May 2, 2016, Jakarta Post

State construction firm Wijaya Karya ( Wika ) plans to hold a rights issue to raise Rp 2 trillion ( US$151.2 million ) to help finance its projects this year, including a controversial high-speed railway project.

Wika president director Bintang Perbowo said it was possible the corporate action would reduce the government’s stake in the company, adding that the company was still in the process of asking shareholders’ permission to conduct the rights issue, after previous uncertainty surrounding the government’s plan to carry out a state capital injection ( PMN ) into the company.

The company’s postponed PMN was to reach Rp 4 trillion, and was considered a crucial part of planned capital expenditure of Rp 6.9 trillion this year.

“If we end up getting it [the PMN], that’s great. But if not, we’ll conduct a rights issue, as we need the cash to participate in the bidding for infrastructure projects,” Bintang said on Thursday.

Bintang added that if the company did not receive the PMN, it might obtain the rights issue by offering investors up to 10 percent of the government’s stake in the company, which would still leave the government as the majority shareholder at 55 percent from the current 65 percent.

“With this rights issue, we can also boost our loan capacity to Rp 6 trillion. In total, we will have Rp 8 trillion to develop all sort of infrastructure projects, such as toll roads and power plants,” he said.

The remaining Rp 6 trillion will be sourced from bonds or medium-term notes, Bintang added.

The company revealed that the rights issue was also needed to transfer the company’s capital share to the joint Indonesian-Chinese firm PT Kereta Cepat Indonesia China ( KCIC ), in the Indonesian part of which the company holds 38 percent, to fund the development of a 142.3-kilometer high-speed railway connecting Jakarta and the West Java capital of Bandung.

The $5.5 billion project, however, has triggered a number of controversies, including over the absence of proper environmental permits.

The Indonesian consortium, which includes Wika and state railway operator PT Kereta Api Indonesia ( KAI ), holds 60 percent of the Rp 17 trillion capital required for the project from its internal funds.

Wika then has to transfer a total of Rp 4 trillion to the consortium over the course of the next three years, with Rp 890 billion expected to be transferred this year.

“We have already transferred Rp 285 billion and the next Rp 600 billion will follow. The remaining payment will be sourced from the rights issue and the civil work on the project over the course of the next three years,” Bintang said.

Wika corporate secretary Suradi Wongso said the company aimed to record Rp 52.8 trillion worth of new contracts this year, compared with Rp 25.2 trillion last year.

As of Thursday, the company had booked Rp 8.6 trillion in new contracts.

The new contracts include the construction of hotels, offices and a convention hall in Surabaya, East Java, a cooking oil factory in Sei Mangke, North Sumatra, and a Rp 503.3 billion deal with the Energy and Mineral Resources Ministry for projects including the Prabumulih gas system in North Sumatra, the Bekasi natural-gas filling station in West Java, biofuel tanks and public-road lighting support facilities.

In the future, the company is also eyeing the contract for the renovation of the Rawamangun Velodrome in East Jakarta, amounting to Rp 450 billion, ahead of the 2018 Asian Games 2018, among other sporting events.

The company is eyeing a Rp 750 billion profit by the end of this year, a 20 percent increase from the Rp 625 billion profit it recorded last year.

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