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.