(Repeat for additional subscribers)
Oct 16 (The following statement was released by the rating agency)
Fitch has assigned PT Sarana Multi Infrastruktur (SMI) a Long-Term Foreign- and
Local-Currency Rating of 'BBB-' and Short-Term Foreign-Currency Rating of 'F3'. At the same
SMI's National Long-Term Rating has been upgraded to 'AA+(idn)' from 'AA(idn)'. The Outlook on
long-term ratings is Stable.
SMI's international ratings are equalised with the Indonesia sovereign
(BBB-/Stable), reflecting ownership by the central government through the
Ministry of Finance (MOF) and the important strategic role the entity has in the
development of Indonesia's infrastructure. SMI's national rating was upgraded as
a result of the re-assessment of the link with the government under Fitch's
Rating of a Public Sector Entity methodology.
KEY RATING DRIVERS
Close Link to the Sovereign: SMI is a state-owned enterprise that is 100%-owned
by the government of Indonesia through the MOF. SMI's budget is not consolidated
into the general government budget. However, the budget is approved by the MOF
and capital injections are included in the government's budget.
Strategic Role in Economic Development: The national budget can only finance up
to 65% of the country's required infrastructure development, with private
investment expected to make up the shortfall. Fitch believes SMI's long-term
financing can help to support the growth of public-private partnerships for
infrastructure projects throughout Indonesia, making the company strategically
important to the country's economic development.
Ongoing Capital Injections: The government provided capital to the company to
start its operations. SMI's paid-up capital was IDR4trn at end-2012 and Fitch
expects it to grow to IDR8trn by the end of FY17 due to continued government
injections. SMI will leverage its paid-up capital to a maximum of 3x equity.
Close Control and Monitoring: SMI's Board of Commissioners and Board of
Directors meet regularly, providing a mechanism to actively supervise the
company's management. In addition as the sole shareholder, the MOF has the
authority to approve the company's budget and long-term plans, to appoint and
dismiss members of both boards, to approve SMI's annual report and ratify the
Board of Commissioner's supervisory report.
Adequate Performance: Fitch forecasts SMI's net income after tax to increase
over the budget period to IDR214bn in FY14 from IDR93bn in FY12. The growth in
net income is primarily driven by net operating income increasing to IDR272bn in
FY14 from IDR119bn in FY12 as a result of increased lending activities.
Nonetheless, profit maximisation is not the ultimate goal for this company due
to its primary policy role.
Limited Financial Liabilities: SMI currently has no outstanding borrowings
beyond the subordinated loan to its 34.3%-owned subsidiary, IIF. The loan has
been provided to IIF via the government and SMI from ADB and World Bank.
However, SMI has said it plans to issue IDR1,000bn (USD100m) of debt in FY14 to
fund growth. SMI's leverage cannot exceed a regulatory limit of 10x equity,
although management has said they will limit future borrowings to 3x of equity.
The Indonesian government created SMI in 2009 in response to the need to provide
long-term financing for infrastructure projects in the country. Providing
long-term financing attracts more private participation in public-private
partnership schemes in Indonesia. The sectors eligible for financing from SMI
are power, water, roads and bridges, transportation, sewerage and solid waste,
irrigation, telecommunications, and oil and gas.
An upgrade of Indonesia's sovereign rating, with continued strong implicit
support for SMI, would trigger a rating upgrade, as SMI is credit linked to the
A downgrade of Indonesia or negative changes to SMI's governance that lead to a
dilution of the government's shareholding or control would trigger a rating