Mountain biking in the hills on the outskirts of San Francisco, things took a dangerous turn for Ray Anthony Gerungan, President Director of Astrindo Nusantara Infrastruktur, as he flew off his cycle. But even after a hospital stint, a broken forearm, two dislocated wrists, a few bent-out-of-shape fingers and a couple of broken teeth, he is adamant that he will be back on his bike as soon as possible. It is a resilience that is evident in his professional dealings as well as his personal life.
“Typically on the downhill, you should always brake with your rear tyre, but I hit the brake on both the rear and the front tyres and I flipped,” he tells The CEO Magazine. “It’s a cardinal rule for mountain biking – never break on your front.” But he is adamant that he will get back on his bike as soon as he can, wiser for the experience. This steely determination is also helping Ray calmly steer Astrindo towards its goal of becoming the “leading Indonesian investment company focusing on energy infrastructure”.
In search of opportunity
It was also a big driver when, at the age of 24, Ray decided to move to Jakarta from Los Angeles in the US, where he grew up with a love of rockets. This childhood passion saw him go on to study aerospace engineering at the University of Southern California before he decided his career lay in another direction.
He landed a job with Indonesia’s largest state-owned oil and gas company, Pertamina, where one of his responsibilities was to entertain Indonesian officials who were visiting the US. As he showed them around town, sharing LA through the eyes of a local, he built meaningful relationships that would eventually result in an influx of job offers from Indonesia. After two years, he became convinced that there were great opportunities awaiting him on the other side of the world and so he made the move.
“I moved to the US when I was 18 months old and I might have visited Asia twice in the 24 years I was there, so I thought of myself as an American and moving to Jakarta was culturally shocking,” Ray shares. But he stuck with it, despite the challenges of working initially under the authoritarian Suharto regime, renowned for its nepotism and cronyism, as well as the Asian financial crisis of 1997.
After contemplating his options, Ray chose to enter a career in finance, starting off in research. “I didn’t really have an economics background or a business management background, but I knew numbers pretty well,” he says. “There was a whole bunch of hot-shot Ivy League guys who might have had a degree in economics, but in terms of business, we were on the same level because our experience was fairly even.”
It turned out to be a wise choice, and he steadily climbed the ladder with ease thanks to his distinctive accent and natural confidence. Companies he worked with include Lippo Securities, a Swiss Bank initiative, NatWest Markets and Deutsche Bank among others.
From consultant to president
When Ray first started working with Astrindo, it was as a consultant. Even then, it was clear to him what needed to be done. He was convinced the company needed to divest its oil and gas interests. “I just thought, ‘Why are you even touching oil and gas when the managers of your company aren’t oil and gas guys; they’re all financial guys?’” he recalls. “I realised for it to work, the focus had to be on cash flow, which was around the energy infrastructure assets, and the oil and gas stuff should be sold off.”
So impressed by his vision, the company asked him to come on board as President Director and make the plans a reality. At the time, he had just left a position with the Macquarie Group, so the timing was perfect. Excited by both the challenge and the opportunities ahead, Ray accepted the offer in December 2017 and embarked on the “game-changing” plan of switching from oil and gas to focus solely on infrastructure.
Making that plan a reality required some of that trademark resilience, with Ray encountering some resistance to the changes he was implementing. “Leading a company and advising a company are two different things,” he points out. “When I was simply advising people, we would do it over drinks, but when you lead a company, you have to make decisions and those decisions are impactful.”
Making things happen
As part of the overhaul, the company changed its name from Benakat Integra to Astrindo Nusantara Infrastruktur. For Ray, top of the agenda was tackling the company’s capital structure. It had negotiated a short-term loan which, as a result of market changes, ended up spreading out over more than three years. “We were effectively paying interest and we were never going to pay down the principal,” he explains. “That was the biggest challenge, so we had to make some tough decisions both internally and externally.”
Ray succeeded in negotiating the company out of this unfavourable arrangement. “I guess the American came out of me in terms of the negotiating, but it was very harsh sailing for a while,” he admits. “We absolutely had to be confrontational to get things done.” Now the company has a “normal” bank loan, which has made a drastic difference to the company’s finances. “We’re in a better position today than we ever were thanks to this refinancing.”
The second part of the three-year plan was to restructure the company to prepare it for future growth and future financing. The final stage of the journey, to be undertaken in the third year, was to refinance. But then COVID-19 rocked the world and the plan ground to a halt. “The pandemic set us back a good amount,” Ray says. “The refinancing was linked to growth; without growth there is no refinancing.”
A new path
Although frustrating, the setback gave Ray the chance to reflect on the company’s direction. “The world changed. Banks that were with us just two years ago now didn’t even want to talk to us because of our relationship with coal.” For them, coal was now a “dirty word”.
“I thought about it and realised this is actually something we could focus on – decarbonising our assets and our operation,” he remembers. “Not only does it allow us to clean up the environment, but it allows us to transform our company from what people might think of as a high-carbon business to something that is greener.”
“Leading a company and advising a company are two different things.”
The game-changing shift makes Astrindo one of the pioneers of green energy in Indonesia where coal remains a “necessity”, according to Ray. But that too brings with it challenges. “It’s very difficult to talk to shareholders about this green initiative because they think it’s going to be costly. So I need to present it in a way that shows it will be cost-effective and will futureproof our company,” he says. “It’s one thing to talk about it but another to execute it because even though it becomes more cost-effective over time, up-front it’s more costly. People don’t do this because the costs in the beginning are somewhat prohibitive.”
The high costs of becoming cleaner are unbalancing the playing field in the banking space, with Indonesian companies becoming the subject of “institutional prejudice”, according to Ray. “Third World countries like Indonesia are heavily penalised because of our reliance on carbons, whether it’s gas, oil or coal,” he stresses. “I fear that institutional racism against high-carbon countries is getting to the point where the banks who are striving for a greener economy have lost sight of actually getting people to that level. Western countries have had that chance to create wealth through oil and through coal so they are in a better position to shift, but Third World countries still need that ability to transition.”
Preparing for change
With the pandemic’s worst hopefully behind us, Ray is optimistic that Astrindo will get that all-important bond issue out before the first quarter of next year. “That will just kickstart everything else we want to do,” he confirms. Growth, he confidently predicts, will follow quickly.
“We’re not a company that is into high-risk investments; we want to do new projects that give us at least a 10-year cash flow,” he explains. “With that refinancing and regrowth strategy, we’re going to take our billion dollars of assets today and turn it into US$4 billion within five years. We’ll take our US$120 million EBITDA per annum and increase that to about US$350 million within that same time frame.”
Ray insists that this is no “blue sky” forecast, even though a 300% increase in EBITDA may seem ambitious. “The projects we’re working on and the amount of capital we need to develop – they give us these cash flows,” he says. The same time frame will see the company operations become carbon neutral although it will still be dealing with coal in a “high-carbon environment”; however, the growth will give Astrindo the platform to evolve.
“With potentially US$400 million in EBITDA and US$4 billion in assets, we would then be in a position where we could do what the Europeans or the Americans are doing – investing in real green technology like hydrogen and green ammonia, and that completely transitions our company to a futureproof green company going forward.”
A necessary investment
Indonesia, considered one of the Next 11 economies poised for growth, is one of the world’s major emitters of greenhouse gas emissions. Home to around 276 million people, the country emitted 625 million tonnes in 2019, a sizeable portion of the global figure of 35 billion tonnes, which represented a record high. Significantly, 38% of Indonesia’s power was generated by coal in 2020, while 19% was from gas and nearly 32% from oil, according to government figures. Just 11% was generated by renewable sources.
However, the country is stepping up its focus on the issue of climate change with the Indonesian government earlier this year underlining its commitment to reducing greenhouse gas emissions by 41%, the equivalent of more than 1.02 billion tonnes of carbon dioxide, by 2030 with international support. It also plans to reduce the share of coal-fired power in its energy mix to 30% by 2025 as it ups its focus on renewable energy resources.
Serious investment is required to ensure the right infrastructure is in place to help achieve these targets, according to Ray. “It’s impossible for an Indonesian company to do that without the infrastructure to support it,” he reveals. “Yeah, we could do hydrogen from the chemicals, but that would be dirty hydrogen, grey hydrogen. We want to get to blue and green hydrogen.”
Encouraging news came in June when US President Joe Biden and other G7 leaders committed to an action plan that would accelerate decarbonisation in a bid to combat climate change. As part of the strategy, Canada, Germany, the UK and US will collectively contribute up to US$2 billion to the Climate Investment Funds to help key developing countries move away from coal. The necessary technology, job training and infrastructure will also be provided as part of the G7 Industrial Decarbonisation Agenda.
“We absolutely had to be confrontational to get things done.”
“If this materialises, it is exactly what countries like Indonesia and companies like Astrindo need to push us through a transitioning period in our economic development,” Ray comments. “I can only hope at this stage, but it’s definitely a step in the right direction.”
Meanwhile, he is confident Astrindo is on the right track. “I have to be; it’s my dream,” he shares. “I’m getting buy-ins from people that maybe last year were all, ‘Oh, no, it’s going to be too expensive,’ to, ‘OK, we’ve got to do this. We’ve really got to do this.’ It’s nice to see that level of resonance, people catching onto this idea.”
A positive culture
While it prepares for this massive evolution, Astrindo is already striving to ensure its day-to-day operations are as environmentally friendly as possible by reducing the use of plastic in the company’s work environment and with more efficient use of energy. It has replaced its diesel-fuelled engines with gas-fuelled engines, which has significantly reduced its emissions. It is also mindful of the local flora and fauna in areas where it operates, with the preservation of animals and the conservation of mangrove forests both on the agenda.
Corporate social responsibility is another area of focus for Astrindo. A range of investment and educational programs have been put in place to help support local communities and ensure they have access to well-maintained schools, job opportunities, training and other forms of welfare support where necessary.
Closer to home, it is continually working to ensure equal opportunities for its staff and to help safeguard their wellbeing, according to Ray. Some of these measures include medical check-ups, health facilities and the provision of life insurance for employees and their families.
The pandemic prompted Astrindo to reassess its actions in many of these areas too. “I think COVID-19 allowed people to take a step back from where they were,” Ray reflects. “For good or for bad, the world has changed, so what can we do now? Rethink everything, re-engineer everything, and then start from there.”