Singapore — Moody’s Investors Service says that Perusahaan Gas Negara (P.T.) (IDX: PGAS, Baa3 positive) Baa3 issuer rating and senior unsecured rating are not immediately affected by the impending change in ownership of PGAS. The outlook on all ratings remains positive.
Moody’s announcement follows presidential approval of the reorganization
process, allowing Pertamina (Persero) (P.T.) (Baa3 positive) to acquire 57% equity stake in PGAS from Government of Indonesia (Baa3 positive).
“PGN’s credit profile will not be immediately affected by the change in ownership from the Government of Indonesia to Pertamina”, says Abhishek
Tyagi, a Moody’s Vice President and Senior Analyst.
“We do not expect PGN’s standalone credit strength to materially change as
a result of the change in ownership. At the same time, we expect that PGN
will continue to receive support from the Government of Indonesia, which
may be through Pertamina,” He continued.
The change of PGAS’s ownership means that Moody’s will no longer classify
the company as a government related issuer (GRI) and as such will not use its Joint Default Analysis framework for assessing PGAS’s credit ratings.
PGAS’s ratings primarily reflect the company’s standalone credit strength,
which is consistent with Baa3 rating level. The ratings consider PGAS’s strong market position as Indonesia’s largest gas transmission and distribution player, solid financial profile, which tempers the impact of reduction in distribution margins due to softening in demand for gas.
“Furthermore, we expect that PGN will continue to receive support from
the Government of Indonesia, which may be through Pertamina, in case of
need”, Tyagi says.
He adding: “Such expectation of support stems from our view that PGAS carries national strategic importance, being the largest ultimately state-owned gas transmission and distribution company in Indonesia, with more than 80% market share. Accordingly, PGN’s outlook is positive, consistent with the positive outlook on the Baa3 ratings of Government of Indonesia and Pertamina.:
The consideration amount for the change in PGN’s ownership from Government of Indonesia to Pertamina will be determined by Ministry of Finance, and the transaction is pending notarization.
PGN will continue to be a publicly listed company, with the remaining 43%
ownership in the company being publicly held. However, the Government of
Indonesia will hold a golden share in PGN directly, giving it veto powers
on critical corporate decisions.
Moody’s understands that PGAS will, over time, acquire certain gas downstream assets from Pertamina. Moody’s will assess the impact of such
transactions, as more details about the specific assets and funding
structure become available.
Given the positive outlook on the ratings, there is limited likelihood that downward ratings pressure will emerge. That said, the ratings could come under pressure if there is a material weakening in PGN’s financial profile, including its consolidated debt/capitalization ratio exceeding 60%-65% and/or its retained cash flow/debt ratio falling below 9%-12% on
a sustained basis.
The ratings could be upgraded if Indonesia’s sovereign rating is upgraded,
and if PGN’s maintains its standalone credit strength. An upgrade to
PGN’s ratings is very unlikely if the sovereign rating is not upgraded,
because the company’s revenues are from domestic sources.