Fitch Rates Indonesia's PT Sarana Multi Infrastruktur 'BBB-', Outlook Stable


SYDNEY/JAKARTA/SINGAPORE, October 16 (Fitch) Fitch has assignedPT Sarana Multi Infrastruktur (SMI) a Long-Term Foreign- and Local-CurrencyRating of 'BBB-' and Short-Term Foreign-Currency Rating of 'F3'. At the same SMI'sNational Long-Term Rating has been upgraded to 'AA+(idn)' from 'AA(idn)'. TheOutlook on the long-term ratings is Stable.SMI's international ratings are equalised with the Indonesiasovereign (BBB-/Stable), reflecting ownership by the central governmentthrough the Ministry of Finance (MOF) and the important strategic role theentity has in the development of Indonesia's infrastructure. SMI's national ratingwas upgraded as a result of the re-assessment of the link with the governmentunder Fitch's Rating of a Public Sector Entity methodology.KEY RATING DRIVERSClose Link to the Sovereign: SMI is a state-owned enterprisethat is 100%-owned by the government of Indonesia through the MOF. SMI's budget isnot consolidated into the general government budget. However, the budget isapproved by the MOF and capital injections are included in the government's budget. Strategic Role in Economic Development: The national budget canonly finance up to 65% of the country's required infrastructure development,with private investment expected to make up the shortfall. Fitch believesSMI's long-term financing can help to support the growth of public-privatepartnerships for infrastructure projects throughout Indonesia, making the companystrategically important to the country's economic development.Ongoing Capital Injections: The government provided capital tothe company to start its operations. SMI's paid-up capital was IDR4trn atend-2012 and Fitch expects it to grow to IDR8trn by the end of FY17 due tocontinued government injections. SMI will leverage its paid-up capital to a maximumof 3x equity.Close Control and Monitoring: SMI's Board of Commissioners andBoard of Directors meet regularly, providing a mechanism to activelysupervise the company's management. In addition as the sole shareholder, theMOF 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 reportand ratify the Board of Commissioner's supervisory report. Adequate Performance: Fitch forecasts SMI's net income after taxto increase over the budget period to IDR214bn in FY14 from IDR93bn in FY12.The growth in net income is primarily driven by net operating incomeincreasing to IDR272bn in FY14 from IDR119bn in FY12 as a result of increased lendingactivities. Nonetheless, profit maximisation is not the ultimate goal forthis company due to its primary policy role. Limited Financial Liabilities: SMI currently has no outstandingborrowings 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 andWorld Bank. However, SMI has said it plans to issue IDR1,000bn (USD100m) ofdebt in FY14 to fund growth. SMI's leverage cannot exceed a regulatory limit of10x equity, although management has said they will limit future borrowingsto 3x of equity. The Indonesian government created SMI in 2009 in response to theneed to provide long-term financing for infrastructure projects in the country.Providing long-term financing attracts more private participation inpublic-private partnership schemes in Indonesia. The sectors eligible forfinancing from SMI are power, water, roads and bridges, transportation, sewerageand solid waste, irrigation, telecommunications, and oil and gas.RATING SENSITIVITIESAn upgrade of Indonesia's sovereign rating, with continuedstrong implicit support for SMI, would trigger a rating upgrade, as SMI iscredit linked to the sovereign.A downgrade of Indonesia or negative changes to SMI's governancethat lead to a dilution of the government's shareholding or control wouldtrigger a rating downgradeContacts:Primary Analyst (International Ratings)Matt WrightDirector+61 2 8256 0323Fitch Australia Pty. Ltd. Level 15, 77 King Street, Sydney NSW 2000Secondary Analyst Fernando MayorgaManaging Director+34 93 323 8407Iwan Wisaksana (National Ratings)Director+62 21 2902 6406Committee ChairpersonRaffaele CarnevaleSenior Director +39 02 87 90 87 203Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326,Email:; Leslie Tan, Singapore, Tel:+65 67 96 7234, Email: information is available at Applicable criteria, 'Tax-Supported Rating Criteria', dated 14August 2012, and 'Rating of Public Sector Entities - Outside the United States',dated 04 March 2013, are available on FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS ANDDISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THISLINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION,RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLEON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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