PT Pertamina, has plans to releases another global medium term notes (GMTN) under its US$10 billion program - Photo by the Company

JAKARTA (TheInsiderStories) – Indonesian energy producer, PT Pertamina, has plans to releases another global medium term notes (GMTN) under its US$10 billion program. The plan was revealed in the latest research of Moody’s Investors Service released today (02/13).

No further details on the amount. But last year, the oil and gas producer was re-issued two series GMTN with total amount $1.5 billion. Series A have tenure 10 years with coupon rate 3.65 percent, while Series B is 30 years with an interest rate of 4.7 percent.

For the new issuances, Moody’s has assigned a Baa2 rating to the proposed senior unsecured US Dollar notes to be issued by the state-owned company. The ratings outlook is stable.

According to Vikas Halan, a Moody’s SVP, the issuer rating reflects its strategically important position as Indonesia’ (Baa2 stable) national integrated oil and gas company, contributing significant upstream production, and accounting for substantially all of the country’s refineries, fuel marketing stations and gas pipelines.

At the same time, the rating also takes into account Pertamina‘ exposure to an evolving regulatory environment in Indonesia, and a high degree of execution risk associated with its sizable investment plan.

The Baa2 issuer rating also incorporates Moody’s expectation of the very high likelihood of extraordinary support from the Government of Indonesia to the state enterprises in times of need, and very high interdependence between the two parties.

Moody’s support assessment is based on the oil and gas holding strategic importance, given its important role in oil and gas exploration, petroleum product distribution and gas distribution in the country, as well as the government’ close supervision of its strategies and budget.

In 2018, the government agreed to reimburse Pertamina for the revenue shortfall arising from the difference between the stated-regulated sale price and market-linked price for specific types of fuel. However, these reimbursements are not immediately accretive to cash inflow because they will be paid by installments on a deferred basis starting in 2020.

As of Sept. 30, 2019, the company had $5.3 billion of receivables from the government as against $2.2 billion as of Dec. 31, 2017. The increase is largely on account of a delay in the receipt of compensation from the government for selling certain petroleum products at subsidized prices.

“Pertamina expects to start receiving compensation from the government in installments from this year, which will improve its cash flows,” says Halan.

Moody’s expects Pertamina‘ capital spending over the next 3 years to average around $7 billion annually as against $3 billion over the last three years. The increase in capital spending will be driven by the company’ plan to increase in refining capacity and efficiency.

Also, the producer will start spending in development of new oil  and gas that has been awarded by the government in 2018 and 2019. This will result in increase in its total borrowings. Consequently, Moody’s estimates that the producer’ retained cash flow to net debt will deteriorate to 27 – 28 percent from about 38 percent for the 12 months ended September 2019 but will still remain supportive of its ratings.

However, any delay in the disbursement by the government or continued price-freeze will result in further deterioration in Pertamina‘ credit metrics. But currently, the company has strong liquidity, with cash and cash equivalent of $8.1 billion as against debt maturing over next 12 months of $2.5 billion.

The outlook on the firm’ ratings is stable, reflecting the stable outlook for Indonesia’ sovereign rating, as well as Moody’s expectation that Pertamina will manage its capital expenditure program, such that its financial metrics will remain supportive of its BCA.

Pertamina is a 100 percent Indonesian government-owned, fully-integrated oil and gas corporation, with operations in upstream exploration and production, gas transmission and distribution, and downstream refining and marketing.

by Linda Silaen, Email: