VALUE FOR MONEY ANALYSIS FOR INDONESIAN PPP PORT

• Main Author: Shirleen
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/67625
• Institution: Institut Teknologi Bandung

Indonesia as archipelago country showing demand for infrastructure requirement especially port and sea transportation to support the national and international logistic to enhance the national economic growth. Align with the demand of port and sea transportation, Government of Indonesia has been showing a strong interest and commitment to strengthen the Indonesia port infrastructure through Sea Gateway Program (Tol Laut) and National Strategic Project (Proyek Strategis Nasional / PSN). However, to develop the full masterplan of Sea Gateway Program, Government of Indonesia required investment support from private partners. To fulfill the investment gap, the government developed a public-private partnership scheme for infrastructure projects and has tendered the PPP project for port sector, the PPP business scheme will be Design-Build-Finance-Operate-Maintain-Transfer (DBFOMT) for 30-50 years with several potential revenue scheme depends on the project structure and commercial feasibility. This research will focus on the port sector project which categorized as commercial project, thus will adopt user-charge scheme as project revenue stream. The user charge scheme will expose private party to uncertainty of demand risk but will ease the government from liabilities to repay the investment from government budget. From private party perspective, potential demand and applicable tariff become a highlight to evaluate the Project feasibility. However, Based on Ministry of Transportation Regulation No. PM 121/2018 related to Type, Structure, Category, and Mechanism of Port Tariff Clause 18.1.a.4 that the Minutes of Agreement from Port Association become one of the mandatory terms to adjust the Port Tariff. To enhance the private investment, the project sustainability become the key point of the consideration, thus even though the demand may be uncertain due to dynamic situation, the other respective aspects should be at least providing some certainty to the private party to regain their investment and margin. From lender’s perspective, the cash flow sustainability will become their assessment point for the loan approval which also become consideration for potential investors whether the project could meet the bankability aspects. The purpose of this research is to do the best analysis and provide a better project structure for the PPP Port Project in Indonesia. A good and sustainable project structure will bring competitive potential and qualified investors and enhance their interest to do the investment in Indonesia. Align with the purpose, this research will obtain several perspectives to reach a conclusion related to how is PPP port project could be sustainable. PESTLE and SWOT Analysis is used to understand current business condition and to overcome the threat to the project sustainability. The current business model still yet to reach the expectation level and still have some gap to maintain the sustainability. Thus the sensitivity analysis will be perform based on the key highlighted of internal and external analysis including concession period, demand flexibility, tariff adjustment, and inflation rate. By performing the sensitivity analysis, this research will provide another perspective about how if the demand declining and did not meet the target, how if there’s a tariff restructuration from the government, and or what is the best scenario to run to reach the project sustainability from both private and government perspectives. Apart from the sensitivity analysis, this research also will observe the potential risk that the party will bear and the mitigation for each risk item. From both sensitivity analysis and risk identification, this research will come up with the potential recommendation and mitigation to enhance the project sustainability through long concession period. From the analysis we could conclude that the current PPP business model is unresistant to dynamic economic development such as inflation rate and decrease demand which has direct impact to the income profile, the sensitivity profile also shows uncertainty in terms of absorbing cost increase during the operational period due to economic condition which caused by lack of tariff adjustment, in addition the current business model has fixed and non-negotiable period length which could impact to the less profit actualization. Based on the above approaches, we conclude that the current business model needs to be improved to fill some gap to maintain the project sustainability. The findings suggest some improvement and implementation strategy into the business model including (i) open for different PPP Bidding mechanisms such as Least Present Value of Revenues (“LPVR”) to mitigate the renegotiation contract due to commercial / demand risk, (ii) Explore the potential government guarantee to mitigate the arise public risk and protect the government contracting agency for their financial obligation and private party due to breach of contract including early termination, tariff adjustment risk, political risk, (iii) Positioning the tariff adjustment decision to the government by propose supporting new regulation.