S&P may downgrade power project bonds<\/p>\n
JAKARTA (JP): The U.S.-based credit rating agency Standard &
\nPoor's (S&P) announced yesterday that it was considering
\ndowngrading several bonds used to finance Indonesian power
\nprojects.<\/p>\n
The rating agency said in a statement that it placed the
\ntriple-B minus (BBB-) ratings of two bonds and a loan used to
\nfinance power projects on its Credit Watch with negative
\nimplications.<\/p>\n
S&P noted a possible waning of government support for the
\nstate-owned electricity company PT Perusahaan Listrik Negara
\n(PLN), and for Indonesia's independent power producer (IPP)
\nprogram as a whole.<\/p>\n
The rating agency's statement said that the debt instruments
\naffected would include senior secured bonds at Paiton Energy
\nFunding B.V. due in 2014, a bank loan rating on CE Indonesia
\nFunding Corp., and US$150 million at 9.12 percent in senior
\nsecured notes at DSPL Finance Co. B.V. due in 2010 which was
\nguaranteed by PT Dayabumi Salak Pratama.<\/p>\n
S&P said that the Credit Watch placement reflected a
\npotential shift in government support for PLN and the Indonesian
\nIPP program.<\/p>\n
The rating agency said that its original assessment took into
\nconsideration the government's overall support of the state-owned
\nelectricity firm PLN, as well as specific letters of support
\nissued by the Ministry of Finance and guarantees from the
\nMinistry of Mines and Energy of individual power offtake
\ncontracts.<\/p>\n
However, a team from S&P, which made a recent visit to
\nJakarta, found that the Ministry of Finance \"was not prepared to
\naffirm the support arrangements for IPP in particular nor assert
\nsupport for the state-electricity firm PT PLN in general\".<\/p>\n
The rating agency said that it was concerned that the
\ndevaluation of the rupiah would hurt PLN because the state-owned
\nelectricity company was paid in rupiah by its customers for
\nelectricity but had to buy much of its electricity in foreign
\ncurrency.<\/p>\n
S&P said that the potential shift in government support for
\nthese projects increased the uncertainty of PLN's ability to
\nhonor its contractual obligations to the project's electricity
\nsales agreements.<\/p>\n
The ratings agency said other risks include the possibility
\nthat electricity sales agreements would be renegotiated, which
\ncould lower profit margins and the ability to repay obligations.<\/p>\n
S&P said that it would not downgrade the ratings if
\nIndonesian ministries reaffirmed support for the original project
\nofftake contracts.<\/p>\n
The rating agency also said that it was concerned whether PLN
\nand the government would allow the 27 government-approved IPP
\nprojects to continue as scheduled.<\/p>\n
\"Should all projects with executed electricity agreements
\nproceed, PLN's already weakened business position could
\ndeteriorate further,\" the rating agency said.<\/p>\n
Given with no renegotiation discussions for the projects, S&P
\nwould be prepared to remove the rating from its Credit Watch if
\nthe relevant ministries reaffirm the support for the projects
\nofftake contracts. (aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sp-may-downgrade-power-project-bonds-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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