Singapore — Moody’s has assigned a provisional (P)Baa3 rating to the proposed $2.0 billion global medium term notes (GMTN)
programme of Perusahaan Listrik Negara (P.T.) (PLN). At the same time, Moody’s has assigned a Baa3 rating to the proposed notes issued under this MTN programme, which will represent the first drawdown under this programme and will rank pari passu with all other senior unsecured debt issued by PLN. The outlook on all ratings is positive.
PLN’s Baa3 rating reflects the application of Moody’s rating methodology for government-related issuers (GRIs) (October 2014) that combines: (1) the company’s standalone credit quality, or baseline credit assessment (BCA) of ba2; and (2) Moody’s assessment of the credit support that the
government of Indonesia (Baa3 positive) is likely to provide in a distressed situation in light of its 100% ownership of PLN.
The ba2 BCA reflects the company’s strategically important position as Indonesia’s only vertically integrated electric utility, including its
dominant position in generation, transmission and distribution (T&D), and its close linkage with the government. Longstanding subsidies from the government ensure its financial viability and operational soundness.
PLN’s rating also takes into consideration its involvement in the national capacity additions programs – Fast Track program 1 and 2, and a 35GW
five-year program. These programs are expected to increase PLN’s debt levels and put pressure on its key credit metrics over the next five to
eight years until the programs are completed. The impact of the capex requirements on PLN’s metrics will reduce the cushion within the BCA and
The (P)Baa3 rating reflects Moody’s view that drawdowns under the GMTN program will effectively represent senior unsecured obligations of PLN. Drawdowns under the GMTN programme will be mainly used by PLN to partially fund its capital expenditure requirements and for general
corporate purposes or as set forth in the Pricing Supplement applicable to the notes.
Furthermore, underpinning the (P)Baa3 rating is our expectation that drawdowns under the GMTN programme will be made in a manner such that PLN’s credit profile will remain within rating expectation, including retained cash flow/debt staying above 5% on a sustained basis.
The positive outlook reflects the positive outlook on Indonesia’s sovereign rating and PLN’s strategically important position as
Indonesia’s only vertically integrated electric utility, and its close linkage with the government.
WHAT COULD CHANGE THE RATINGS – UP/DOWN
Given the close link between PLN’s rating and the sovereign rating, an upgrade of the latter may trigger an upgrade of PLN’s rating. PLN’s BCA
could be raised if retained cash flow/debt is above 10% on a consistent basis.
Similarly, a downgrade of the sovereign will almost certainly trigger a downgrade for PLN. Furthermore, a partial privatization of PLN or a
meaningful reduction to government subsidies — a scenario that Moody’s considers unlikely in the near to medium term — will negatively impact
the rating. PLN’s BCA could be lowered if a greater than expected proportion of planned capital expenditures are funded with debt, such
that retained cash flow/debt falls below 5% on a sustained basis.
Perusahaan Listrik Negara (P.T.) (PLN) is the only vertically integrated electricity utility in Indonesia and is 100% owned by the Government of
Indonesia (Baa3 positive) through the Ministry of State-Owned Enterprises. It is the dominant operator of generation plants,
transmission and distribution (T&D) networks. Its transmission network covered around 44,065kmc and its distribution network covered 887,241kmc at end-2016.
PLN is also the country’s largest electricity producer, with a capacity of around 43.3GW, which accounted for 79% of the market at end-2016. It
is the sole offtaker for Indonesia’s independent power producers.