Indonesia had a large infrastructure pipeline under President Joko Widodo, including approximately IDR5 quadrillion (USD350 billion) of National Strategic Projects planned from 2014 to 2019.
The toll road section of Jakarta-Bogor-Ciawi in Indonesia is approximately 50 km long and was opened in 1978. It is owned and managed by PT Jasa Marga, a state-owned enterprise responsible for managing many of Indonesia’s toll roads.
Indonesia could not fund its infrastructure pipeline through the state budget alone, and had already raised significant funds from bonds, bank loans, and other sources.
Unprecedented changes in population settlement patterns and working arrangements in Indonesia created uncertainty for demand and usage of new and proposed infrastructure assets, and thereby discouraged private financing.
PT Jasa Marga experienced difficulty accessing private financing for new toll road projects due to the long-term nature of returns, the high delivery risk, the high demand and usage risk, and a historic preference among institutional investors in Indonesia for short-term investments.
PT Jasa Marga responded to this challenge by securitising its future toll revenues for the Jakarta-Bogor-Ciawi toll road over a period of five years for mature assets that have a greater certainty of usage demand. Funds raised through this securitisation would be used to finance new projects, allowing PT Jasa Marga to hold the usage risk on this new infrastructure until an operational steady state is achieved.
Under this securitisation process, toll revenues over a five-year term were sold in advance to institutional investors and are expected to offer an annual return of 8-9% over those five years.
These securities were marketed to large institutional investors who would not typically invest in new projects under construction or newly opened assets due to their unwillingness to hold the associated risks.
PT Jasa Marga – Owner and operator.
1973 – Construction commenced on Jakarta-Bogor-Ciawi toll road
1978 – Jakarta-Bogor-Ciawi toll road opened
2011 – Jagorawi road segment widened
2017 – Future toll revenues securitised for a term of five years.
Results / impact
The money raised through the toll revenue securitisation process gave PT Jasa Marga the financing required to undertake new projects it could not have otherwise undertaken due to a lack of state budget capacity and a lack of willingness of the private sector to finance new projects.
Securitising mature assets opened the process to a broader pool of investors as they could manage and assess risk in a much clearer way while allowing PT Jasa Marga to retain ownership of the toll road assets.
Key lessons learnt
Revenue securitisation of mature assets can be an effective way to finance new infrastructure projects that have struggled to attract private funding or are the subject of demand and usage uncertainty. Revenue securitisation can also allow ownership of the underlying asset to be retained.
Some asset managers noted these types of securities are relatively new in Indonesia, have limited liquidity and offer returns not much greater than other fixed-income assets. These factors (in particular the limited liquidity) may have limited the demand for these securities from foreign investors.