Rating reduction upsets several RI entities
Rating reduction upsets several RI entities
NEW YORK (Reuter): Standard & Poor's lowered Saturday its long-term foreign currency ratings on several Indonesian entities following the downgrade on the Indonesian sovereign ratings.
The long-term foreign currency rating on P.T. Bank Negara Indonesia (Bank BNI) has been lowered to triple-'B'-minus from triple-'B', while the rating on Bank BNI's US$145 million unsecured notes due 2007 also has been lowered to triple-'B'- minus from triple-'B'.
At the same time, Standard & Poor's revised Bank BNI's foreign currency rating outlook to stable from negative. The bank's triple-'B' long-term local currency rating, negative local currency rating outlook, and 'A-3' short-term ratings are not affected.
Standard & Poor's also lowered the long-term foreign currency rating on P.T. Hanjaya Mandala Sampoerna to triple-'B'-minus from triple-'B', but affirmed the company's triple-'B'-plus local currency rating.
The outlook on both ratings is stable. In addition, the rating on US$200 million unsecured notes due 2006 issued by the company's guaranteed subsidiary, Sampoerna International Finance Co. B.V., also has been lowered to triple-'B'-minus from triple- 'B'.
The long-term foreign currency rating on PT Satelit Palapa Indonesia also is lowered to triple-'B'-minus from triple-'B', and the triple-'B' long-term local currency rating is affirmed.
The company's rating outlook is stable, Standard & Poor's said.
Paiton
Standard & Poor's also lowered its rating on Paiton Energy Funding B.V.'s senior secured bonds due 2014, to triple-'B'-minus from triple-'B'.
The bonds are guaranteed by P.T. Paiton Energy Co., a limited liability Indonesian company established to develop, construct, own, and operate the $2.5 billion Paiton (Units 7 and 8) power project, consisting of two 615 MW (net) coal-fired power plants located in East Java, Indonesia.
The Indonesian currency and financial situation increases repayment risk to lenders in two ways:
-- Based upon depreciation trends this year, electricity from dollar-financed IPP projects is about 40 percent more expensive in rupiah terms to PLN than originally anticipated, thus putting some financial pressure on PLN; and
In addition, PT Perusahaan Listrik Negara (Persero) (PLN), the state electricity company, has a purchase power agreement with Paiton Energy Co. that has a rupiah-denominated tariff structure indexed to the U.S. dollar-Indonesian rupiah exchange rate.
Hence, the rupiah tariff completely hedges the project's U.S. dollar debt but electricity becomes more expensive to PLN. PLN still assumes convertibility risk by agreeing to remit electricity payments in dollars if the project cannot enter into foreign-exchange contracts to secure dollars.
-- As PLN's call on the hard currency needed to honor IPP obligations increases with new IPPs coming online in the next few years, PLN may find it more difficult to access U.S. dollars to the extent that Indonesia's reserves become more limited.
Paiton Energy Co. should enjoy preferred access, vis-a-vis PLN, to dollars than nonstate-owned corporations that have hard currency obligations. In addition, interest payments due on the bonds prior to project completion are prefunded and are not at risk.
The project level risks and strengths, against which Standard & Poor's based the original rating, remain largely unchanged.
The rating agency said that the outlook is stable.
The project's rating likely will remain at the sovereign rating level in the near term based on government support, vis-a- vis the Ministry of Finance support letter, the project's strategic importance to Indonesia's electricity sector, a fixed- price, turnkey construction contract, and prospective stable financial profile.
CE Indonesia
Standard & Poor's affirmed its triple-B'-minus bank loan rating on CE Indonesia Funding Corp. The outlook is stable.
The sovereign downgrade on Indonesia does not affect the credit worthiness of the bank loan rating or its underlying projects. However, should Indonesia's foreign currency rating fall further, the CE Indonesia rating would similarly drop.
As stated in the original rating, CE Indonesia may delay issuing a capital markets takeout of the construction loan, or chose not to issue bonds at all.
In this case, construction loans issued by CE Indonesia to fund construction at the Dieng or Patuha power projects would convert to term loans. Upon completion, the projects would immediately start sweeping 100 percent of excess project cash flows to begin amortizing project debt.