Two Indonesian companies have appointed Bahrain-based investment bank Elaf Bank to arrange the issuance of their Islamic bonds (sukuk) amounting to US$84 million in total to be sold both in domestic and international financial markets.
The two companies, compressed natural gas (CNG) distributor PT Java Energi Semesta (JES) and power producer PT Mitra Abadi Rahardja (MAR), signed agreements to launch the Islamic bonds with Elaf Bank in Jakarta on Wednesday.
JES supplies gas to medium-sized industry such as small-scale power plants and fuel stations located far from gas pipeline networks.
The company expects to raise $62 million from the issuance of the sukuk to finance the construction of its three CNG filling stations located in Gresik (East Java), Karawang and Cilegon (both in West Java) and associated infrastructure.
“The proceeds from the issuance of sukuk will be used to finance 80 to 90 percent of the project,” JES’s corporate service director Joseph M J Renwarin said.
He added that each filling station would have a capacity of 10 million standard cubic feed per day (MMSCFD) and the construction was expected to be finished within three months.
“Insya Allah this year. But, this will depend on how fast we can finish the due diligence and the structuring.”
As for MAR, the company expects to generate $22 million from the sukuk issuance and will use the funds to finance the construction of a 2x4 megawatt mini hydro power plant in Jambi. “We expect the power plant will contribute to reduce the power shortage in the region,” the company’s commissioner Hamdani M. Syah said.
The power plant project is expected to be finished within two years.
Elaf Bank’s chief executive officer Jamil El Jaroudi said the Islamic bonds were expected to be issued not later than this year.
“Insya Allah [God Willing] this year. But, this will depend on how fast we can finish the due diligence and the structuring”.
“Now, we have to work on what are the best sukuk to introduce to the market, their duration, their cost and so on,” he said.
“Some time this can take three to five months or five to eight months, depending on the size of the projects. This one should not take too long, because we are not talking about a huge amount,” he said on the sidelines of the signing ceremony.
Jaroudi added, “I think that [the sukuk issuance] will be implemented both here in the local domestic market and in the Gulf region,” he said.