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Engineering & Construction

Indonesia state builder Waskita Karya to secure $1bn in new loans

Debt-ridden company also hopes to benefit from sovereign wealth fund support

JAKARTA -- Debt-ridden Indonesian toll road builder Waskita Karya on Friday secured shareholder approval for 15.3 trillion rupiah ($1.05 billion) in new loans in a fresh boost after a promise of support from the country's newly announced sovereign wealth fund.

Waskita Karya is a major state-owned construction company and the most indebted with liabilities of nearly 90 trillion rupiah at the end of December. The company posted 7.3 trillion rupiah in net losses last year, from 938 billion rupiah in net income in 2019.

It and several other state-owned builders have been racking up debts in recent years under President Joko Widodo's ambitious infrastructure push in Southeast Asia's biggest economy. But conditions worsened last year as the coronavirus pandemic and mobility restrictions caused major project delays that have dented companies' earnings.

"Waskita is planning to receive 15.3 trillion rupiah of funding from banking loans and issuance of bonds or sukuk," or Islamic bonds, the company said in a press statement after its shareholders meeting on Friday.

It added that it plans to use the funds to complete various ongoing infrastructure projects.

"Waskita is currently waiting for the finance ministry's approval for ... a government guarantee, which will improve Waskita's creditworthiness and therefore make the cost of debt more competitive," the company also said.

Besides the company's own debt woes, its subsidiary Waskita Beton Precast is facing a bankruptcy lawsuit from one of its vendors over 15 billion rupiah of debt. Waskita Beton said in an Indonesia Stock Exchange filing last week that it respected the vendor's move and has the ability to pay back the amount, but that it wants to negotiate the payment deadline.

Waskita Karya has been relying for profits on an "asset recycling" strategy under which the company has been seeking to divest toll roads it has built while continuing to construct new ones across many parts of Indonesia. But last year the company only managed to divest one out of the five toll roads it had targeted to sell.

"Last year was very tough for us," Waskita President Director Destiawan Soewardjono told a webinar last week. "With the nearly 90 trillion [rupiah] in debts, we had to bear an interest cost of 4.7 trillion rupiah. Declines in productivity also directly affected the company's overall financial performance."

The company is more optimistic this year, however, with Soewardjono citing the expected involvement of the Indonesia Investment Authority, or INA, a newly established body that will manage the country's planned $15 billion sovereign wealth fund.

Government officials have said that the first priorities of the fund will be to support "strategic national" infrastructure projects -- including toll roads, airports and seaports -- and help asset recycling among state-owned enterprises involved in such projects.

Waskita is aiming to shed stakes in nine toll roads this year, and company executives said recently that the divestment of four of them is nearing completion. INA is expected to acquire some or all of the remaining five.

"INA will start functioning in 2021, and we've discussed some segments that will be acquired by INA," Soewardjono said. "That will help us deleverage more quickly."

Waskita said it won 27 trillion rupiah worth of new contracts last year, adding to its 39 trillion rupiah of existing contracts. The company said it is "the highest achievement" among other state builders. Nearly half of the contracts are for transportation projects -- mainly toll roads -- with the remainder for power plants, buildings and water infrastructure projects.

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