With lower dividends being paid out this year, state-owned enterprises (SOEs) are preparing themselves for further business expansion to support the national development agenda.

The companies, operating in numerous business sectors, have expressed their firm commitment to using higher retained profits as a result of lower dividend payments to support the government'€™s programs.

Publicly listed construction firm PT Wijaya Karya (WIKA) has stated that it will use its retained profits to finance part of its capital expenditure (capex) for various infrastructure projects this year.

'€œShareholders have agreed to slash the dividend payout from 30 percent last year to 20 percent this year ['€¦]. The retained net profits of around Rp 492.14 billion [US$37.9 million] will be used to finance part of our capex,'€ WIKA finance director Adji Firmantoro said recently.

WIKA, which is 65 percent controlled by the government, plans to quadruple its capex to a maximum of Rp 4.4 trillion this year, most of which will be used to finance its power plant projects.

The government has set an ambitious target of building power plants with a capacity of 35,000 megawatts over the next four to five years to support an economic growth target of 7 percent by 2017, from 5 percent at present.

Other state-controlled construction firms, PT Adhi Karya and PT Waskita Karya, also plan to use their retained profits as part of their respective capex outlays this year.

Adhi Karya president director Kiswodarmawan said previously that his firm would like to use the greater retained profits to enlarge its equity and expand its business.

As at Adhi Karya, Waskita'€™s dividend this year has also been cut to 20 percent from 30 percent last year.

'€œWe need a huge amount of funding because there are new projects that require a big investment. We will use the remaining 80 percent of net profits to fund our capex,'€ said Waskita finance director Tunggul Rajagukguk.

As of March this year, Waskita has registered new contracts worth Rp 2.56 trillion.

In the banking sector, dividends were either cut slightly or maintained at the same level as those of last year.

Bank Mandiri president director Budi Gunadi Sadikin said previously that the reduction in dividends would help the firm enlarge its equity.

The state lender paid out a total of Rp 25 trillion in dividends during the period of 2006 to 2014, according to the firm'€™s internal data.

Telecommunications giant PT Telekomunikasi Indonesia (Telkom), meanwhile, will use its bigger retained profits this year to expand its business aggressively and support the government'€™s national broadband plan.

Under the 2015 revised state budget, the government expects to pocket Rp 37 trillion from state-owned enterprises'€™ dividend payments, lower than the initial target of Rp 44 trillion.

There are currently around 122 state enterprises, 20 of which are publicly listed.

SOEs Minister Rini Soemarno said previously that under her leadership, her ministry would urge state enterprises to take part in various aspects of the development agenda by allowing them to pay lower dividends '€” among other things.

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