RPT-Fitch rates PT Penjaminan Infrastruktur Indonesia 'BBB-'/'F3'; outlook stable

Fri Aug 30, 2013 3:48am EDT

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Aug 30 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned PT Penjaminan Infrastruktur Indonesia (Persero) (Indonesia Infrastructure Guarantee Fund (IIGF)) Long-Term Foreign and Local Currency ratings of 'BBB-' and Short-Term Foreign Currency rating of 'F3'. The Outlook is Stable.

Key Rating Drivers

The ratings reflect Fitch's expectation of strong support from the Indonesian government (BBB-/Stable), based on its 100% state ownership and IIGF's policy role in infrastructure development in Indonesia.

IIGF was created to guarantee against political risk inherent in public-private partnership (PPP) infrastructure projects. IIGF serves as the government's sole representative for appraising infrastructure projects, structuring guarantees and processing claims. The sectors eligible for guarantee are power, water, roads and toll roads, transportation, sewerage and solid waste, irrigation, telecommunications, and oil and gas.

As the national budget can only contribute less than half of required development, the remaining portion is expected to come from private investment. Fitch believes IIGF's guarantees can help to grow PPP infrastructure projects throughout Indonesia, making the company strategically important in the region. IIGF's paid-up capital was IDR4.5trn at end-2012 and Fitch expects it to grow to IDR9trn by the end of the forecast period ending FY17. IIGF will leverage their paid-up capital to a maximum of 2x equity.

Fitch expects IIGF's profitability to grow over the forecast period. Nonetheless, profit maximisation is not the ultimate goal for this company due to its primary policy role.

IIGF was established by the government of Indonesia in 2009 and is regulated and supervised by the Ministry of Finance.

Rating Sensitivities

Downward rating pressure may arise from a downgrade in the sovereign's ratings, dilution of IIGF's legal status or diminished government support. However, Fitch views these as remote prospects in the near- to medium-term. IIGF expects total paid-up capital to reach IDR9trn with capital injection from government over the medium term.