The Indonesian power sector is estimated to require US$132.2 billion for power infrastructure development over the next 10 years. While Indonesia’s national electricity utility company Perusahaan Listrik Negara will continue to be the key facilitator, private investments via independent power producers are expected to play a prominent role.
The private investments are likely to take the form of export credit and support from multilateral lending agencies, RAM Ratings said. “With a healthy appetite for project bonds, the ringgit sukuk market can also be a viable funding option for the Indonesian power sector,” said Chong Van Nee, Co-Head of Infrastructure and Utilities Ratings, RAM Ratings.
The private investments are likely to take the form of export credit and support from multilateral lending agencies, RAM Ratings said. “With a healthy appetite for project bonds, the ringgit sukuk market can also be a viable funding option for the Indonesian power sector,” said Chong Van Nee, Co-Head of Infrastructure and Utilities Ratings, RAM Ratings.
A ready pool of long-term investors, ample liquidity and an established sukuk framework are some of the advantages for Indonesian project managers thinking of relying on the ringgit bond market for funding. “We have seen Indonesian corporations tap the ringgit market and there could be room for Indonesian project financing funding, particularly power sector bonds, in the market,” said Chong.
RAM has published a report on the Indonesian power sector, Power Up or Power Out, as part of the ASEAN Power Series. The industry is characterised by its robust electricity demand growth (CAGR of 7.1% from 2004 to 2014) and a pressing need for rapid electrification in support of the country’s aggressive economic growth ambition. Despite its population of more than 250 million, Indonesia’s electrification ratio is deemed low – at 84.3% as at end-2014 – relative to most of its ASEAN neighbours.
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Read the Suroor Asia blog post about RAM Ratings' findings on sukuk in the Malaysian power market.
Read the Suroor Asia blog post about RAM Ratings' findings on sukuk in the Malaysian power market.