Indonesian government set the reference coal prices in February at US$87.79 per metric ton (MT) or up by 15.7 percent from the previous month at $75.84 per MT - Photo: Special

JAKARTA (TheInsiderStories) – Moody’s Investors Service reported that while the cash needs of rated Indonesian coal mining companies are manageable over the next 12 months. But, the refinancing risk will rise materially towards 2022 ahead of a large debt maturity wall, said the agency.

“The seven Indonesian coal miners that we rate have sufficient liquidity to address their cash needs over the next 12 months, including projected capital spending, dividends and scheduled debt maturities,” says Maisam Hasnain, a Moody’s Assistant Vice President and Analyst, today (11/11).

In addition, the refinancing risk will rise materially towards 2022, and credit quality will likely weaken for miners in the absence of clear refinancing plans 12 – 18 months before their debt maturities.

“For some miners, the capacity to refinance maturing debt will depend on their need to replace depleting coal reserves, while others have mining licenses expiring over the next few years,” adds Hasnain.

Refinancing risk is further exacerbated by rising creditor concerns over environmental risk, which could materially limit sources of capital, and for some miners also by the untested track record of redeeming US Dollar bonds.

Among the rated companies, Moody’s says those with strong business profiles, large coal reserves and demonstrated access to capital markets are better positioned to manage refinancing risk. These include PT Adaro Indonesia (Ba1 stable) and PT Indika Energy Tbk (IDX: INDY) (Ba3 stable).

Absent countermeasures, PT ABM Investama Tbk (IDX: ABMM) (B1 stable) and Geo Energy Resources Limited (B2 negative) will have considerably weaker credit profiles as they approach their scheduled debt maturities, due to their depleting coal reserves. However, both companies remain committed to acquiring coal assets within the next 6 – 12 months.

And among the companies with mining licenses expiring before debt maturities, Adaro, Indika and PT Bumi Resources Tbk (IDX: BUMI) (B3 negative) face higher regulatory uncertainty because mining rights at their coal concessions are under Coal Contract of Work (CCoW) licenses.

While Moody’s expects the CCoWs to be extended on broadly similar terms, there is limited clarity from the Government of Indonesia (Baa2 stable) on the extension or conversion of these licenses.

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