private Participation Level

Air Side Support Facilities Land Side Support Facilities

ATC GTC Runway Taxiways Apron Terminal Parking Hotel

Priv

ate

Part

icip

atio

n Le

vel b

ased

on

Type

of

Cont

ract

s an

d So

urce

of

Fund

ing

Management Contract (brownfield)

Leasing (brownfield)

Concession (brownfield/greenfield) BTO, BOT (expansion/greenfield)

Sale / Divestiture (brownfield)

Pote

ntia

l Sou

rce

of

Reve

nues

Contract period based

Passenger frequency related

Airline frequency related

Aviation facilities and services (landing/take-off, parking, lighting, noise

surcharge, ramp services, cabin cleaning, etc.

Fees from passenger services & baggage/cargo handling

Retail revenues Revenues from

parking& real estate

traffic control fees (air side & land side)

BOO (greenfield)

Gov’t budget

Private 7

Key Question: •  What type of facilities and business model that the private sector is interested in?

The Potential for Certain Type of Private Participation

Source: World Bank & PPIAF, 2010 and IIF analysis

Types of Airports

Airport revenues / passenger

Highly developed

US$26

Middle income

US$15

Low income

US$8

Traffic (pax) 385,000 1.35mn 1.5mn 5jt 6jt

Mgt contract

Terminal concession/BOT

Airport concession/trade sale

8

•  Jayapura •  Lampung •  Komodo •  Palu

•  Wakatobi •  Bengkulu

•  Palangka Raya

•  Tanjung Pandan

•  Tarakan •  Ternate

BOT model can be considered if there is

“build” component

Key Question: •  What are the private sector interests and also ideas to be able to participate more and invest in the

development of the mentioned airports?

Proposed Next Steps After Initial Market Consultation

9

Due Diligence

and Finalize Pre-FS

Award & Signing Bid

Submission & Evaluation

Bid negotiation RFP

Issuance EOI and PQ

Final RFP

Financial Close

Project Preparation and Transaction Process

PPP Structuring

Transaction Market

Sounding

Guarantee Application to IIGF

VGF Application

to MoF

PPP Book

Project Planning /

Prioritization

Transaction Implementation - Scope of Work (12-18 months)

Phase 1: PPP due diligence and structuring •  PPP due diligence (technical, financial, economic, and legal)

•  Project structuring options and market sounding

•  Preparation and application of VGF and government

•  Preparation of transaction documents (RFQ and RFP) project

agreements Phase 2: Bid implementation and project award

•  Bid negotiation and finalization of RFP

•  Evaluation of bid and recommendation for project award

•  Execution of project agreements and achievement of financial

close

Project Preparation – Scope of Work (6-9 months)

Project Readiness

Review

•  Project due diligence and preparation of Pre-FS (Outline Business Case – OBC)

•  Project readiness review (Final Business

Case – FBC)

o  Land acquisition (if applicable)

o  EIA (AMDAL + EP) o  Government contribution (e.g.

land, VGF, if applicable)

If project is viable, and bankable structure can be obtained – project will continue to transaction phase

MOT may want to select 3-4 airport project for model transaction •  Two/three from priority airports •  One from tourism based /pioneer airport

Initial market sounding

More Private Sector Feedbacks To Be Expected

10  

Contacts: •  Mr. Budi Prasetyo

Deputy Director for Airport Management Directorate General of Civil Aviation, Ministry of Transportation bdimaz2000@yahoo.com

Phone: +62-21 3507623 – 3506661, 3507577 Fax: +62-21 3505571

•  Mr. Irman Boyle

Head of Public Sector Advisory – PT Indonesia Infrastructure Finance (IIF) iboyle@iif.co.id Phone: +62-21-29915060 Fax : +62-21-29915061

T h a n k Y o u

PT Indonesia Infrastructure Finance The Energy Building, 30th Floor

Sudirman Central Business District, Lot.11A Jl. Jend. Sudirman Kav.52-53, Jakarta 12190 - Indonesia

Phone 62-21-29915060 Fax. 62-21-29915061 11