S&P cuts Indonesian IPP projects to 'BB'<\/p>\n
NEW YORK (Reuters): Standard & Poor's Saturday lowered its
\nratings on Indonesian independent power producer (IPP) project
\nbonds and bank loans to BB from BB-plus.<\/p>\n
This action affects the following ratings:<\/p>\n
-- Paiton Energy Funding B.V.'s US$180 million senior secured
\nbonds due 2014 (guaranteed by PT Paiton Energy Co.);<\/p>\n
-- CE Indonesia Funding Corp.'s US$400 million bank loan;<\/p>\n
-- DSPL Finance Co. B.V.'s US$150 million 9.12% senior secured
\nnotes due 2010 (guaranteed by Dayabumi Salak Pratama Ltd.); and<\/p>\n
-- MNL Indonesia Funding Corp.'s US$250 million bank loan (Wyang
\nWindu Geothermal Project).<\/p>\n
The projects' debt ratings remain on CreditWatch with negative
\nimplications, where they were placed Dec. 1, 1997.<\/p>\n
The downgrades are a direct result of Standard & Poor's
\ndowngrade of its rating on Indonesia's long-term foreign currency
\nto double-'B' from double-'B'-plus. The rating is on CreditWatch
\nwith negative implications.<\/p>\n
The downgrades reflect increased risk of inconvertibility of
\nthe Rupiah to U.S. dollars and transferability of U.S. dollars
\nout of Indonesia, and a continued weakening of the projects'
\nofftaker, the state-owned electricity company, PT Perusahaan
\nListrik Negara (Persero) (PLN).<\/p>\n
The IPP power projects have electricity tariffs that are
\neither denominated in dollars or are payable in Rupiah, but
\nindexed to dollars. PLN's call on the hard currency needed to
\nhonor IPP obligations will increase with new IPPs coming online
\nin the next few years.<\/p>\n
Hence, as Indonesia's foreign currency reserves become
\nscarcer, PLN will have greater difficulty accessing the U.S.
\ndollars needed to honor its electricity sales contracts (ESCs).<\/p>\n
Standard & Poor's placed the project debt ratings on
\nCreditWatch on Dec. 1, 1997 due to a potential shift in
\ngovernment support for ESCs executed by PLN and for the
\nIndonesian IPP program. Recent conversations that Standard &
\nPoor's has had with the Indonesian Ministry of Finance (MoF)
\nindicate that the MoF is still supporting the projects.<\/p>\n
The MoF stated that it will continue to ensure that PLN honors
\nits ESC payment obligations and that, if necessary, the MoF will
\npay PLN so that it can make the payments.<\/p>\n
Standard & Poor's emphasizes that the volatile political and
\neconomic Indonesian environment could change, adversely affecting
\nthe IPP program. Standard & Poor's will continue to assess the
\ngovernment support of the IPP program.<\/p>\n
Even those projects that have support letters from the MoF and
\nare either in operation or, have reached financial closure and
\nhave begun construction could be at risk.<\/p>\n
Should sufficient evidence exist that the projects will no
\nlonger be able to rely upon government support, additional
\nproject rating downgrades may result.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sp-cuts-indonesian-ipp-projects-to-bb-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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