 |
December 28, 2007 |
|
|
|
 |
PERUSAHAAN LISTRIK: Pefindo Upgrades Corporate Rating Pefindo upgraded corporate rating of PT (Persero) Perusahaan Listrik Negara (PLNG or the Company), the Company's Bond VIII/2006 of IDR2.2 trillion and the Company's Ijarah Bond I/2006 of IDR200 billion to "idA+" and "idA+sy" from "idA" and "idAsy". The ratings upgrade reflects strong and proven supports from the Government of Indonesia, the Company's superior market position and relatively strong liquidity. However, the ratings are still constrained by inflexible tariff adjustments, large exposures to foreign exchange currency risks and high production cost in the medium term. PLNG is a wholly state owned company, engaging in generation, transmission and distribution of electricity throughout the country. Following the cancellation of law No. 20/2002, PLNG remains the monopoly holder of electricity sector in Indonesia. The ratings upgrade reflects the following factors: * Strong and proven support from the Government. Strong government support to PLNG has been proven and is expected to continue going forward given its important role to the country. The Government has continued to provide and distribute subsidy more timely and has helped the company reduce its operating deficit. For 2008, the Government has committed to provide another subsidy for the amount of IDR28.5 trillion. The Government also agreed to give full guarantee for loans that are dedicated to 10,000 MV fast track power plant through the issuance of Presidential Decree No.86/2006 and the new amendment No.91/2007. Trough Fast Track Program, PLNG is now in the phase of tendering and constructing several coals based power plants in Jawa- Bali with total capacity of 6,900 MW, which is expected to be in service by the end of 2009-2010. The projects should reduce PLNG's dependency on oil-generated power plants. Historically, the Government has shown its support by various forms, such as conversion of the government loans into equity, giving a subsidy for the low-income level customers, and a waive of interest on asset revaluation tax. * Superior market position. As the only provider of electricity throughout the country, PLNG will continue to enjoy a perfectly superior market position. PLNG is estimated to control around 85% of national power capacity and hold full monopoly in electricity transmition and distribution. PLNG will be benefited from the favorable demand driven by better economy condition, growing population and current low electricity penetration. This has been shown by PLNG's increased electricity production (to 133,108 GWH in 2006 from 127,370 GWH in 2005), increased electricity sales (to 112,609 GWH from 107,032 GWH), and larger number of costumers (to 35.75 million from 34.56 million). * Relatively strong liquidity. With cash balance of IDR23.45 trillion, including balance from latest global bond issuance of US$2.1 billion, at end of June 2007, PLNG will have sufficient capability to fulfill its maturing financial obligation within one year totaling to IDR3.24 trillion. PLNG also has fully repaid domestic bond VI amounting to IDR600 billion due last August 2007. Meanwhile, payable from Pertamina amounting to IDR14 trillion at end of March 2007 is expected to be converted into long term debt. The ratings are constrained by the following factors: * Inflexible tariff adjustments. Given its very sensitive impacts on the country's social and political stability, the adjustment to increase electricity tariff has never been easy. Government does not have any clear plan when the next tariff adjustment will be implemented. Without the tariff increase, the company's capacity expansion should be very dependent on borrowing, which in turn should weaken PLNG's financial profile. * Large exposure to foreign exchange risks. PLNG is largely exposed to foreign currency risks, as majority of its production costs are related to foreign currency. Cost of source energy for electricity (diesel, natural gas, coal, geothermal and diesel) and power purchase from private sectors as well as several of maintenance cost are denominated or directly linked to foreign currency rates. Added with significant foreign debt portion, while its entire revenues that are quoted in IDR, the fluctuation of foreign exchange currency would have a major impact on the company's financial performance. At end of December 31, 2006, PLNG's production cost and debt borrowing in foreign currency rate accounted to around 20% and 75% respectively. * High dependency on fuel price in the medium term. Until significant energy conversion take places, the company should still be faced with unfavorable production cost structure. In 2006, the Company recorded loss operating profit of IDR501.61 billion as compared to IDR519.72 billion in 2005 mainly due to soaring oil price. Fuel and lubricant cost accounted for 60.6% of PLNG's operating cost during the year. PLNG's average production cost in 2006 of IDR790.55/kWH was still higher than its average revenue of IDR531.41/kWH, equivalent to 67.22% cost recovery, lower than 83.91% a year earlier. Large portion of fuel consumption for power source generation will continue to challenge the Company's operating cost. OUTLOOK A "stable" outlook is assigned to the ratings. The absence of tariff adjustments in the medium term and high production cost will remain the major factors that could significantly affect the company's overall performance. However, the Government is believed to continue its support to PLNG should the latter face serious financial difficulties. About Perusahaan Listrik Indonesian state utility firm PT Perusahaan Listrik Negara -- http://www.pln.co.id/ -- transmits and distributes electricity to around 30 million customers, roughly 60% of Indonesia's population. The Indonesian Government decided to end PLN's power supply monopoly to attract independents to build more capacity for sale directly to consumers, as many areas of the country are experiencing power shortages. The Troubled Company Reporter-Asia Pacific reported on June 18, 2007, that Standard & Poor's Ratings Services affirmed its 'BB-' foreign currency rating and 'BB' local currency rating on Indonesia's PT Perusahaan Listrik Negara (Persero). The outlook is stable. At the same time, Standard & Poor's assigned its 'BB-' issue rating to the proposed senior unsecured notes to be issued by PLN's wholly owned subsidiary, Majapahit Holding B.V. |
|
|
||
|
Today's Top Stories have been selected from the Troubled Company Reporter - Asia Pacific. To receive the Full TCR-AP please CLICK HERE.
