Paiton's $180m debt on watch: S&P

Paiton's $180m debt on watch: S&P

PT Paiton Energy, Indonesian unit of Edison Mission Energy, had $180 million of debt placed on credit-watch with negative implications by Standard & Poor's, which said the company's expansion plan may hurt its creditworthiness.

The bond, issued by Paiton Energy Funding BV, is currently rated B-, six levels below investment grade and on a level under Indonesia's B sovereign rating, S&P said in a statement. The outlook on the rating is stable.

Paiton last week said it plans to spend $580 million to expand the capacity of a coal-fired power plant in East Java province. It plans to raise the capacity of its 1,230-megawatt Paiton I plant by 800 megawatts, and sell the power to PT Perusahaan Listrik Negara, the state utility company.

"If Paiton proceeds with the expansion, its credit profile could weaken, as the company might be exposed to construction risk and a higher debt burden depending on the contractual structure," S&P said in the statement. "The proposed sharing of coal and ash-handling facilities of the two projects could affect the operational factors for the existing project."

The credit-watch indicates Paiton's "rating may be affirmed or lowered," S&P said. -- Bloomberg