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Wika to inject Rp 1.13t for new subsidiary

State-owned construction firm PT Wijaya Karya (Wika) will gradually inject Rp 1

Prima Wirayani (The Jakarta Post)
Jakarta
Thu, February 23, 2017

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Wika to inject Rp 1.13t for new subsidiary

State-owned construction firm PT Wijaya Karya (Wika) will gradually inject Rp 1.13 trillion (US$84.4 million) worth of capital to establish a new toll road operator subsidiary as it aims to tap into the lucrative business.

Wika is set to hold majority shares in the future subsidiary, proposed to be named PT WIKA Serang Panimbang (WSP), after placing 80 percent of the latter’s paid capital, according to a statement submitted to the Indonesia Stock Exchange (IDX) on Wednesday.

The remaining 15 percent of the shareholding will be owned by state construction firm PT PP, while another 5 percent will be controlled by industrial estate management company PT Jababeka Infrastruktur (JBIS).

The move by Indonesia’s major construction firm follows the current administration’s nationwide infrastructure development plan, including 1,000 kilometers of new toll roads by 2019.

The corporate action, the statement reads, will enable Wika to develop its toll road investment business and become a contractor for toll road construction. That will benefit the firm and improve its consolidated financial performance and add value for its shareholders.

“Wika sees prospects in the toll road development business,” Suradi explained.

The foundation of WSP, its first subsidiary in toll road operation, marks business expansion outside its core business of construction, which already includes development of toll roads, such as the Soreang-Pasir Koja toll road in West Java and the Samarinda-Balikpapan toll road in East Kalimantan.

WSP will work on the Serang-Panimbang toll road in Banten, which spans 83.6 km. Of the
Rp 5.3 trillion investment needed for the project, 25 percent will come from Wika’s equity, while the rest is expected to come from a syndicated bank loan.

The government would build about 30 km of the planned toll road, while WSP would tackle the rest, Suradi said.

“We just sealed the PPJT [toll road concession agreement] today, and we hope the BUJT [toll road operator company WSP] can immediately take action,” he said. “We aim to complete the project in 2019.”

The construction will use a contractor pre-financing scheme, under which Wika will initially provide the project’s funding that WSP will repay later once the construction is complete.

Suradi expressed optimism that Wika could secure the necessary investment as it already held Rp 6.1 trillion in additional capital from a recent rights issue.

The company can leverage the capital up to three times its value to banks and plans to maximize the available banking facility to support its business plan.

Wika aims to book a total Rp 102.9 trillion worth of contracts this year, up 23.7 percent from last year, which also comprised carry-over projects from 2016. Of the figure, it hopes to obtain 25.8 trillion worth of new contracts from infrastructure construction.

Previously, state-owned construction firm PT Waskita Karya set up a toll road operator subsidiary, PT Citra Karya Jabar Tol. Waskita controls 15 percent shares totaling Rp 150 million in Citra Karya through its subsidiary, PT Waskita Toll Road (WTR), while another 14 percent is owned by another state-owned construction firm PT PP.

Waskita also injected Rp 3.8 trillion of capital into its third-tier subsidiary toll road company PT Pejagan Pemalang Toll Road.

RHB Securities Indonesia expressed its confidence in Indonesia’s construction sector this year.

“We forecast solid new contract growth and stronger earnings in 2017 for the sector, driven by a larger infrastructure budget and a stronger balance sheet of the big four state-owned contractors given that they have all been recapitalized [through state capital injection (PMN)] by the government,” it said in a research note.

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