Capital Structure Optimization of Staging Development Toll Road Project in Indonesia

The characteristics of toll road project investment are lengthy payback and high upfront capital requirements, therefore, its funded with mixed debt-equity capital. The government Indonesia was invite investors to participate road infrastructure development, nevertheless financial viability of investment packages were not interesting enough for certain number of promoted projects. Staged development divided road into segments and it should be an alternative to generate traffic demand for assign minimum viability threshold. Each segment constructing schedule should not delayed to avoid cost escalation that borne to the next development. On-time construction start highly depend on traffic demand projection accuracy. The last constructed segment, would have shortest independent concession. Government own the authority to determine initial tariff and its adjustment, therefore, investors have no power to set price. Both internal and external condition of the industry must thoroughly examined because there was a time arrangement for staging investment. Optimal capital structure analysis was done to calculate minimum equity level and maximize profitability. Either interest rate or equity cost were modeled as the function of DER, where exact solution found by a trial-error approach. Simulation output was reveal that late start of construction schedule would escalate the investment cost and decrease viability of project.