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Infra projects on the line as construction SOEs face funding woe
State-owned enterprises (SOEs) in the construction sector are poised to face difficulties in obtaining financing, which could potentially hamper the progress of many future national projects that require funding.
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Traffic flows along a Jakarta thoroughfare on July 26. (AFP/Bay Ismoyo )
S
tate-owned enterprises (SOEs) in the construction sector are poised to face difficulties in obtaining financing, which can potentially hamper the progress of many future national projects that require funding.
Among four major publicly listed construction SOEs this year, the debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratios, which measure debt serviceability of a company based on its cashflow, were at their highest in years.
Most SOEe’s figures improved slightly in the first half of the year compared to the same period last year, but remained higher than in the past five years.
PT Wijaya Karya has the highest debt ratio at 99.26, followed by PT Adhi Karya at 78.79 and PT Pembangunan Perumahan at 46.27, while PT Waskita Karya has the worst ratio among the four at negative 142.73, which means it is highly leveraged while suffering losses, according to each company’s financial statement.
This year, these SOEs, were each working on multiple assigned projects. Several notable ones include Jakarta-Bandung high speed railway and Greater Jakarta light rail transit, integrated industrial zone, many projects in new capital city as well as many toll road projects.
Agung Iskandar, rating analyst at Indonesian credit bureau Pefindo, told The Jakarta Post on Sept. 20 that generally, a company might want to limit its debt to EBITDA ratio to between 3 and 4, which most analysts view as “moderate”, while anything beyond that is “aggressive”.
“If a company, or in this case, a state-owned construction firm, has a high leverage, it could reduce the investor’s interest in providing financing,” Agung said, adding a high leverage reflected each company’s ability to pay back its debt.
