Rating reduction upsets several RI entities<\/p>\n
NEW YORK (Reuter): Standard & Poor's lowered Saturday its
\nlong-term foreign currency ratings on several Indonesian entities
\nfollowing the downgrade on the Indonesian sovereign ratings.<\/p>\n
The long-term foreign currency rating on P.T. Bank Negara
\nIndonesia (Bank BNI) has been lowered to triple-'B'-minus from
\ntriple-'B', while the rating on Bank BNI's US$145 million
\nunsecured notes due 2007 also has been lowered to triple-'B'-
\nminus from triple-'B'.<\/p>\n
At the same time, Standard & Poor's revised Bank BNI's foreign
\ncurrency rating outlook to stable from negative. The bank's
\ntriple-'B' long-term local currency rating, negative local
\ncurrency rating outlook, and 'A-3' short-term ratings are not
\naffected.<\/p>\n
Standard & Poor's also lowered the long-term foreign currency
\nrating on P.T. Hanjaya Mandala Sampoerna to triple-'B'-minus from
\ntriple-'B', but affirmed the company's triple-'B'-plus local
\ncurrency rating.<\/p>\n
The outlook on both ratings is stable. In addition, the rating
\non US$200 million unsecured notes due 2006 issued by the
\ncompany's guaranteed subsidiary, Sampoerna International Finance
\nCo. B.V., also has been lowered to triple-'B'-minus from triple-
\n'B'.<\/p>\n
The long-term foreign currency rating on PT Satelit Palapa
\nIndonesia also is lowered to triple-'B'-minus from triple-'B',
\nand the triple-'B' long-term local currency rating is affirmed.<\/p>\n
The company's rating outlook is stable, Standard & Poor's
\nsaid.<\/p>\n
Paiton<\/p>\n
Standard & Poor's also lowered its rating on Paiton Energy
\nFunding B.V.'s senior secured bonds due 2014, to triple-'B'-minus
\nfrom triple-'B'.<\/p>\n
The bonds are guaranteed by P.T. Paiton Energy Co., a limited
\nliability Indonesian company established to develop, construct,
\nown, and operate the $2.5 billion Paiton (Units 7 and 8) power
\nproject, consisting of two 615 MW (net) coal-fired power plants
\nlocated in East Java, Indonesia.<\/p>\n
The Indonesian currency and financial situation increases
\nrepayment risk to lenders in two ways:<\/p>\n
-- Based upon depreciation trends this year, electricity from
\ndollar-financed IPP projects is about 40 percent more expensive
\nin rupiah terms to PLN than originally anticipated, thus putting
\nsome financial pressure on PLN; and<\/p>\n
In addition, PT Perusahaan Listrik Negara (Persero) (PLN), the
\nstate electricity company, has a purchase power agreement with
\nPaiton Energy Co. that has a rupiah-denominated tariff structure
\nindexed to the U.S. dollar-Indonesian rupiah exchange rate.<\/p>\n
Hence, the rupiah tariff completely hedges the project's U.S.
\ndollar debt but electricity becomes more expensive to PLN. PLN
\nstill assumes convertibility risk by agreeing to remit
\nelectricity payments in dollars if the project cannot enter into
\nforeign-exchange contracts to secure dollars.<\/p>\n
-- As PLN's call on the hard currency needed to honor IPP
\nobligations increases with new IPPs coming online in the next few
\nyears, PLN may find it more difficult to access U.S. dollars to
\nthe extent that Indonesia's reserves become more limited.<\/p>\n
Paiton Energy Co. should enjoy preferred access, vis-a-vis
\nPLN, to dollars than nonstate-owned corporations that have hard
\ncurrency obligations. In addition, interest payments due on the
\nbonds prior to project completion are prefunded and are not at
\nrisk.<\/p>\n
The project level risks and strengths, against which Standard
\n& Poor's based the original rating, remain largely unchanged.<\/p>\n
The rating agency said that the outlook is stable.<\/p>\n
The project's rating likely will remain at the sovereign
\nrating level in the near term based on government support, vis-a-
\nvis the Ministry of Finance support letter, the project's
\nstrategic importance to Indonesia's electricity sector, a fixed-
\nprice, turnkey construction contract, and prospective stable
\nfinancial profile.<\/p>\n
CE Indonesia<\/p>\n
Standard & Poor's affirmed its triple-B'-minus bank loan
\nrating on CE Indonesia Funding Corp. The outlook is stable.<\/p>\n
The sovereign downgrade on Indonesia does not affect the
\ncredit worthiness of the bank loan rating or its underlying
\nprojects. However, should Indonesia's foreign currency rating
\nfall further, the CE Indonesia rating would similarly drop.<\/p>\n
As stated in the original rating, CE Indonesia may delay
\nissuing a capital markets takeout of the construction loan, or
\nchose not to issue bonds at all.<\/p>\n
In this case, construction loans issued by CE Indonesia to
\nfund construction at the Dieng or Patuha power projects would
\nconvert to term loans. Upon completion, the projects would
\nimmediately start sweeping 100 percent of excess project cash
\nflows to begin amortizing project debt.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rating-reduction-upsets-several-ri-entities-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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