PT Pertamina, has appointed six banks to seek loans in the form of a bridging loans around US$3 billion for expansion - Photo by the Company

JAKARTA (TheInsiderStories) – Indonesian state-owned oil and gas producer, PT Pertamina sell global medium terms note (GMTN) with worth US$750 million in the midst global market, the financial director told TheInsiderStories today (02/11). Initially the company would sell $2 billion of bonds.

Previously, the company announced offered GMTN to investors in Asia, London and the United States on Oct. 22. The funds from the debt issuance under the company’s $10 billion’s GMTN program will use to finance the its business expansion program.

Moody’s Investors Service has assigned a Baa2 (stable) rating to the notes, S&P BBB- and BBB by Fitch Rating. The company has engaged BNP Paribas, Deutsche Bank AG,London Branch, The Hongkong and Shanghai Banking Corporation Limited, SingaporeBranch, Standard Chartered Bank and Mandiri Securities Pte Ltd as joint lead managers and book-runners for the notes.

He said, the bonds with tenor 30 years have yield 6.5 percent and the bidders offered to buy more than 1.2 times of the amount. The Indonesian government’s 30-year bonds have a yield of 5.5 per cent while state-owned power producer PT Perusahaan Listrik Negara has issued $1 billion bonds with interest 6.15 percent.

Last week, Pertamina failed to generate enough demand for the bonds and announced that it has terminated its cash tender offers program to purchase 2021 and 2022 Notes amid the poor market on Oct. 22.

Previously Pertamina aimed to use the fund from GMTN were intended for buybacks bond program. In a written statement released on Oct. 19, the company aimed to use the proceeds to finance the tender offer for its outstanding $1 billion’s 5.25 percent senior notes due 2021 and $1.25 billion’s 4.875 percent senior notes due 2022.

But in Oct. 26, Pertamina said the planned terminating were subject to the financing condition, which was not satisfied and as a result of the company’s decision not to proceed at this time.

Recently, the state owns (SOEs) ministry allowed Pertamina to sell part of its assets to meet the company’s financial needs. Lately, there is a rumors the energy producer is experiencing financial difficulties amid the higher premium subsidy and the increasingly of US dollar.

Prior, Finance Minister Sri Mulyani Indrawati has warned SOEs ministry on the financial condition of Pertamina and its fellow’s power producer PT Perusahaan Listrik Negara financial amid the strengthened US dollar.

Based on the 2017’s financial report, Pertamina has liability about $10 billion but in the other hand the net cash only around $5 billion. Most of the debt will mature in 2021. If calculated since now to the maturity date, Pertamina is experiencing difficulties in fulfilling its obligations if not maintaining its financial liquidity.

On the other hand, fuel subsidy becomes a separate burden for Pertamina. If the selling price of premium and diesel remain until the end of 2018, its estimated that the subsidy will be borne by Pertamina Rp38.5 trillion (US$2.57 billion).

Minister for Energy and Mineral Resources Ignasius Jonan has stressed it that the government will not raise fuel prices until next year and does not restricted the Pertamina production. This policy also hurt Pertamina’s financial conditions.

For more, Pertamina has confirmed to trimmed approximately 20 percent of the downstream investment from initial planned allocated $5.6 billion.

The SOEs ministry stated four corporate actions that will be conducted by Pertamina. First, selling its assets to private entities, share down on upstream asset, maintaining Pertamina’s control in strategic assets and seeking credible partners, also striving for other strategic values such as access to overseas upstream assets.

Second is spinning off Cilacap and Balikpapan refineries to subsidiaries, and potential farm-in subsidiaries in line with the Refinery Development Master Plan (RDMP) program.

Third, is additional investment to expand distribution of non-subsidy fuel such as Pertashop. Fourth, Pertamina will review the company policies that can significantly impact to the financial performance without reducing the company’s goal.

Deputy of Mining, Strategic Industries and Media for SOEs Ministry Fajar Harry Sampurno said, the letter is an initial approval for the Board of Director of Pertamina to conduct adjustment steps in order to overcome the Indonesia Crude Price (ICP) price spike.

The realized ICP is far above price assumption of $48 per barrel in the 2018 state budget. In May 2018, ICP averaged $72.46 per barrel, while in June it was at $70.36 per barrel. The average of ICP in the first semester of this year reached $66.6 per barrel.

The oil price spike potentially hurt the Pertamina’s financial performance. The firm on March 2018 estimated a potential loss of Rp3.9 trillion due to oil price hikes.

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