Singapore, October 29, 2013 -- Moody's Investors Service has upgraded the
rating of Perusahaan Gas Negara (PGN) to Baa3 from Ba1.



According to Moody's practice with investment-grade ratings, the
corporate family rating of PGN has been withdrawn and simultaneously
replaced with an issuer rating.



The rating outlook is revised to stable from positive.

RATINGS RATIONALE

PGN's Baa3 rating reflects the application of Moody's rating methodology
for government-related issuers (GRIs), updated in July 2010, and which
combines (1) the company's standalone credit quality, or baseline credit
assessment (BCA) of baa3; and (2) Moody's assessment of the credit
support that the government of Indonesia (Baa3 stable) is likely to
provide in a situation of stress.



"The rating upgrade is mainly driven by PGN's good pricing power with a
track record of cost pass through, favorable industry dynamics that offer
strong growth potential, and a solid financial profile that is
constrained by upstream business expansion," says Ray Tay, a Moody's
Associate Vice President and Analyst.



"Although PGN is ambitious in seeking to expand its upstream business,
thereby increasing its capex and execution risk, we recognize the
long-term benefits of this strategy as it will help diversify its
business and supply sources," adds Tay.



"PGN's solid financial profile as well as its management strategy and
investment criteria somewhat mitigate the execution risks," continues Tay.



Its BCA also incorporates the potential volatility in distribution cash
flows owing to the mismatch between its sales contracts and supply
contracts.



Under Moody's rating methodology for GRIs, government support for the
company is assessed as "strong" given its strategic role in Indonesia's
gas sector. Moody's assesses the dependence level as "high" as the
credit profiles of PGN and the Indonesian government are closely linked,
given PGN's domestic focus.



The rating outlook is stable, reflecting PGN's sustained and strong
financial profile, and Moody's expectation that (1) the company can
continue to pass through any cost increases of upstream gas to its
end-users; (2) it will maintain its dominant position in Indonesia's gas
transmission and distribution sector; and (3) PGN's upstream acquisitions
will be measured and sustainable.



The rating could be upgraded if PGN's underlying credit quality remains
strong and Indonesia's sovereign rating is upgraded.



A downgrade is possible if PGN's underlying credit quality deteriorates
because of (1) an unfavorable regulatory environment that hurts its
financial position; (2) an erosion of its dominant market share under a
deregulated environment, with increased pressure on its profit margins
owing to rising competition; and/or (3) changes in the management's
strategy regarding its upstream business, and which deviates from
Moody's expectations.



Its BCA could come under pressure if its consolidated credit metrics
weaken, such that debt/ capitalization increases beyond 45%-50% or
retained cash flow (RCF) over debt falls below 20% to 25% on a sustained
basis.



Furthermore, a change in the government's supportive policy towards the
gas industry could prompt a review of its rating.



The principal methodologies used in rating PGN were Regulated Electric
and Gas Utilities, published in August 2009, and Government-Related
Issuers: Methodology Update, published in July 2010. Please see the
Credit Policy page on www.moodys.com for a copy of these methodologies.

Established in 1965, Perusahaan Gas Negara (PGN) is primarily engaged in
the transmission and distribution of natural gas. Its transmission
business mainly operates under its 60%-owned subsidiary, PT Transportasi
Gas Indonesia, while its distribution business has a strong market share
of 83% in 2012.



In the 12-month period ended 30 June 2013, PGN generated total revenue of
$2.9 billion. Of this total, more than 90% came from the gas distribution
business, while the remainder came mostly from its transmission business.
PGN is publicly listed, with a market capitalization of $10.9 billion as
of 22 October 2013. The Indonesian government, through the Ministry of
State-Owned Enterprises, owns 57% of the company.