CMNP gets BBB rating from Standard & Poor's

JAKARTA (JP): Standard & Poor's has given a 'BBB' rating to the proposed US$100 million notes to be issued by Citra Marga Finance B.V. and guaranteed by toll road developer PT Citra Marga Nusaphala Persada (CMNP).

The international rating agency announced yesterday the notes' rating outlook was stable.

S&P said its rating was based on "the uncertainty over potential projects involving the company, the refinancing risk of a lumpy maturity profile and uncertainty on toll road policies in Indonesia".

"The rating reflected the high demand for the construction of the city's intra urban tollway and CMNP's strong cash flow position," it added.

According to S&P, the company's major asset is a 30-year concession to build, own and operate two sections of the city's intra urban tollways, which reached about 85 percent of its operating revenues last year.

At the same time, traffic on the tollways has increased around 15 percent per annum since 1990, although the future growth levels are forecast to remain at eight percent per annum for longer term, it said.

S&P said the solid growth was supported by the country's dynamic economic growth of between 6.5 percent and 7.5 percent per annum since 1990. In addition, the population in the greater Jakarta increased at 3.6 percent per annum.

Noting the strong demand for the intra urban tollways, S&P said the CMNP's revenue, which comes from a single asset, may be exposed to some technical or engineering risks.

It also predicted the company's financial ratios would weaken this year as a result of the debt incurred to fund the company's current project, the Surabaya Eastern Ring Tollway development in East Java.

S&P estimated the funds flow from operation net interest in the next few years would fall between four to five times, which would equal to 35 percent of this year's net debt, from nearly 10 times last year.

It also said the rising opportunities for new investors for additional toll roads would affect CMNP's business profile.

In addition, the political uncertainty regarding the successor of President Soeharto, whose eldest daughter Siti Hardiyanti Rukmana controls the CMNP, will also raise the risk to refinance the company, it said.

Meanwhile, the credit ratings corporation said the lack of alternative routes in built-up urban areas could end up in the government's granting concessions to operate toll roads in direct competition with CNMP's existing concessions.

"Given the increasing level of investment in the sector, the central government is likely to introduce a more transparent pricing regime over the medium to longer term, the impact of which to CMNP's financial profile is unknown," S&P said. (02)