PGN may drop dollar, yen bond plan on weak market
PGN may drop dollar, yen bond plan on weak market
Dow Jones, Jakarta
State-owned PT Perusahaan Gas Negara may drop plans to issue
U.S. dollar and Samurai bonds due to the current unfavorable
global market situation.
"Due to current weak bond markets, investors may ask for
higher yields, which isn't good for the company's financial
performance in the longer term," PGN President WMP Simanjuntak
told Dow Jones Newswires in an interview over the weekend.
"If the market remains weak over the year, we may drop plans
to issue both U.S. dollar and Samurai bonds," he said.
PGN, which controls natural gas distribution in Indonesia, has
said it plans to raise up to US$250 million from the
international bonds markets later this year to help finance gas
pipeline projects in Java and Sumatra.
This would be in addition to the $150 million in offshore
bonds PGN issued in September 2003 and the $125 million in bonds
it issued in February this year.
Simanjuntak said the recent fall in the rupiah, and fears of
political fighting ahead of July's presidential polls, are also
likely to deter foreign investors from buying Indonesian bonds.
The rupiah has fallen to 19-month lows against the dollar, and
the stock market is down 12 percent from its April 27 high, as
foreign capital flows back to the U.S. in anticipation of an
imminent interest rate hike there.
The Finance Ministry canceled an auction of treasury bonds
last week as bidders demanded high yields - a sign that investors
are turning their back on the country.
Other issuers have also been delaying their bond plans. State-
owned PT Bank Negara Indonesia, the country's second-largest
bank, last week decided to delay its $300 million bond issue to
the third quarter of the year from June.
"It's too risky for us to issue dollar bonds under current
market situation," PGN's Simanjuntak said. The company is now
looking at other alternatives to raise funds, such as through a
project-financing scheme with partners.
Several utility concerns from Japan have offered to develop
PGN's gas pipeline projects through a build-operate-transfer
agreement, he said. Under the scheme, PGN's partners would build
and operate the pipelines, paying PGN a portion of the revenues
for a contracted period before handing the assets over to
Indonesia.
"The good thing is that the project-financing scheme wouldn't
increase the company's net gearing," Simanjuntak said.
PGN operates a total of 1,079 kilometers of transmission
pipelines as well as 2,547 kilometers of distribution pipelines
to link the remote gas sources to the gas market centers across
the country.
This year, PGN expects revenue to rise by up to 15 percent due
to an increase in the gas distribution and transmission volumes.
In 2003, the company's revenue was Rp 3.596 trillion (US$388
million), compared with Rp 2.780 trillion a year earlier.
The company last year distributed and transmitted a total of
228.9 billion cubic feet of gas, and analysts say it has bright
future outlook given its business dominance.
Simanjuntak said the company plans next month to sign gas
purchase contracts with ConocoPhillips and Australian oil and gas
producer Santos Ltd. to meet gas shortages in West and East Java
provinces.
Under the contract, PGN will buy up to 300 million cubic feet
per day from Conoco and 100 million cubic feet per day from
Santos for 20 years each.
Simanjuntak said he expects the contract to boost the
company's revenue over the longer term.