Wed Oct 16, 2013 6:52am EDT
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Oct 16 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has given ranked in the Long Term Foreign Currency and Local Currency at'BBB-' and Short-Term Rating Foreign Currency at 'F3' to PT Sarana Multi Infrastructure (SMI). At the same time, national rankingsLong-term company also raised to 'AA + (idn)' from earlier in'AA (idn)'. Prospects for long-term rankings is stable.SMI international rankings equated with sovereign ratings Indonesia ('BBB-' / stable), reflecting the ownership of the central governmentthrough the Ministry of Finance (MOF) is an important and strategic role thatcarried in Indonesia's infrastructure development company. national ranking of SMI is raised after a reassessment of the relationship held firmwith the government by using the methodology of Public Sector Entities owned by Fitch Ratings.
Rating considerations
Closer relations with the Government: SMI is a state-owned company 100%by the Indonesian government through the Ministry of Finance. Budget SMI is not consolidated intoin the state budget. However, the budget approved by the Ministry of Finance and the injection of capital put intoin the state budget.
Strategic Role in Economic Development: State can only finance 65% of theIndonesian infrastructure development required, with private investmentexpected to finance the shortfall. Fitch views the long-term financingSMI will help support the growth of the Public Private Partnership(public-private partnership) for infrastructure projects throughoutIndonesia, which make the company become strategically important ineconomic development of the country.
Periodic capital injections: Government provides capital for the company tobecame operational. Paid up capital of SMI is IDR4 trillion at end of 2012and Fitch estimates that by the end of FY17 will reach IDR8 trillion duegovernment capital injections periodically. By utilizing the paid-up capital,SMI will raise 3x the maximum debt level of capital.
Adequate controls and oversight: Board of commissioners and board of directors meetingregular basis, providing a mechanism to monitor the management of the companyactive. In addition, as a shareholder, the Ministry of Finance has the authority toapproved budget and company's long-term plan, lifting anddismiss members of the two councils, approved the financial statements and the SMIendorsed the report of the supervisory Board of Commissioners.
Adequate performance: Fitch predicts net income after taxesthe company will increase to IDR214 billion in FY14 from IDR93 billion inFY12. Growth in net income is largely driven by the increaseNet operating income to IDR272 billion in FY 14 from USD 119 billionin FY 12 due to higher financing activity. However, the maximizationprofit is not the main goal for the SMI given the role of policyprimary.
Loans are limited: SMI currently has no debt maturities in additionIIF subordinated debt, its subsidiaries amounted to34.3%. Borrowing facilities granted to the government and the IIF through SMI byADB and the World Bank. However, SMI had planned to issue andebt of IDR1 trillion (USD100m) in FY14 to finance growth.By regulation, the debt level SMI is not allowed to exceed the limit of 10xof capital, but management has told to limit lending by 3xof capital.
SMI Indonesian government established in 2009 to respond to the financing needslong-term infrastructure projects in Indonesia. availabilitylong-term financing will attract private sector participation in the cooperation schemeIndonesian government in the private sector. Sectors are allowed toobtain financing of SMI is electric power, water, roads and bridges,transportation, sewage treatment, irrigation, telecommunications, and oil and gas.
Initiator Level Factors
Indonesia's sovereign rating upgrade, with a strong implicit supportperiodically for SMI, will trigger a rise in the rankings because rankings SMIclosely related to sovereign ratings.
Declining levels of Indonesian or negative changes to governance SMIThe result terdilusinya government ownership or supervision willtrigger levels drop.
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