Indonesia: Indonesian Infrastructure Financing Facility Company Project

Sovereign Project | 42109-013

Summary

The proposed financing of IIFF supports the Government of Indonesia's objective to increase the flow of private investment into infrastructure projects to a level that is 6 7 times the current average level.The financial projections developed for this transaction indicate that there is considerable untapped demand for long-tenor financing, however, and the lack

of this product has significantly constrained the sustained expansion of infrastructure investment in Indonesia. It is in response to this perceived demand that an institutional response,

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Project Name Indonesian Infrastructure Financing Facility Company Project
Project Number 42109-013
Country Indonesia
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2516-INO: Indonesian Infrastructure Financing Facility Company Project
Ordinary capital resources US$ 100.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Finance - Finance sector development

Gender Equity and Mainstreaming No gender elements
Description

The proposed financing of IIFF supports the Government of Indonesia's objective to increase the flow of private investment into infrastructure projects to a level that is 6 7 times the current average level.The financial projections developed for this transaction indicate that there is considerable untapped demand for long-tenor financing, however, and the lack

of this product has significantly constrained the sustained expansion of infrastructure investment in Indonesia. It is in response to this perceived demand that an institutional response,

tentatively named IIFF, was conceived in 2007. IIFF was conceptualized as a nonbanking financial institution incorporated as a limited liability company, with a target fund base of about $1 billion in 5 years from the commencement of operations and estimated to grow to about $4.4 billion by year 10. IIFF will finance commercially viable infrastructure projects in Indonesia by offering ii long-term debt denominated in local or foreign currency and by providing the intellectual capital needed to catalyze public private partnerships in such projects. To help finance infrastructure projects structured as public-private partnerships (PPPs), IIFF will seek financial participation by pension funds, insurance companies, nstitutions, and new investor classes that can provide long-term sources of finance. IIFF will proactively seek, establish, and develop relationships with regional and local governments

and take on the development of projects promoted by these governments to generate fee-based income in the initial years of its operations. IIFF will be able to capitalize on its early

involvement in advising the Government and other parties in relation to developing infrastructure projects to generate funding opportunities.

Project Rationale and Linkage to Country/Regional Strategy Infrastructure is a critical area of emphasis for the Government and ADB to support Indonesia's economic growth and poverty reduction strategies. Given increasingly significant infrastructure shortages and bottlenecks, infrastructure investments are critically needed to avoid power outages and relieve transportation bottlenecks. Two key issues include a lack of infrastructure project development skills (most notably at the local government level) and a lack of long-term corporate debt to finance infrastructure projects in the private sector. Deficiencies in the regulatory frameworks for public-private partnerships are being addressed under ADB's Infrastructure Reform Sector Development Program (IRSDP) Cluster (2005 2010). As such, there is a critical need for an institution like IIFF that can be a focal point for infrastructure project development, and particularly at the local government level. While providing long-term debt and equity financing to infrastructure projects in cooperation with local financial institutions, IIFF could, through credit enhancements and other innovative products, also provide comfort to lenders and investors adequate for their participation in infrastructure development. IIFF's exposure to infrastructure projects that are solely developed by the public sector (including state-owned enterprises) will be limited to a maximum 20% of IIFF's overall lending portfolio. ADB is aware of the potential conflict of nterest that may arise with respect to IIFF's joint mandate to both provide development advice to government and financial support to the projects that may be structured based on this advice, and it will ensure that IIFF adopts policies and procedures that resolve and mitigate this potential conflict.
Impact Support Indonesia's economic growth and poverty reduction through improved and equitable access to infrastructure
Project Outcome
Description of Outcome Efficient allocation of financing to economically vaible infrastructure projects
Progress Toward Outcome IIF is continuing to work on a pipeline of projects with ADB financing disbursed in 2013.
Implementation Progress
Description of Project Outputs

IIFF operates as a financially viable infrastructure finance intitution. It leads public and private capital to finance commercially viable infrastructure projects in Indonesia

Improved long-term debt market due to increased financing of infrastructure projects

Increased equity investment in infrastructure projects in Indonesia

Growth of viable financial institutions and financial markets development

Positive externalities of the subprojects in the targeted sectors

Development of PPP projects facilitated

Institutional awareness and capacity to implement environmental, health and safety, and social issues

Status of Implementation Progress (Outputs, Activities, and Issues)

For closer monitoring of project activities, the project has been delegated to IRM effective 1 August 2012. SEPF conducted a review mission in late July and obtained a more detailed update of the loan disbursement schedule. ADB financing has been disbursed at 94.6% to finance the IIF projects in the pipeline.

The project has been extended to 2014 to allow the remaining disbursement. The remaining disbursement is expected to occur in Q4 2014 upon DIPA approval by the Parliament.

Geographical Location Indonesia
Safeguard Categories
Environment FI
Involuntary Resettlement A
Indigenous Peoples A
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services tbd
Procurement tbd
Responsible ADB Officer Rabin Hattari
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Indonesia Resident Mission
Executing Agencies
Director General of State Asset Management Mr.HadiyanatoMOF
Timetable
Concept Clearance 13 Mar 2008
Fact Finding 10 Jul 2008 to 23 Jul 2008
MRM 04 Sep 2008
Approval 31 Mar 2009
Last Review Mission -
PDS Creation Date 23 Oct 2008
Last PDS Update 25 Mar 2015

Loan 2516-INO

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
31 Mar 2009 20 Jan 2010 25 Apr 2011 31 Dec 2013 31 Dec 2014 31 Dec 2014
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 100.00 Cumulative Contract Awards
ADB 100.00 31 Mar 2009 99.48 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 31 Mar 2009 99.48 0.00 100%
Title Document Type Document Date
Loan Agreement for Indonesian Infrastructure Financing Facility Project between Asian Development Bank and Indonesia Loan Agreement (Ordinary Resources) Apr 2009
Indonesian Infrastructure Financing Facility Company Project Reports and Recommendations of the President Mar 2009
Indonesian Infrastructure Financing Facility Design and Monitoring Frameworks Aug 2008

Evaluation Documents

See also: Independent Evaluation

No documents found.


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