August 18, 2017 / 8:53 AM / a year ago

Fitch Affirms Penjaminan Infrastruktur Indonesia at 'BBB-'; Outlook Positive

(The following statement was released by the rating agency) HONG KONG/BARCELONA, August 18 (Fitch) Fitch Ratings has affirmed PT Penjaminan Infrastruktur Indonesia (Persero)'s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BBB-' and Short-Term Foreign-Currency IDR at 'F3'. The Long-Term Outlook is Positive. The company is also known by its English name, Indonesia Infrastructure Guarantee Fund (IIGF). IIGF's ratings are credit linked and equalised to those of Indonesia (BBB-/Positive/F3), reflecting its status as a wholly owned state corporation and important role in providing guarantees for Indonesian public-private partnership (PPP) infrastructure projects, which is a priority sector for the government. Fitch believes there is a high probability of the company receiving extraordinary government support, if needed. KEY RATING DRIVERS SOE and Government Recourse: IIGF is wholly owned by the government. Under Presidential Regulation 78/2010, and further elaborated by ministerial regulation 8/2016, the Ministry of Finance (MoF) is required under a recourse agreement to set-off any payments IIGF may be required to make under any called guarantees and allocate sufficient budgetary resources for payment. This mechanism reinforces the company's link with the government and the legal status is assessed as "Stronger" given the recourse agreement. Strong State Control: IIGF reports directly to the MoF and is overseen by a three-member board of commissioners, all of whom are appointed by the MoF. The MoF approves IIGF's annual budgets, long-term plans and board composition at the general shareholder meeting. IIGF is also audited by the state auditor every three years. In August 2017 the MoF passed a regulation to limit IIGF's gearing ratio to 10x equity; the ratio is currently at 3.2x. Ongoing State Funding: IIGF's total paid-up capital from the MoF reached IDR7 trillion as at end-2016 and a further IDR1 trillion is expected in 2017. The company also has a two-step loan from the International Bank for Reconstruction and Development with a 20-year maturity. The loan, totalling IDR 35.8 billion, is received by the government then relented to IIGF. The integration attribute has been assessed as "Midrange", as the company only receives limited government funding. Moderate Strategic Importance: IIGF's role is to attract wider private-sector participation in Indonesia's PPP projects by providing guarantees. There is a significant investment need that cannot be financed solely from the national budget. IIGF is the government's sole representative in issuing guarantees in this sector. The strategic importance attribute is assessed as "Midrange" as it is not a mandatory responsibility of the government to provide guarantees for PPP projects. Increased Activity: IIGF extended the sectors that are eligible for guarantees to 19 in 2016, from eight previously, following a presidential decree. Operations picked up in 2016 when IIGF issued nine guarantees for various Indonesian projects, including power, information and communication technology, water and toll roads. This allowed IIGF to book commission income for the first time. Additional revenue includes interest earned on liquid investments. Strong Liquidity: IIGF's main risks - given the nature of its activities - are guarantees it has issued. These amounted to IDR19.5 trillion at end-2016. IIGF's liquidity from capital injections is entirely invested in short-term securities or bank deposits. If additional liquidity is needed to meet called guarantees, IIGF says it can obtain a short-term facility from a bank or approach the MoF for additional capital. RATING SENSITIVITIES An upgrade of Indonesia and continued strong implicit sovereign support could trigger a rating upgrade. A downgrade of Indonesia's rating or changes to IIGF's status due to a dilution of MoF's ownership or weakening of control could trigger a rating downgrade. Contact: Primary Analyst Samuel Kwok Associate Director + 852 2263 9961 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Secondary Analyst Fernando Mayorga Managing Director +34 93 323 8407 Committee Chairperson Guido Bach Senior Director +49 69 768076 111 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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