IDB, Pertamina Pension Fund to form equity firm

Islamic Development Bank (IDB) and Pertamina Pension Fund have agreed to establish a joint venture private equity firm to support the financing of infrastructure and other projects in Indonesia, The Jakarta Post reported on Monday.

Pertamina Pension Fund, a subsidiary of state-owned oil and gas company PT Pertamina, was chosen by the Jeddah-based IDB Group for its experience and performance in managing funds invested in the capital market and other assets, said CEO of Pertamina Pension Fund, Helmi Kalam as quoted by The Post on Thursday following an agreement signing with IDB.

Helmi said the IDB?s initiative of establishing an investment company with an Indonesian partner was relatively new since Islamic funds rarely entered the domestic financial market, which has limited instruments of investment, and usually went to neighboring Malaysia.

Helmi said the future company would be an Indonesian legal entity in the form of a Perseroan Terbatas (PT) and resemble local private equity firms, such as Saratoga Investama Sedaya and Northstar Pacific Partners, yet based on sharia compliance.

Helmi said Pertamina Pension Fund had submitted a permit proposal to the Financial Services Authority (OJK) and the Law and Human Rights Ministry, while preparing funds amounting to Rp 25 billion (US$1.93 million) as a minimum capital requirement for an investment management company.

In addition, Helmi said the 1DB had committed to the future company having total paid-up capital worth around $100 to $200 million in the first year, with the help of two other investors from the United Arab Emirates and Bahrain.

Helmi expected matters related to the establishment of the firm, including legal, to be completed soon so that the company could launch at the end of May, even though he refused to disclose its name.

Helmi further said that the company would focus mainly on stocks of listed companies, especially those in the energy, property and infrastructure sectors, which are relevant to Pertamina Pension Fund?s expertise as well as IDB?s commitment.

In June last year, Pertamina Pension Fund purchased shares of mid-size energy firm Elnusa. Pertamina Pension Fund had Rp 9.92 trillion in assets under management as of last year, with a 20.74 percent increase in return of investment (ROl) worth Rp 2.05 trillion.

IDB president Ahmed Mohammed Al-Madani met with President Joko ?Jokowi? Widodo at the State Palace in Jakarta last week to disclose IDB?s commitment to supporting Indonesia?s development as the group revealed to have around $3 billion to $5 billion in the pipeline for the next five years to finance various projects in the country centering on infrastructure, education and poverty alleviation.

In December last year, the IDB Group launched its Country Gateway Office in Jakarta as the group previously only had a local field representative. Prior to the launch, all communications and transactions with the IDB entities were carried out from Jeddah, Saudi Arabia, or from the IDB representative office in Kuala Lumpur, Malaysia. (*)