The Key Strategies to Obtain Funding for Indonesia's Largest Projects
Jakarta, October 6, 2023 – The Holding-Subholding formation structures within the Pertamina Group have become one of the main success factors in financing large projects in Pertamina. One of the significant projects assigned to PT Kilang Pertamina Internasional (KPI) is the Refinery Development Master Plan (RDMP) project in Balikpapan. To complete the project financing for the RDMP Balikpapan project, which involves 4 Export Credit Agencies (ECA) and 22 Commercial Banks, KPI and PT Kilang Pertamina Balikpapan (KPB) required swift action and quick decision-making to accelerate the project financing process.
In the past year, from 2022 to 2023, KPI and KPB proactively engaged with all lenders/ECAs to expedite the project financing process. "It turns out that for the 5Cs (Capacity, Capital, Collateral, Conditions, Character) that serve as the basis for us to obtain credit, Character is the most crucial. How our lenders could accept our Character and believe in us to proceed with our project financing," stated Fransetya Hasudungan Hutabarat, Director of Finance of KPI, during the "Conference & Awarding Indonesia SWA 100 & Best CFO Forum 2023" event by SWA at Hotel Shangri-La Jakarta (4/10).
One of the main challenges in implementing the RDMP Balikpapan project financing is the Trustee Borrowing Scheme (TBS) used, which means the project financing is carried out without collateral, relying solely on a tolling agreement between KPI and KPB. The equity funds limitation available for the RDMP Balikpapan project also posed a significant time constraint on completing the project financing. These factors presented substantial challenges for Fransetya and the team in the project financing process. However, they completed the project financing and continued to support the progress of the RDMP Balikpapan project without financial shortcomings.
Some key strategies employed in the project financing execution for the RDMP Balikpapan project included appointing appropriate and competent Legal Advisors and Financial Advisors, actively conducting offline meetings with lenders and advisors to expedite the project financing process, and providing Shareholder Loans to KPB as the project executor to ensure continuous project progress.
Fransetya also mentioned that the project financing success for the RDMP Balikpapan project, with a substantial size of USD 3.1 billion, resulted in an oversubscription of USD 4.39 billion (142%) despite the volatile global economy. Additionally, Fransetya announced that they secured lower interest rates compared to previous projects. "We are proud to present the Biggest Project Financing in Pertamina, involving ECA, with a value of USD 3.1 billion or approximately 45 trillion Indonesian rupiahs, for Indonesia's energy sustainability, reducing our reliance on large imports so that we could be self-sufficient," he concluded at the end of his presentation.
Regarding the RDMP Balikpapan project, Fadjar Djoko Santoso, Vice President of Corporate Communication of PT Pertamina (Persero), explained that RDMP Balikpapan is one of the National Strategic Projects essential to achieving national energy self-reliance.
"Pertamina requires financial institutions' partnership to expedite project completion. Therefore, the role of the Chief Financial Officer is crucial in securing and managing project financing," stated Fadjar.
In addition to sharing insights on the execution journey of the RDMP Balikpapan project financing, Fransetya also shared the keys to his success as a CFO over more than a decade in 6 different companies. On duty, Fransetya always adheres to several core values, including teamwork, Empowering Others, Respect (Not Fear), Taking Ownership, Servant Leadership, Open Mind, Open Heart, and Overcoming Complexity. At the "Conference & Awarding Indonesia SWA 100 & Best CFO Forum 2023" event, Fransetya Hasudungan Hutabarat, Director of Finance of PT Kilang Pertamina Internasional, received the Indonesia Best CFO 2023 award by SWA and served as one of the speakers discussing the topic "CFO's Role in Leading The Smart Strategy to Become Investors' Darling – Project Financing of National Strategic Project Refinery Development Master Plan Balikpapan PT Kilang Pertamina Internasional."
PT Kilang Pertamina Internasional is a PT Pertamina (Persero) subsidiary, primarily engaged in oil refining and petrochemicals business focusing on ESG (Environmental, Social & Governance) principles. PT KPI is also a member of the United Nations Global Compact (UNGC) and is committed to the Ten Principles of the UNGC in its operational strategy as part of its dedication to ESG aspects. PT KPI will continue to conduct its business professionally to achieve its vision of becoming a world-class oil refinery and petrochemical company with environmental awareness, social responsibility, and good corporate governance.**