APG, ADIA invest in Indonesian road infrastructure
APG Asset Management, which oversees €517 billion ($567 billion) in assets for Dutch pension funds, is leveraging its extensive infrastructure expertise to invest in the Trans Java Toll Road alongside the Indonesia Investment Authority (INA).
"Given the long concession lives of 30-50 years and inflation-protected revenues, Indonesian toll roads allow our pension fund clients to match their long-term liabilities," ChinChan Lim, APG senior portfolio manager of infrastructure investments for Asia Pacific, told AsianInvestor.
APG’s investment will cover two sections of the road: Kanci-Pejagan and Pejagan-Pemalang. This new toll road platform with INA is seeking up to $2.75 billion in projects to aid development.
"Toll roads halve travel times versus highly congested toll-free national highways, thereby encouraging development in rural regions of Indonesia," Lim explained.
"As a regulated asset, toll road pricing is controlled by the government and linked to inflation to ensure equitable access across income levels," he added.
GROWTH POTENTIAL
Toll roads are seen as crucial to foster Indonesia's economic development.
“There is a very strong positive social impact component to these assets,” said Lim.
By providing high-quality road infrastructure, INA and its global asset-owner partners can inject strategic capital and expertise to help unlock Indonesia's immense infrastructure potential.
The Kanci-Pejagan and Pejagan-Pemalang sections have seen traffic surge over 50% from 2016 to 2021, underscoring their important role in Indonesia's growth.
The INA’s foreign partners, including APG, have also been interested in ensuring quality and sustainability, and are expected to bring international best practices to the platform, according to Lim.
“We will ensure milestones are met on ESG standards, climate change mitigation, and continual improvements in road quality and safety," he said.
With this strategic toll road platform, Indonesia can leverage inbound expertise to enable greater domestic connectivity and more inclusive national development.
“By significantly reducing travel times, toll roads can seamlessly connect underdeveloped regions and spur further socioeconomic development,” said Lim.
INCREASING INDUSTRIALISATION
The new toll road sections will also link key industrial hubs and ports in West and Central Java, regions with 30-40% less GDP per capita than Indonesia overall, which are projected to have greater growth potential.
The Abu Dhabi Investment Authority (ADIA) is also allocating significant capital to Indonesian toll roads.
By working together, APG and ADIA are aiming to accelerate Indonesia's ambitious infrastructure development goals over the coming decades. ADIA views Indonesia as an attractive market, a source close to the deal told AsianInvestor.
Indonesia is wisely developing its infrastructure to support increased industrialisation and more efficient supply chains, according to the source.
Given the geographic dispersion of Indonesia across over 17,000 islands, movement of goods and services is highly dependent on its road connectivity, they said.
NATIONAL STRATEGY
The platform with INA and APG is targeting up to $2.75 billion of toll road opportunities in Indonesia, according to the official announcement. The platform aims to introduce world-class institutional expertise in infrastructure investing to the world’s fourth most populous country.
INA
"By welcoming APG and ADIA as shareholders, we aim to bolster our capacity to support and advance strategic national development projects, which is anticipated to yield significant economic benefits and propel Indonesia into a future of connectivity and prosperity,” Ridha Wirakusumah, CEO of INA, said in an official release.
The INA’s stated goals for the Trans Java toll road sections include boosting regional connectivity and access to key industrial hubs and ports, creating jobs and driving domestic economic growth.