PINA Financing Scheme

With our ambition to cater for creative financing investment appetite, PINA offers schemes for both investors and investees to match based on their funding demand and project requirements. While we are flexible to the demand of our stakeholders, PINA promotes these three schemes as the most feasible.

Hybrid Instrument

Hybrid instrument incorporates characteristics of both a debt and equity instrument. One of the instruments that PINA promotes is the Perpetual Notes. This financing scheme is a debt security that has no maturity date (in perpetuity) which can be treated as equity, rather than liability in the balance sheet. This financing scheme is desirable for investors that are not willing to increment more debt in their balance sheet.

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The challenge associated with perpetual notes in Indonesia is the scarcity of such an instrument, as it is considered to be a foreign financing scheme in Indonesia. PINA aims to build the groundwork towards a new creative financing ecosystem among the investors and investees. With our vast network of stakeholders, we believe that this financing scheme can be the answer to finance projects without inflating leverage.

Case in point:

An Indonesian energy state-owned enterprise required to finance projects initiated by their subsidiaries including a power plant in Melabouh. With their higher than desired Debt-to-Equity ratio, the state-owned enterprise prefers a financing scheme that is not detrimental to their leverage standings. To circumvent this predicament, the state-owned enterprise opted to issue perpetual bond (notes), which is accounted as equity in the balance sheet.

Equity Financing

Equity Financing entails a method of raising capital through the sale of company ownership. Equity financing can be pivotal during the early stages of a project to attract capital in the absence of revenues, cashflow or hard assets to act as collateral required for debt financing. In the pursuit of establishing the equity financing agreement, the common practice is to institute a Joint Venture enterprise between both investor and investee.

Case in point:

An Indonesian investment state-owned enterprise financed PT Waskita Toll Road through the means of equity financing, which will be directed to the development of 9 toll roads. Majority of the toll roads will be on the island of Java with total road length of 408.41 km – in which 5 toll road sections will be a part of the Trans-Java Toll Road with the total road length of 305.27 km. Total project financial size for the toll road projects above are estimated to be USD 1 billion (IDR 16 trillion), in which the equity portion of PT Waskita Toll Road fulfilled only USD 380 million (IDR 6 Trillion) of the funding required. Through the funding scheme arranged by PINA, the initial state-owned enterprise working collectively with an insurance state-owned enterprise have been able to participate in an equity financing which contributes to 30 percent of the remaining project cost, equivalent to USD 225 million (IDR 3.5 Trillion).

Limited Participation Fund

RDPT (Reksa Dana Penyertaan Terbatas) is an investment vehicle formed by Investment Manager and Custodian Bank to collect funds from professional investors, to be invested in a portfolio of selected projects. The unique characteristic of this instrument is that it can allocate project company’s shares as an underlying asset of the instrument, rendering it as an equity-based mutual fund.

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The challenge for the Investment Manager is that they are required to commit capital equivalent to the investment unit value of the RDPT. With the vast network that PINA maintain, we were able to engage with a selected Finance State-owned Enterprise as Investment Manager for this RDPT issuance scheme with the target value of Rp 2 Trillion (US$ 140 million).

Case in point:

An Indonesian investment state-owned enterprise is planning to perform debt restructuring by means of debt securities issuance. PINA proposes a solution that this enterprise issues Islamic Debt Securities that is enveloped under RDPT. The role of PINA in this instance is to facilitate the enterprise by acquiring a suitable Investment Manager for the issuance of the RDPT.

Customized Supply Chain Financing

This scheme provides the participating party with procurement of materials with a flexible payment arrangement corresponding to the level of project cash flow. With this financing scheme, the purchaser will obtain the required amount of materials for the project directly and relinquish the issue of inventory management to be handled by a third-party – under the umbrella of Integrated Supply Chain Management.

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With procurement of materials being the largest cost component of infrastructure development, PINA championed this financing scheme as a solution for project developers to avoid overloading on debt obligations, without sacrificing infrastructure development.

Case in point:

For the investee (project developer), this financing scheme will allow them to finance their material requirement using debt securities through third-party Integrated Supply Chain Management (ISCM), instead of directly to supplier. In addition to lowering the cost of inventory management, this scheme can offer a more competitive pricing for the material. For the investors, this scheme managed by the ISCM will allow them to purchase this debt securities at a discount – to be paid with interest by ISCM after maturity. The maturity is set in conjunction with the payment made by investees to the ISCM.