The rating outlook is stable.
The proceeds will be used for capital expenditures, working capital
requirements and other general corporate purposes.
Moody's definitive rating on this debt obligation follows PGN's completion
of its USD note issuance, the final terms and conditions of which are
consistent with Moody's expectations.
"The successful issuance of PGN's inaugural rated bond will enhance its
liquidity, and strengthen its financing channels in the offshore market,"
outlook and assigned a provisional (P)Baa3 rating with a stable outlook
to its proposed issuance of senior unsecured bonds.
PGN's Baa3 rating reflects the application of Moody's rating methodology
for government-related issuers (GRIs), updated in
incorporates (1) the company's standalone credit quality, or baseline
credit assessment (BCA) of baa3; and (2) Moody's assessment of the credit
support that the government of
provide in a situation of stress.
"The Baa3 senior unsecured rating is mainly driven by PGN's good pricing
power with a track record of cost pass through, favorable industry
dynamics that offer strong growth potential, and a strong financial
profile that is constrained by sizeable capital expenditure and upstream
business expansion," adds Tay, also the Lead Analyst for PGN.
PGN is ambitious in seeking to expand its upstream business, thereby
increasing its capital expenditure and execution risk. However, Moody's
recognizes the long-term benefits of this strategy as it will help
diversify PGN's business and supply sources. Additionally, the company's
strong financial profile as well as its management strategy and
investment criteria somewhat mitigate the execution risk.
Its BCA also considers the potential volatility in distribution cash flows
owing to the mismatch between its sales contracts and supply contracts.
Under Moody's rating methodology for GRIs, government support for the
company is assessed as "strong" given its strategic role in
Moody's assesses the dependence level as "high" as the credit profiles of
PGN and the Indonesian government are closely linked, given PGN's
The rating outlook is stable, reflecting PGN's sustained and strong
financial profile, and Moody's expectation that (1) the company can
continue to pass through any cost increases of upstream gas to its
end-users; (2) it will maintain its dominant position in
transmission and distribution sector; and (3) its upstream acquisitions
will be measured and sustainable.
The rating could be upgraded if
and if PGN's underlying credit quality remains consistent with its
current BCA of baa3. Absent an upgrade to the sovereign rating, an
upgrade to PGN's ratings is very unlikely because the company's revenues
and most of its funding are from domestic sources.
A downgrade is possible if PGN's underlying credit quality deteriorates
because of (1) an unfavorable regulatory environment that hurts its
financial position; (2) an erosion of its dominant market share under a
deregulated environment, with increased pressure on its profit margins
owing to rising competition; and/or (3) changes in the management's
strategy regarding its upstream business, and which deviates from
Its rating could come under pressure if its consolidated credit metrics
weaken, such that debt/capitalization increases beyond 60%-65%, or
retained cash flow/debt falls below 9%-13%, on a sustained basis.
Furthermore, a downgrade of the sovereign rating or a change in the
government's shareholding level and supportive policy towards the gas
industry could prompt a review of its rating. Established in 1965,
the transmission and distribution of natural gas. Its transmission
business mainly operates under its 60%-owned subsidiary, PT Transportasi
of 79% as of
In the financial year ended
business, while the remainder mostly came from its transmission business.
PGN is publicly listed, with a market capitalization of
State-Owned Enterprises, owns 57% of the company.
Most Popular Stories
- Homeowners More Satisfied With Mortgage Servicers
- Russia, Ukraine Now Face Off Over Football Clubs
- Law Lets Users Unlock Cellphones
- Motorists Get Rare Summer Break on Gas Prices
- Body Parts Retrieved at MH17 Crash Site
- Obama Vows to Veto House Immigration Bill
- Government Meets Goal for Small-business Contracts
- Reno Gigafactory No Cinch to Land Tesla Plant
- MassMutual Teams Up With ALPFA
- Chrysler U.S. Sales in July Hit 9-Year High