Insights

Indonesia's Infrastructure Financing Deficit—ABS to the Rescue?

Indonesia's Infrastructure Financing Deficit—ABS to the Rescue?

Indonesia's considerable infrastructure financing deficit is a hot topic in the project finance market. A likely outcome of this infrastructure gap is the growth of alternative financing instruments, such as asset-backed securities ("ABS"). An ABS is the transformation of illiquid financial assets (e.g., income receivables and infrastructure charges) to liquid financial assets by way of the purchase of such financial assets from the originator and the issuance of an ABS. An infrastructure ABS would allow project owners such as state-owned enterprises to finance their construction costs by monetizing stable cash flows from their existing revenue-generating infrastructure assets.

It has been reported that state-owned electricity distribution company Perusahaan Listrik Negara ("PLN"), and state-owned transportation company Jasa Marga, intend to raise Rp 10 trillion (approximately US$750 million) and Rp 2 trillion (approximately US$150 million), respectively, from the issuance of ABS this year. PLN's underlying ABS assets are the future cash flow of Indonesia Power (a PLN subsidiary). These upcoming ABS issuances will test the appetite of the market for this financing instrument and almost certainly necessitate changes to the regulatory environment (including incentives for investment in ABS).  

At Jones Day, we will be closely monitoring the development of infrastructure ABS instruments in Indonesia and any changes to the regulatory environment to foster its growth. Given that the current market size of ABS in Indonesia is well below those of the equity and bond markets, there is the potential for significant growth. Stay tuned.

Lawyer Contacts

For further information, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our “Contact Us” form, which can be found at www.jonesday.com/contactus.

James Harris
Singapore
+65.6233.6450
jsharris@jonesday.com

Jared Raleigh
Singapore
+65.6233.5500
jraleigh@jonesday.com

Jones Day publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our "Contact Us" form, which can be found on our web site at www.jonesday.com. The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.

We use cookies to deliver our online services. Details of the cookies and other tracking technologies we use and instructions on how to disable them are set out in our Cookies Policy. By using this website you consent to our use of cookies.