Sukuk Al Istisnaa Scheme for

Balongan Project
Case Study
September, 2006

Strictly Private and Confidential

Funding Structure
Project Financing, which will be developed in the Shariah concept SUKUK AL ISTISNAA
The structure relies on future cash flows from a specific development as the primary source of
repayment, with that developments assets, rights, and interests held as collateral security.
The repayment will be sourced from proceed under the SPA of incremental Propylene products
produced from the Projects.
Basic Structure
Repayment

Collection
Account

Sales
Proceed

Offtaker
Company

Propylene
Sales
Contract
Advance Payment
Agreement

Lender
Disbursement

Propylene
Supply

PT Pertamina
(Persero)

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Strictly Private and Confidential

Sukuk Al Istisnaa (1)

Pre-Completion
Pre-Completionof
ofthe
theProject
Project

Offtaker

EPC
Contractor

(2) Propylene SPA

Agreement

(5) $
Disbursement

PERTAMINA and the

Investment Agent acting on
behalf of the Islamic Participants
enter into an Istisnaa
Agreement

2.

PERTAMINA and the Offtaker

enter into the Propylene SPA
Agreement.

3.

PERTAMINA assigns/novates
the Projects under EPC
Contracts to Investment Agent

4.

PERTAMINA issues the

Istisnaa Certificate (SUKUK) to
transfer its ownership to the
Investment Agent.

5.

Pursuant to an Investment
Agency Agreement, Islamic
Participants fund PERTAMINA
through the Investment Agent
based on the EPC schedule.

6.

Fund disbursed to PERTAMINA

are utilized to make periodic
payments to the EPC
Contractor.

PERTAMINA

(1) Istisnaa
Agreement

Islamic
Participants

1.

(6) Funding
based on EPC
Schedule

$
Investment
Agent

(3) Assignment
/Novation of
EPC Contract
& SPA
(4)
Istisnaa
Certificate
(SUKUK)

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Strictly Private and Confidential

Sukuk Al Istisnaa (2)

Post-Completion
Post-Completionof
ofthe
theProject
Project

Offtaker
(1)
Propylene
delivery

PERTAMINA
(3) Sale of
completed projects
at cost plus profit

Islamic
Participants

(4) Pro-rata payment

based on principal
participation plus
profit

(2) $ Payment
for the
purchase of
Propylene

1.

PERTAMINA delivers
Propylene to the Offtaker

2.

The Offtaker pays the

Propylene to the Investment
Agent. This payment will be
dedicated as the repayment
of projects costs at cost plus
profit.

3.

The Investment Agent sells

the completed Project to
PERTAMINA at cost plus
profit basis.

4.

The sale proceeds are paid

onwards to the Islamic
Participants based on their
pro-rata participation in the
Projects.

Investment
Agent

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Strictly Private and Confidential

Key Considerations
Sukuk as a tradable Islamic instrument;
Regulations i.e. The Presidential Decree No. 59 of 72 for the Negative
Pledge of the security required over Pertamina assets, and etc;
Tax Issue i.e. tax implication for the novation of assets and etc;
Documentations i.e. no experience in the Sukuk Al Istisnaa agreement;
Difference on the completion projects schedule.
2007

2008

2009

2010

Revamping Phase II Balongan

Off Gas RCC Balongan

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