Wed, 16 Jul 2003

PGN may issue $250m in bonds next month

The Jakarta Post, Jakarta

State gas distribution company Perusahaan Gas Negara (PGN) will issue dollar-denominated bonds worth about US$250 million in August or September, a company official said on Tuesday.

PGN finance director Djoko Pramono said that the proceeds would be used to help finance a 190-kilometer gas pipeline project in South Sumatra.

He added that the company would issue another $250 million- worth of bonds in the first quarter of next year to fund the development of a gas pipeline from the Duri gas field in Riau to North Sumatra's Belawan Port.

He said that the company would decide next week on the lead underwriter for the bond issue. So far, five underwriting firms had been invited to join the selection process.

He did not name the firms, but earlier reports said that a number of firms including ABN-Amro, Credit Suisse First Boston and Merrill Lynch had expressed interest in leading the company's bond issue and initial public offering (IPO).

ABN-Amro played a major role in the successful IPO of state Bank Mandiri.

The government also plans an IPO for PGN later this year as part of a privatization program. Local investment bank PT Danareksa Sekuritas is reportedly also interested in underwriting it.

PGN is currently awaiting ratings on the planned bonds from Standard & Poor's and Moody's Investors Service.

A source familiar with the deal told Dow Jones Newswires that S&P had informally told PGN it would assign a B rating to the bonds. Similarly, Moody's also unofficially told the company it would rate the bonds B1. Both are junk grades.

A number of Indonesian companies have been successful in raising funds overseas through bond issuance, taking advantage of foreign investors seeking higher returns amid declining global interest rates and the fall in value of the U.S. dollar against major currencies.

Elsewhere, Djoko said that PGN booked a jump in 2002 net profit to Rp 1.1 trillion, from Rp 317 billion the previous year, but did not explain why this occurred.