Public Private Partnership Co-Financing: ECAs, DFIs, Banks

Source picture: blog.ipleaders.in

Public Private Partnership Co-Financing: ECAs, DFIs, Banks

A foreign sponsor wins preferred-bidder status on an Indonesian toll road, and the harder problem starts immediately: the project needs several hundred million dollars of debt, and no single institution will write that ticket. 

This article sets out who funds which tranche in an Indonesian public private partnership, what triggers an export credit agency’s participation, and why the government guarantee available to public private partnership projects in Indonesia sits underneath the capital stack rather than inside it.

In brief: Co-financing in a public private partnership is the practice of several lenders, typically commercial banks, export credit agencies (ECAs) and development finance institutions (DFIs), jointly funding one project company’s debt under coordinated terms rather than one lender carrying the full exposure. Each participant brings its own eligibility rules, currency and conditions precedent. 

What is co-financing in a public private partnership?

Co-financing means two or more lenders fund one project company under a common or coordinated set of terms. At infrastructure scale it is rarely optional: single-lender exposure limits, tenor appetite and currency capacity seldom stretch to a full ticket. It shares the money, not the risk cover.

The two are negotiated in different rooms. Co-financing runs through a common terms agreement and an intercreditor agreement among lenders, settling who is repaid and in what order. A co-guarantee runs through separate contracts with their own claim mechanics, settling who absorbs a loss. Institutions that insure rather than lend belong in the second category and never appear in a capital stack. 

Who sits in the capital stack of an Indonesian PPP

A large Indonesian KPBU project typically draws on five funding sources: sponsor equity, senior commercial bank debt, an ECA-supported tranche tied to equipment sourcing, a DFI or multilateral loan, and local-currency bank debt matched to rupiah revenue. The government guarantee sits beneath all five and funds none.

Under a KPBU (Kerja Sama Pemerintah dengan Badan Usaha, Indonesia’s public-private partnership scheme), a PJPK (Penanggung Jawab Proyek Kerja Sama, the contracting agency) signs a Perjanjian KPBU with a BUP (Badan Usaha Pelaksana, the project company) under Peraturan Presiden No. 38 Tahun 2015, still in force. Indonesian-language sponsors will find how the same scheme is documented for domestic KPBU sponsors the closer reference. 

Tranche	Typical provider	What it requires	What it changes
Sponsor equity	BUP shareholders	First-loss capital sized to lenders’ gearing tests	Thin equity, tighter covenants behind it
Senior commercial debt	Domestic or international banks	Project-finance diligence, shared security, covenants	Priced off the ECA or DFI paper present
ECA-supported tranche	ECA of the equipment’s origin country	Export content from that country, plus bounded local costs	Longer tenor; ties sourcing to financing
DFI or multilateral loan	ADB, IFC, AIIB and peers	Credit appraisal, environmental and social safeguards	Preferred-creditor comfort mobilises banks that would not otherwise lend
Local-currency bank debt	Indonesian commercial banks	Rupiah capacity matched to IDR revenue	Narrows the currency mismatch; single-bank limits cap the ticket
Government guarantee (not a tranche)	Infrastructure guarantee business entity (BUPI), Ministry of Finance	Perjanjian Penjaminan on the PJPK’s contractual performance	Strengthens government-side obligations, outside the waterfall

Two dated transactions show the mechanism, though neither was a KPBU project and neither carried an Indonesian government guarantee. IFC’s facility for PT Indonesia Infrastructure Finance paired a USD 15 million A loan for its own account with up to USD 135 million of B loan mobilised from third parties, signed 22 February 2016. 

The USD 222 million financing of a 275 MW gas-fired independent power producer in Riau, signed 20 March 2019, brought ADB and IFC in as direct lenders, with two commercial banks behind ADB’s B loan.

How export credit agency support is actually triggered

ECA appetite follows the origin of the goods and services being financed, not the sponsor’s nationality or the project’s merit. An export credit agency supports export contracts from its own country’s suppliers, with a bounded allowance for local costs in the buyer’s country. Procurement decides which ECA can participate. 

1. Sourcing, not shareholding, sets eligibility, and it is settled early. A European sponsor awarding its EPC contract to a Japanese supplier brings that country’s agency into scope and leaves its own out. Equipment selection usually lands before financing is seriously discussed, yet it sets the tranche, tenor and pricing available at close.
2. The local-costs allowance is bounded. Under the OECD Arrangement on Officially Supported Export Credits, the allowance for local costs rose to 40 percent of Export Contract Value for high-income buyer countries and 50 percent for the rest, effective 20 April 2021, as reported in trade-finance commentary. Which bracket applies turns on the buyer country’s classification under the Arrangement, and this review did not confirm Indonesia’s.
3. Indonesian procurement rules select the project company, not the lender. Peraturan Lembaga LKPP Nomor 1 Tahun 2026, enacted and promulgated on 5 August 2026, governs procurement of the Badan Penyiapan (the preparation agency) and the Badan Usaha Pelaksana under Article 40 of Perpres 38/2015 and revokes the 2025 version. It says nothing about where the BUP buys its turbines.

Scale is not the binding constraint. ICIEC, part of the Islamic Development Bank Group, citing TXF Data, puts ECA-supported debt into Indonesia at roughly USD 80 billion over a five-year period measured from a 2018 base. Read that as a period figure from a mid-decade publication, not a 2026 number. 

Does Indonesia’s government guarantee cover the loan itself?

No. The Indonesian government guarantee responds to the contracting agency’s obligations under the KPBU contract, not to a lender’s right to be repaid. In practice it is described as covering termination payments arising from political risk, tariff-adjustment delay and land-procurement delay. It underlies the stack; it is not a tranche in it.

Three consequences follow, and credit committees test all three: 

• It does not repay a facility if the project company defaults commercially.
• It does not rank in the repayment waterfall, so it alters no intercreditor position.
• It is not a subsidy: it carries hak regres, a right of recovery against the party responsible for any claim that is paid.

The instrument is issued by PT Penjaminan Infrastruktur Indonesia (Persero), or PT PII, internationally the Indonesia Infrastructure Guarantee Fund (IIGF), the Badan Usaha Penjaminan Infrastruktur mandated for KPBU projects under the Ministry of Finance. PMK No. 68 Tahun 2024, effective 18 October 2024, is the consolidated implementing regulation.

The guarantor’s own standing is the live question, and the dates matter. Fitch affirmed the entity at BBB / F2 / AAA(idn), Outlook Stable, on 12 February 2026, assessing it as a government-related entity credit-linked to the sovereign. On 4 March 2026 Fitch affirmed Indonesia’s sovereign rating at BBB but revised the sovereign Outlook to Negative. No entity-specific action followed before this review in September 2026; read the two together. 

Where multi-lender stacks break: currency, intercreditor and the clock

The failure modes are rarely credit failures. A rupiah-revenue project servicing hard-currency debt carries a currency mismatch someone must absorb; multiple facility agents multiply conditions precedent; every extra lender adds an approval calendar. More lenders means more capital and more ways for a timetable to slip.

Most KPBU projects earn availability payments or user tariffs in rupiah, while ECA and DFI tranches are typically dollar-denominated. Three answers exist: hedge the gap, add a local-currency tranche, or price it into equity returns. None is free.

The intercreditor problem is quieter and often costlier. Each lender arrives with its own conditions precedent, facility agent and approval calendar, and the common terms agreement must reconcile them before first drawdown. Transaction practice commonly targets loan signing and initial disbursement within roughly twelve months of KPBU contract signature, but this review did not locate that deadline in Perpres 38/2015 or PMK 68/2024. 

Treat the twelve-month clock as market convention.

For a smaller regional project, a cross-border stack is usually the wrong instrument. Three lenders, two currencies and an intercreditor agreement cost more in preparation than the project recovers in pricing. Creative financing instruments used where a project is too small for an offshore tranche are the better start. 

FAQ (Frequently Asked Questions)

What is co-financing in an infrastructure public-private partnership?

Two or more lenders jointly funding one project company’s debt under coordinated terms, rather than a single institution carrying the full exposure. Usually commercial banks, export credit agencies and development finance institutions. It concerns who supplies the money, not who absorbs a loss. 

Which lenders typically fund an Indonesian PPP project?

A large KPBU project usually combines sponsor equity, senior commercial bank debt, an ECA-supported tranche tied to equipment sourcing, a DFI direct loan from ADB or IFC, and local-currency bank debt matched to rupiah revenue. Few projects use all five. 

Does the Indonesian government guarantee cover the loan itself?

No. It responds to the PJPK’s obligations under the KPBU contract, in practice termination payments linked to political risk, tariff-adjustment delay or land-procurement delay. It does not guarantee repayment of any tranche and does not remove the project company’s commercial risk. 

What determines whether an export credit agency will support an Indonesian PPP project?

The origin of the goods and services procured, not the sponsor’s nationality. Under the OECD Arrangement on Officially Supported Export Credits, cover attaches to export contracts from the ECA’s own country, with a bounded local-costs allowance revised effective 20 April 2021. 

How is co-financing different from a co-guarantee?

Co-financing shares the funding: banks, ECAs and DFIs each take a tranche under a common terms and intercreditor agreement. A co-guarantee shares risk cover through separate contracts with their own claim mechanics. Projects can use both, arranged and priced separately. 

How soon after signing must financing be in place for an Indonesian PPP project?

Transaction practice commonly references around twelve months from KPBU contract signing to loan signing and first disbursement. Treat it as market convention rather than a codified deadline; it was not confirmed in Perpres 38/2015 or PMK 68/2024 during this review. 

Conclusion

At preferred-bidder stage the question is rarely whether Indonesia’s public private partnership framework works, but which lender funds which slice and what each needs before committing. That assembly moves faster when the obligations beneath the stack carry a guarantee an offshore credit committee recognises. 

PT PII is the only state-owned entity mandated to issue government guarantees for KPBU infrastructure projects, covering 61 guaranteed projects, KPBU and non-KPBU, worth more than IDR 732 trillion in project value, with IDR 113 trillion of guarantee value, as at June 2026. 

How a Government Guarantee is structured for a specific KPBU project, and what it does not cover, is set out at ptpii.co.id. 

Berbagi :