CPPIB enters SE Asia with toll road deal in Indonesia

The Canada Pension Plan Investment Board took on emerging market infrastructure exposure with an investment in a toll road spanning 117 kilometres throughout the densely-populated Indonesian island of Java.

CPPIB announced it had acquired a minority stake in PT Lintas Marga Sedaya (LMS), the concessionaire managing the Cikopo-Palimanan (Cipali) toll road, its first infrastructure investment in South-East Asia.

The transportation asset, one of the longest operation toll roads in Indonesia, is managed through a 22-year concession. It is a critical link in Java’s transportation network, serving as a thoroughfare within West Java, the island’s most populous and fastest growing province, as well as connecting West Java and Jakarta’s suburbs with the rest of the island.

The Canadian pension fund, which managed over C$400 billion ($301.5 billion; €272.8 billion) as of 30 June, said in a statement it had partnered with Astra Infra, part of the Indonesian conglomerate Astra International, to secure the deal. CPPIB purchased a 45 percent interest from a subsidiary of Malaysia’s sovereign wealth fund, Khazanah Nasional Berhad, while Astra Infra agreed to increase its own stake from 45 percent to 55 percent.

The transaction, which is expected to close later this year, gives CPPIB core brownfield infrastructure exposure in a developing country with a fast-growing population, according to CPPIB. The pension fund did not disclose how much it invested in LMS, and Scott Lawrence, head of CPPIB’s C$33.1 billion infrastructure portfolio, declined to give return expectations.

He did, however, tell Infrastructure Investor that CPPIB had sought to increase its exposure to Asian infrastructure in recent years. Lawrence said that in Indonesia there “is a great fit between growth supporting infrastructure and infrastructure supporting growth”.

“Thinking about Indonesia’s strong, stable growth over the past 10 years, projecting forward and recognising where it’s at on the GDP growth curve makes it very exciting for mobility trends,” he said.

Before the Cipali investment, CPPIB had C$19 billion invested in toll roads. It owns stakes in assets in Australia, Canada, Chile, Mexico, India and the US. In May 2018, the Canadian pension made a C$200 million anchor commitment for a 30 percent stake in IndInfravit Trust, the first private infrastructure investment trust in India which now owns stakes in 14 road assets.