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Indonesia plans US$2b injection for troubled state builders

Tan KW
Publish date: Tue, 06 Jun 2023, 05:58 PM
Tan KW
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 JAKARTA Indonesia's state-owned enterprises (SOEs) ministry plans to inject an additional 30.5 trillion rupiah into two construction firms by 2024 to help shore up the companies, an official said on Monday (June 5).

On top of providing additional capital for state-owned Hutama Karya and Wijaya Karya (Wika), the government also plans to transfer its 75.35% stake in builder Waskita Karya to Hutama Karya after Waskita completes a debt restructuring, deputy minister Kartika Wirjoatmodjo said.

He was speaking at a hearing of parliament's committee overseeing state investments.

The companies are among Indonesia's biggest construction firms and have been overleveraged having been assigned by the government to build massive infrastructure projects such as toll roads, airports and dams.

Kartika said the government proposed to inject 12.5 trillion rupiah by early 2024 into Hutama Karya so the company could take over two toll road projects from Waskita, which has been having trouble repaying its debt.

Trading in Waskita's shares has been suspended since last month after it failed to secure bondholder approval to defer a coupon payment.

Waskita is also under investigation after the Attorney General's Office (AGO) launched a corruption probe last year into the company and its unit in relation to misuse of a bank loan.

Waskita has previously said it respects the AGO's investigation, without giving further comment.

The 12.5 trillion rupiah capital injection would be done through Hutama Karya because of the AGO's investigation, among other factors, Kartika said.

"We are not ruling out the possibility of topping up (the capital injection proposal) in case of increasing needs under the restructuring.

"We are recalculating and discussing with the finance ministry how far we are going to push in terms of capacity needed to make Waskita healthy again," Kartika told the hearing.

Separately, the ministry was conducting an investigation into Waskita and Wika's past financial statements, which had not matched real cash flows, Kartika said.

"If we find criminal element ... like fraud, we can sue past managements," he said.

Squeezed margins

The government said last month that it had withheld a 3 trillion rupiah capital top-up for Waskita until the firm completes its debt restructuring.

The government's new capital injection proposal also included another 8 trillion rupiah for Wika to strengthen its capital position, while the firm negotiates its debt, said Kartika. The government controls 65.05% of Wika.

The ministry also requested 10 trillion rupiah for Hutama Karya in fiscal year 2024 to fund operational expenses, according to its presentation materials to parliament.

Wika's corporate secretary Mahendra Vijaya said a financial investigation was within the authority of the SOEs ministry, adding that the firm welcomed the planned capital injection.

Ermy Puspa Yunita, spokesperson for Waskita, on Tuesday said the firm fully supports steps taken the by the SOEs ministry to improve its financial condition, adding its financial reports have always complied with regulations and have been independently audited.

Hutama Karya did not respond to requests for comment.

Ratings agencies have warned for years that Indonesian state construction firms' balance sheets were deteriorating amid extensive borrowing to fund an infrastructure push led by President Joko Widodo's government.

However, Kartika blamed the situation on an ultra-competitive market that has squeezed margins.

Any capital injection into state companies must be approved by parliament.


  - Reuters


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Imprudent move.
Cost is rising.

2023-06-06 18:11

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