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Economy

Indonesia's infrastructure developers to debut 'komodo bonds'

Wijaya Karya among first SOEs to issue rupiah-denominated notes overseas

Wijaya Karya is a member of the consortium building Indonesia's first mass rapid transit network in Jakarta. (Photo by Erwida Maulia)

JAKARTA -- Three Indonesian state-owned enterprises are planning to issue rupiah-denominated bonds overseas for the first time, testing investor appetite for the country's infrastructure sector.

Toll road operator Jasa Marga, construction company Wijaya Karya and utility PLN are offering so-called "komodo bonds" -- named after the Komodo dragon, a large species of lizard -- State-owned Enterprises Minister Rini Soemarno told reporters on Thursday.

Soemarno said Jasa Marga and Wijaya Karya will issue the bonds by the end of the year, and that she expects their credit ratings to be assigned by mid-October. "The target is probably for Jasa Marga to go first. The offer will be in the first week of November," she said. Meanwhile, PLN's deal is slated for early 2018.

Soemarno said Indonesia is following in the footsteps of Chinese and Indian companies that have successfully issued local currency bonds overseas. "When we did a non-deal roadshow some time ago, [foreign investors] were really interested," she said. "Actually many foreign investors want to buy rupiah bonds but they don't want to do the transactions in Indonesia."

Indonesia's SOEs are financing President Joko Widodo's massive infrastructure development plans, given constraints in the state budget and a lack of foreign investors. To diversify their funding sources, Jasa Marga and PLN have sold securities backed by future revenue from some of their toll roads and power plants.

Indonesian government bonds have rallied in recent weeks, fueled by growing investor appetite for high-yield assets. The yield, which moves inversely to price, of Indonesia's 10-year government bonds stood at 6.64% on Thursday, after rising to more than 8% in November. 

The financial health of state-owned enterprises, however, has become a heated topic of debate after Finance Minister Sri Mulyani Indrawati revealed her concerns over PLN in a leaked letter widely reported on Wednesday. The "government's policy to eliminate increases in electricity tariffs could potentially increase the risk of default," the letter said.

Nikkei staff writer Erwida Maulia in Jakarta contributed to this story.

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