This case study explored the project financing arrangement for gas infrastructure production facility in East Java, Indonesia done by PT Indogas in the term of Build-Operate-Transfer. The term “Project finance” was defined as financing arrangement for an economically and independent project that uses everything that the project can offer as its collateral for assessing the risk and the basis of its return of investment. The project financing uses different assessment with the traditional corporate finance concepts, where the lender typically took number in company’s historical balance sheet to retrieve their funds back, as well as in a project loan where the creditor will look at solely the expected cash flows from the project for its repayment of the loan. PT Indogas was a gas trading company that owned the right to commercialize and distribute gas from Kalidawir source in Tanggulangin, Sidoarjo, East Java in 2009. The company signed a sales purchase agreement with PT Lapindo Brantas to buy 107,000 m³ volume gas per day and sell it to industrial costumer in East Java area for five years period of supply. This agreement made the company to develop a compressed natural gas (CNG) facility to compress natural gas and provide the trucking fleets to deliver the CNG to the designated customers. The scope of BOT consisted of building CNG Mother Station at designated location, operating and maintaining the CNG station for the 30 (thirty) months period (2,5 years) and transferred it back to the project owner.
Case number: 111-0513-001
Course Major: Project Financing; Corporate Finance – Capital Budgeting; Financial Modeling; Business Valuation
Related Topics: Project Financing Analysis
Teaching Note Availability: PT INDOGAS: Built-Operate-Transfer (BOT) Project Financing [Teaching Note]