The Role of PT. Sarana Multi Infrastruktur in Infrastructure Development

1. The Role of PT. Sarana Multi Infrastruktur inInfrastructure Development Presented at “Strategy for Developing Infrastructure PPP in Indonesia” Seminar Bali, 5 May 2009

2. OUTLINE Background Profile Framework Financing Policy Challenges Target

3. BACKGROUND Rationale • Global economic condition • The important role of infrastructure development as one of the stimuli of the economic growth • Significant funding gap • Needs to support the infrastructure development Follow Up: • The government has provided various strategies to attract private investors to finance the project with the issuance of the regulatory frameworks: • PT SMI establishment through the Government Regulation No. 66/2007 as amended by Government Regulation No. 75/2008 • Infrastructure Financing Company through Presidential Regulation No. 9/2009 • Draft Minister of Finance Regulation on Infrastructure Financing Company • Continuous improvement of the Law/Regulation on each sector • Government will establish Guarantee Fund Company • Coordination with multilateral institutions to raise fund • Establishment of PPP CU

4. PROFILE Minister of Finance 100% ownership PP 66/2007 Juncto PP 75/2008 PT SMI JV JV IIFF* • Founder: • PT SMI • ADB • IFC • DEG • Other Private Sector Investors • Third Parties: • Public, private sector • State Owned Enterprises • Banking • Local Government • Multilateral Organization (World Bank, ADB, etc.) • Private Funds *Indonesia Infrastructure Financing Facility • Benefits of the third parties involvement: • Increase the capability of financial sources • Increase the reputation & credit rating • Absorb the expertise, experience & other resources

5. PROFILE PT SMI was established in February 2009 • To serve as a leading catalyst of the national infrastructure development acceleration VISION MISSION • To become a strategic partner of the government in promoting and accelerating the infrastructure development growth in Indonesia. • To establish the synergy with the third parties, e.g. private institutions, banking, Local Governments, State Owned Enterprises, or multilateral organizations in order to increase the capacity of infrastructure fund MOTTO Spirit – Motivation - Integrity

6. PROFILE Purpose of the establishment of PT SMI: • To become one of the agencies of the Government of Indonesia in promoting infrastructure development growth • To provide alternative source of fund to financing the project • To address the scarcity of long term debt for infrastructure development. • To be responsive to market needs by working with all participants (government, private investor, banking, multilateral organizations, regulator) to create appropriate financing solution • To increase the size of PT SMI and its effectiveness through the partnerships to extend the capacity of infrastructure fund

7. F A C I L I T A T O R C A T A L Y S A T O R FRAMEWORK THE ROLE OF PT SMI Project Owner PT SMI Financiers/ Investors Project Identification Project Socialization Project Preparation Project Marketing (Investor Forum) Government Support Identification Inter-department Coordination Feasibility Study Review/ Due Diligence Project Marketing Financing Scheme Review Project Socialization Project Financing Execution Project Financing Scheme

8. FRAMEWORK Improving the capacity of the Infrastructure Development Acceleration Related Parties PT SMI Goals Regulator: Government Bodies FACILITATOR/CATALYSATOR for Project Owner & Investors Job Creation • Internal Capacity Building • Fund Management • Fund Raising • Development of the fee-based income, • e.g.: Investment advisory • External Capacity Building • Identification of Infrastructure Project • Priority • Inter-departmental Coordination • Partnership with other entities to form • JVs specializing in the infrastructure • financing • Direct financing to other legal entities, in • the form of loan or equity • Partnership with other parties in the • form of BOT or BOO • Socialization on the infrastructure • financing activities I N F R A S T R U C T U R E • Project Owner: • Ministry/ Bureau • Local Government • BUMN/BUMD • BPJT • etc Poverty Reduction D E V E L O P M E N T Human Resources Development • Investors: • Lenders • Local Investor • Foreign Investor • Multilateral • Private Sectors • Banking • Infrastructure • Pool of Fund • PIP Industrial Competitiveness Improvement Distribution Improvement

9. To enable PT SMI to be as flexible as possible Key Parameter To provide effective & useful products that can be run on a commercial basis • According to MoF Regulation (being • finalized): • Maximum equity participation from each • Lender • Maximum equity portion at borrower site • Infrastructure related project • Flexible tenor with appropriate grace period Financing size, coverage and tenor FINANCING POLICY

10. Majority private sector entity Eligible Companies Majority public sector entity • PT SMI may support project in the following sectors: • lEnergy supply • lWater/ waste services • lTransportation • lTelecommunication • lOil/ Gas • lRoad/ toll road • lOther activities that impact positively on • the development of basic infrastructure Eligible Sector FINANCING POLICY Eligible Project PPP & Non PPP Project • Loan: • the terms will reflect the relevant risk profile , • flexible tenor, etc. Eligible Product Equity

11. FINANCING POLICY • Preference: • Positive impact on social/ society & PT SMI • Feasible/Viable Business Plan • No legal problems • Reasonable return • Clear exit strategy • Project Identification The Cycle of Financing Steps of PT SMI 2. Financing Scheme Analysis 3. Risk Analysis, Risk Management & Mitigation • Loan or Equity • Tenor • Amount • Interest PROJECT FEASIBILITY STUDY NO Feasible/ viable? • Terms & Conditions /Covenants • Security/ Collateral • Cash Control Regulation (cash sweep mechanism, etc.) • Regulation on even of default YES 4. Agreement/ Documents 5. Project Financing Implementation • For LOAN  finding lenders to refinancing • For EQUITY  strategic sale/Private Placement, IPO 6. Exit Strategy

12. FINANCING POLICY Infrastructure Financing Scheme SOURCE OF FUND lMultilateral Institutions lInfrastructure Pool of Fund lPrivate (PFI/PE) lBUMN/BUMD lInsurance lPension Fund lLocal/Foreign Banks loan/equity loan PT SMI loan loan/equity loan SOE/ LOCAL GOVT JV IPO, Marketable Securities loan/equity JV loan/equity IPO, Marketable Securities IPO, Marketable Securities CAPITAL MARKET

13. CHALLENGES C H A L L E N G E S • 1. Legal protection of investors • 2. Clear, transparent & stable legal & regulatory framework • 3. Transparency of the procurement process • 4. Integration of donor aid, multilateral institutions and private sectors • 5. Involvement of domestic players, investors, banking, lenders and • commercial participants • 6. Resistance from vested interest • 7. Project profile: • Business and policy rationale for concession • Sustainable cash flow • Incentives for equity to perform • Mitigation of completion risk • Mitigation of environmental impacts

14. TARGET Short Term • Identification on infrastructure project priority • Inter department/ related parties coordination • Partnership with banking, multilateral/private sector investors: • Establishment of IIFF/JVs together with multilateral institutions • Socialization activities • Project Financing Execution Medium Term • To promote Infrastructure Revolving Fund/ Pool of Fund through • partnership with multilateral/ private sector investor • To facilitate & promote creation of sustainable finance for • infrastructure project • To facilitate & ensure a supportive regulatory framework Long Term • To increase the size of capability to financing the project • To extend the role of the company as one of the agencies • of the Government to promote infrastructure development • Ultimately, to improve the growth of infrastructure development

15. CONTACT DETAIL For further information, please contact us at the following address: PT Sarana Multi Infrastruktur (Persero) Gedung BRI II, Floor 29th- Suite 2905 Jl. Jend. Sudirman Kav. 44-46 Jakarta 10210 Phone: +6221 5785 1313 Fax: +6221 570 9460

16. Thank you