S&P keeps ratings on RI project bonds

S&P keeps ratings on RI project bonds

NEW YORK (Dow Jones): Standard & Poor's single-B ratings on the following Indonesian independent power producer (IPP) project bonds and bank loan ratings remain on CreditWatch with negative implications, where they were placed on Dec. 1, 1997:

-- Paiton Energy Funding B.V.'s US$180 million senior secured bonds due 2014 (guaranteed by P.T. Paiton Energy Co.),

-- CE Indonesia Funding Corp.'s $400 million bank loan facility (funding to Dieng and Patuha geothermal projects), -- DSPL Finance Co. B.V.'s $150 million 9.12 percent senior secured notes due 2010 (guaranteed by Dayabumi Salak Pratama Ltd.), and

-- MNL Indonesia Funding Corp.'s $250 million bank loan facility (for Wayang Windu Geothermal Project).

Recent attempts by the state-owned utility, PT Perusahaan Listrik Negara (Persero) (PLN), to make partial payments in rupiah (IDR) instead of contractually required U.S. dollars may potentially result in rating downgrades to at least the triple-C level from the single-B ratings.

As the economic and financial situation in Indonesia continues to deteriorate, operating independent power projects are increasingly at risk of defaulting on their fixed obligations.

The projects' offtaker, PLN, has attempted to pay for December power deliveries in rupiah at a Rp 2,450 to the dollar exchange rate instead of the contractual U.S. dollar amount.

Such a situation, if sustained, which amounts to approximately 25 percent of the amount due at current exchange rates of about Rp 10,000 to the dollar, likely would cause the power project companies to default on their debt.

If the government, vis a vis the Ministries of Finance and Mines and Energy, does not remedy the situation by providing PLN with sufficient funds to cover the shortfall in purchased power payments, the project bond and loan ratings could drop to as low as triple-C.

Both Ministries and PLN have stated that it is their intention to comply with the terms of the electricity sales contracts; however, the monetary crises may prevent PLN from making full payment until the situation improves. Projects that are under construction and not scheduled for completion until the end of 1998 or later are somewhat less at risk of near-term default than those already in operation, but still face many of the same risks, S&P said.