Medco Energi

JAKARTA (TheInsiderStories) – Oil and gas producer, PT Medco Energi Internasional Tbk (IDX: MEDC) has issued bond of US$300 million with final coupon of 8.5 percent per annum, said the company in official statement.

Hilmi Panigoro, the President Director of Medco stated: “With this successfull transaction we are able to extend the average age of our debt maturity and access a new source of funding for our future developments.”

“I am particularly pleased with international markets confidence in the company’s business, commitment, and robust asset portfolio. We look forward to working with the bond holders and expanding our relationship with this new set of investors,” he continued.

According to RTI, since the beginning of this year, share of Medco has gained to 112.88 percent to Rp2.810 per share while in the last three month, the share share has fallen 6.02 percent on Friday (11/8).

Historically, trading on Medco was flat since January, then the share started its substantial gain in February and facing correction since early April. MEDC had ever reached its lowest at Rp705 on Dec 31, 2015.

In 2016, Medco acquired two major companies and it continues allocates funds for acquiring other assets in the coming years. Medco in mid June offered bonds worth Rp1.27 trillion as some of that funds will fund the said acquisition plan.

Medco will also use its bond funds for paying bonds debts scheduled to mature in December this year and March next year and for funding capital expenditure. On the rights issue plan, initial scheduled for this month, it is interesting to see whether the rights issue will lead to ownership change in the company, which has aggressively acquired resources assets in the past two years.

Samsul Hidayat, Director of the Indonesia Stock Exchange (IDX) has said, that Medco will in the second half this year launch the rights issue for 1.3 billion shares, also warrants, at par value of Rp100. The exercise price will refer to its market price at last trading day.

Siendy K Wisandana, Medco’s corporate secretary, the rights issue will be launched after the company split its stocks from current 341 billion units with ratio of 4-to-1. Medco is expected to raise Rp1.92 trillion from its rights issue program after stock split. Acting as underwriters for Medco’s rights issue are Mandiri Sekuritas, CLSA, and Samuel Sekuritas.

Medco has also informed its plan to launch the initial public offering (IPO) for its newly acquired gold-copper producer PT Amman Mineral Nusa Tenggara (formerly Newmont Nusa Tenggara/NNT). This IPO funds might be aimed to repay the matured debts, also debt used to acquire Amman Mineral.

Medco has capacity to serve its existing debt as it booked annual revenues of $583 million, with Ebitda of $274 million. But Medco needs huge funding to build the smelter.

The huge debt will challenge Medco on smelter project, the very important project. Then Medco should have generated funds or capital for building the smelter in five years time to export concentrate or Medco might also cooperate with Freeport on building smelter.

Currently, Medco is focusing in fund raising. Aside of the issued global bond, the company also receive two loan facilities of Rp2 trillion in the first half of this year. The first loan came from PT Indonesia Infrastructure Finance of Rp157.5 billion while the second loan was obtained from PT Bank OCBC NISP Tbk (IDX: OCBC) of $150 million or Rp1.98 trillion.

Medco is optimistic that IPO of Amman Minerals will attract high buying appetite of investors, as Amman has large asset size while the capital market is improving and stabilising.

The company booked net profit of $184.8 million last year, but attributable to $551.7 million gain on bargain purchase of assets, including Batu Hijau gold-copper mine ($467.2 million) and South Natuna Sea Block B from ConocoPhilips ($25.6 million gain). This gain was enough to cover $311.93 million loss on impairment of assets, which expanded from $217.25 million in 2015.

Medco’s gross profit grew 15 percent, while operating expenses declined 12.5 percent, but finance cost jumped almost 38 percent to $106.5 million related to new loans used to finance acquisition of new assets, including Batu Hijau mine. Medco recorded net loss of $31.24 million from its 50 percent shares in PT Amman Mineral Investama, immediate parent of Amman Minerals.

But overall, Medco’s oil and gas business posted 30.5 percent growth in sales revenue, while gross profit increased by 10.7 percent last year. Medco will see stronger contribution from South Natuna Sea Block B this year, including effect of recent acquisition of additional shares from Inpex Ltd (Japan).

Who controls Medco? Mitsubishi Corp might have restructured its ownership in Medco. List of shareholders in December 2015 pointed to Encore Energy Pte Ltd holding 51.26 percent shares, but then declined to 36.44 percent by Dec 2016.

At the same time, Mitsubishi UFJ Bank held 15.28 percent shares. A substantial block of 21.15 percent shares were held by Credit Suisse AG on behalf of trust account client.

(Written by Linda Silaen, Email: linda.silaen@theinsiderstories.com)

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