Khazanah, Saudi Aramco eye stake in Indonesia toll road builder

18/12/2017 08:15 AST

PT Waskita Karya, an Indonesian state-owned construction company, is in talks with a group of investors including Islamic Development Bank and Saudi Arabian Oil Co. to sell a stake in a unit that builds and operates toll roads.

The consortium also includes Malaysia's Khazanah Nasional Bhd. and Waskita is aiming to conclude a deal early next year, President Director Muhammad Choliq said. PT Waskita Toll Road owns 18 toll roads, mostly in Java, and counts state pension fund PT Taspen and financing company PT Sarana Multi Infrastruktur as shareholders, he said.

Waskita is seeking to raise funds by selling toll roads to finance future projects as Indonesia's President Joko Widodo pursues an aggressive infrastructure agenda to improve road, rail and port connectivity in the archipelago. The government will cease budgetary support to state companies from next year and is pushing them to fund infrastructure projects either through debt or equity.

"We are still negotiating the price and hopefully we can reach an agreement early next year," Choliq said in an interview on Thursday. "Aramco wants to diversify its business because of weak oil prices and they are keen to invest in Indonesia's infrastructure projects."

Aramco didn't respond to an email requesting comment, while Khazanah declined to comment. Nabil El Alami, head of marketing and communications for IDB's Islamic Corporation for the Development of the Private Sector in Jeddah, didn't respond to calls and an email requesting comment.

Lack of Toll-Road Bidders Casts Doubt on Widodo Spending Funds

Indonesia won pledges of $1 billion in development finance from Saudi Arabia and signed agreements to cut trade barriers between the two countries during King Salman bin Abdulaziz's visit earlier this year. That's on top of a $6 billion oil refinery deal between Saudi Aramco and Indonesia's PT Pertamina signed in December last year. Saudi Arabia is also planning an initial public offering for Aramco as it seeks to set up the world's biggest sovereign wealth fund and reduce the economy's reliance on hydrocarbons.

The World Bank estimates Indonesia needs about $500 billion over the next five years to bridge its infrastructure gap. The government has identified 245 projects worth about $325 billion as a priority.

Waskita is also talking to PT Astra Infra for selling a stake in the toll road projects, Choliq said. The company will pursue an initial public offering of shares in the second half of next year if it fails to find a strategic buyer by the end of the first quarter of 2018, he said. Waskita failed to get "acceptable offers" for 10 toll road projects it put up for auction in September.

Waskita is targeting 60 trillion rupiah ($4 billion) of new contracts in 2018, the same as this year, and sees net income rising to 7 trillion rupiah if it completes divestment of the toll roads, Choliq said. Net income may be lower at 5 trillion rupiah without the divestment, which would still be up from 4 trillion rupiah seen this year, he said.

Bloomberg