JAKARTA (TheInsiderStories) – On May 19, 2017, we raised the sovereign credit rating on Indonesia to ‘BBB-/A-3’ from ‘BB+/B’ with a stable outlook. • As a result, we are raising the corporate credit ratings on seven Indonesian companies.

• At the same time, the ratings on two state-owned Indonesian companies remain unchanged.

• The outlook on eight entities is stable and the outlook on port operator PT Pelabuhan Indonesia III (Persero) is negative. SINGAPORE (S&P Global Ratings) May 19, 2017–S&P Global Ratings said today that it had raised its long-term corporate credit ratings on seven Indonesian companies following a similar action on the sovereign credit rating on Indonesia (BBB-/Stable/A-3; axA-/axA-2).

We raised the long-term ASEAN regional scale rating on four companies. We also raised the issue ratings to ‘BBB-‘ from ‘BB+’ on the outstanding notes issued by the following entities: PT Pertamina (Persero); PT Pelabuhan Indonesia II (Persero); PT Pelabuhan Indonesia III (Persero); PT Perusahaan Gas Negara (Persero) Tbk.; and the issue ratings to ‘BB+’ from ‘BB’ on the outstanding notes issued by PT Saka Energi Indonesia.

The ratings list is as follows:

Ratings raised;

Ratings affirmed To From PT Pertamina (Persero) Corporate credit rating BBB-/Stable/– BB+/Positive/– ASEAN regional scale axA- axBBB+

PT Pelabuhan Indonesia II (Persero) Corporate credit rating BBB-/Stable/– BB+/Positive/– ASEAN regional scale axA- axBBB+

PT Perusahaan Gas Negara (Persero) Tbk. Corporate credit rating BBB-/Stable/– BB+/Positive/– ASEAN regional scale axA- axBBB+

PT Pelabuhan Indonesia III (Persero) Corporate credit rating BBB-/Negative/– BB+/Developing/– ASEAN regional scale axBBB+ axBBB+

PT Saka Energi Indonesia Corporate credit rating BB+/Stable/– BB/Positive/– ASEAN regional scale axBBB+ axBBB

PT Telekomunikasi Selular Corporate credit rating Foreign currency BBB/Stable/– BBB-/Positive/– Local currency BBB+/Stable/– BBB/Positive/– ASEAN regional scale axA+ axA+

PT Astra International Tbk. Corporate credit rating Foreign currency BBB/Stable/– BBB-/Positive/– Local currency BBB+/Stable/– BBB/Positive/– ASEAN regional scale axA+ axA+ Ratings unchanged To From

PT Perusahaan Listrik Negara (Persero) Corporate credit rating BB/Stable/– BB/Stable/– ASEAN regional scale axBBB- axBBB

PT ANTAM (Persero) Tbk. Corporate credit rating B-/Stable/– B-/Stable/– ASEAN regional scale axB axB

We raised the ratings on four government-related entities–PT Pertamina, PT Perusahaan Gas Negara (PGN), PT Pelabuhan Indonesia II, and PT Pelabuhan Indonesia III–to reflect the sensitivity of these entities to the sovereign credit rating on Indonesia, given their relationship to the government.

Ratings Raised On Seven Indonesian Companies After Similar Action On The Sovereign continue to influence the business and financial strategies of the companies over the next two years at least. The stable rating outlook on PT Pertamina, PGN, and PT Pelabuhan Indonesia II reflects the stable outlook on the sovereign rating on Indonesia. In addition, the stable rating outlook on PT Pelabuhan Indonesia II reflects our expectation that the company will maintain a stand-alone credit profile (SACP) consistent with a ‘bb+’ level, including a ratio of funds from operations (FFO) to debt exceeding 20%.

The stable rating outlook on PGN reflects our expectation that the company will maintain an SACP consistent with a ‘bbb-‘ level, including a ratio of FFO to debt exceeding 23%, with contribution from higher risk oil and gas production activities sustaining below 35% of consolidated EBITDA. We raised the rating on port operator PT Pelabuhan Indonesia III (Persero) to reflect the sensitivity of the entity to the sovereign credit rating on Indonesia, given its relationship to the government.

Nevertheless, we revised the outlook to negative from developing to reflect the prospects of a weaker SACP over the next 12 to 18 months if the company fails to moderate its capital spending and control leverage such that its FFO-to-debt ratio falls below 20% sustainably. We raised the rating on oil and gas producer PT Saka Energi Indonesia to reflect the upgrade on its 100% shareholder parent PGN.

The stable outlook on the company reflects the stable outlook on PGN and our expectation that Saka Energi will maintain a close operational, financial, and ownership relationship with its parent company over the next two years at least. We raised the ratings on PT Astra International and PT Telekomunikasi Selular to reflect our higher assessment of the transfer and convertibility (T&C) risk of Indonesia following the sovereign action.

We had raised our T&C assessment on Indonesia to ‘BBB’ from ‘BBB-‘. We rate PT Astra International above the sovereign because of the company’s low leverage, solid cash flows, and our view that the company has the financial flexibility to withstand a significant period of sovereign stress and still have enough liquidity to honor all its obligations in a timely manner. The SACP is ‘bbb+’.

The stable outlook on the company reflects the stable outlook on the sovereign rating on Indonesia and our expectation that Astra will maintain sound competitive positions in its key businesses, generate resilient cash flows, and preserve its minimal leverage in both financial services and industrial operations. We rate PT Telekomunikasi Selular above the sovereign because we believe the company would be able to meet its debt maturities even in the event of sovereign stress, given minimal debt and strong free operating cash flow.

The SACP is ‘a-‘. At the same time, we believe the company will continue to be exposed to the T&C risk of Indonesia, given that most of its operations are based in the country. The stable rating outlook on PT Telekomunikasi Selular

Ratings Raised On Seven Indonesian Companies After Similar Action On The Sovereign reflects the stable outlook on the sovereign credit rating on Indonesia.

The ratings on power producer PT Perusahaan Listrik Negara (Persero) (PLN: BB/Stable/–; axBBB-) and diversified mining company PT ANTAM (Persero) Tbk. (B-/Stable/–; axB) are unaffected by the upgrade in the sovereign rating on Indonesia. We lowered the SACP on PLN to ‘b+’ from ‘bb-‘ in June 2016 to reflect the prospect of weaker cash flow adequacy ratios and sizable capital spending. At the time, we had highlighted that the weaker SACP on the company would no longer lead to a rating upgrade in the event of an upgrade in the sovereign rating.

We do not incorporate extraordinary government support in the rating on PT ANTAM. This is because the company operates in the mostly private, competitive upstream mining and downstream mineral processing segment; its operations are largely run independently; and we do not consider the company is providing an essential infrastructure, goods or services that cannot be provided on a commercial basis by other market participants.

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