S & P affirms triple-B rating on DSPL Finance

S & P affirms triple-B rating on DSPL Finance

NEW YORK (Reuter): Standard & Poor's affirmed yesterday its
triple-B' rating on DSPL Finance Co. B.V.'s US$150 million 9.12%
senior secured notes due 2010, which are guaranteed by Dayabumi
Salak Pratama Ltd.

The rating outlook is stable.

The rating on DSPL's transaction, a financing of a US$434
million Indonesian geothermal private power project on the island
of Java, incorporates the following risks:
o Premature depletion or mischaracterization of the geothermal
resource;
o A construction program that has only about three scheduled
remaining months, which is located in a remote tropical region of
Indonesia; and
o Potential regulatory and structural changes to Indonesia's
electric supply industry, due to anticipated restructuring and
whole or partial privatization that could adversely affect the
project's electricity sales contract.

However, the following strengths offset the risks at the
triple-B' level:
o Use of a simple and commercially proven power generation
technology;
o Two years of production history that more than adequately
confirms the geothermal resource reserves needed to support the
165 MW power plant expansion;
o Resource development and construction activities on schedule
with engineering and procurement virtually complete and
construction about 70% complete since starting in July 1995;
o An unconditional completion guarantee, except for sovereign
risk events, provided by Unocal Corp. (triple-B'-plus corporate
credit rating) of the obligation of its subsidiary, Unocal
Geothermal of Indonesia Ltd., to pay debt service on the notes
until construction completion;
o Unocal's 30 years of geothermal experience in the U.S.,
Philippines, and Indonesia, which give the company about 29% of
the world market share of geothermal energy production;
o Widespread government support, including a guarantee from
Indonesia which was signed by the Ministry of Mines and Energy,
concerning obligations of PT PLN Persero (PLN), the offtaker, and
all necessary approvals of the state-owned industries' contracts
with the project;
o The project's strategic importance in alleviating Indonesia's
electricity generation capacity shortage; and
o The project's 42% equity capitalization that contributes to a
minimum project debt service coverage ratio of 2.27 and an
average coverage of 2.83.

DSPL on-lent the note proceeds to Dayabumi Salak Pratama Ltd.
Dayabumi is using the proceeds of the offering to finance a
portion of the cost of constructing a 3x55 MW (165 MW) power
plant (Units 4, 5, and 6) located about 65 kilometers south-
southeast of Jakarta, Indonesia.

Dayabumi was formed in 1996 as a special purpose limited
liability company to build and operate a geothermal fueled power
generation facility. Before 1996, Unocal Geothermal had entered
into a joint operation contract with Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara (Pertamina), Indonesia's state-owned
oil company, to act as exclusive contractor and developer for the
geothermal resource located in the Gunung Salak contract area.

The Gunung Salak area is the region on the island of Java in
which the project is located. Unocal Geothermal and its partner,
PT Nusamba Geothermal (Nusamba), will finance the resource
development through US$168 million in equity contributions.
Unocal Geothermal has a 50% interest in the Dayabumi joint
venture and Nusamba, an Indonesian corporation, holds the
remaining 50% interest.

Dayabumi will service the debt with revenues payable pursuant
to an electricity sales contract, which provides Dayabumi with a
build-operate-transfer agreement, with PLN and Pertamina, the
state-owned electricity company.

The agreement provides for certain minimum electricity and
geothermal payments from PLN as long as the plant maintains an
85% availability. Financial projections demonstrate that even
under adverse conditions, adequate cash exists to service the
debt obligations.

The project's sound economic fundamentals, strategic
importance to its offtaker, its highly experienced sponsor,
Unocal Corp.'s project completion guarantee, and Indonesian
Government support allow Standard & Poor's to conclude that the
project's bond rating likely will remain unchanged in the near
term.

Improvements to the Indonesian sovereign triple-B' rating,
combined with proven production history at the 330 MW level and
improvement in the electricity offtaker's business position could
result in upward rating movement, Standard & Poor's said.