Business prospects of property developer Agung Podomoro Land will improve in the near future, following Maritime Affairs Ministry’s approval for the company to continue its once terminated reclamation project on North Jakarta’s Island G, global credit rating agency Moody’s Investors Services said on Monday (16/10).
The government suspended the project in May last year, amid a bribery investigation and strong opposition from environmentalists, which created uncertainty in Agung Podomoro’s future business development. The ministry lifted the moratorium on the island’s reclamation on Oct. 5.
“The green light from the Ministry of Maritime Affairs will prevent any reduction in the developer’s estimated value of assets and compensation payments from the project’s suspension,” Moody’s said in a statement.
Agung Podomoro holds a concession to develop three islands — Island F, Island G and Island I — 550 hectares in total. The islands are among 17 artificial islands off the northern coast of the capital, created as defense against tides.
Prior to the suspension, the company was developing 161 hectares of Island G in what is popularly known as the Pluit City project. The project includes houses, shops and high-rise buildings for residential and office use. It will also have public facilities such as a school, a water management facility, places of worship and recreational areas.
The company has put Rp 2.5 trillion ($185.42 million), or around 8.43 percent of the developer’s total assets as of June this year, into the island’s development in consultant fees, licenses and land-dredging costs.
Although works on Island F and Island I are still suspended, the developer spent Rp 500 billion to secure concessions on both of them.
“Lifting the suspension on Island G removes the risk of significant losses from asset write-offs and the return of the cash collected from customers,” Moody’s said.
The company expects the reclamation project to restart in early 2019.
Still, Moody’s expects that more funds will be needed for Pluit City, which will weaken the company’s debt to Ebitda (earnings before interest, taxes, depreciation and amortization), or its leverage level from 2.8 times last year to 3.3 times to 3.5 times over the next 12 to 24 months.
Source: Jakarta Globe