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Aug 5 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed the Long-Foreign Currency Long and Local Currency Issuer Default Ratings (IDRs) andNational Long-Term rating of PT Perusahaan Gas Negara Tbk (PGN)respectively at ‘BBB-’ dan‘AAA (idn) '. Prospects are stable.
PGN ratings are constrained by the rating of the Republic of Indonesia (BBB-/Stable)as major shareholders who control 57% ownership. credit profilePGN standalone much more powerful than the current ratings are constrained at BBB-.Strong credit profile reflects its dominant market position in PGN distribution of natural gas, the ability to determine the price, and financial profilesolid. Based on the ranking now, PGN has great flexibilityto accommodate the expectations of the investment assets in the oil and gas upstream.
Factors Fueling rating
Determining Ability: PGN has managed to impose increased costsnatural gas so it can continue to maintain gross cash profit above USD 4per million British thermal units (mmbtu). Fitch believes PGN, in general,will be able to maintain profit per unit as companies controlled almost90% market share distribution of Indonesia’s gas infrastructure and the large difference inthe price of natural gas with other alternative energy sources. Almost 98% of basePGN customers are commercial and industrial sectors where pricingbased on the commercial terms.
Fee hike: Some suppliers PGN has negotiated selling pricesthe gas supply contract following the intervention of the old oil regulatorand gas in the upstream sector. Nearly 60% of natural gas needs PGN has negotiatedin USD 5.9/mmbtu in April 2013 from USD 1.9/mmbtu in September 2012. Fitchview further price increases in the medium term is unlikelymaterial and will be passed on to consumers due to price revisionssince 2012 has been quite high compared to the purchase price of the old andapproaching the market price in Indonesia.
Upstream investment increases operational risk: Until now, PGNinvested approximately USD 635 million in assets and possible upstreamissued approximately USD 1.2 billion in 2013. This is part of thePGN long-term strategy to increase the vertical integration; possibilityfurther mergers and acquisitions after 2013 also remains open. risksassociated with oil and gas exploration is higher than the transmission businessPGN and gas distribution. However, Fitch believes would restrict PGN additional risk by involving / retain experienced operators inefforts to expand into the upstream sector. Consider Fitch’s expectations that PGN willgenerate EBITDA of more than $ 1 billion per year, the company willable to accommodate upstream M & A sector without threatening a rating of ‘BBB-'.
Financial Flexibility: Fitch expects PGN is able to retain funds fromoperations (FFO) net leverage below 0.75x in 2013 (-0.69x in 2012), afterinclude the possibility of investment in oil and gas upstream sector and alsoestimated capital expenditure of USD 500 million in 2013. The company’s abilityThis investment is supported by a stable operating cash flow andsolid liquidity profile. PGN has a net cash position of USD 808million at March 31, 2013 and almost 60% of the total debt of USD 858 million will bedue after 2017, with a well-ordered phases before 2017.
Risks relating to the regulation: PGN exposed to regulatory uncertaintyin Indonesia. Aside from the price revision and long-term supply contractsdetermined by the regulator, PGN can be charged a one-off tax ifrequired release distribution operations into a separate subsidiary forcomply with the regulations issued in 2009. However, PGN has a backupenough with respect to the level of profitability and ability to generate cashinternal.
Negative: future developments that individually and collectively canlower level
- Measures negative ranking on Indonesia’s sovereign ratings givenThe sovereign ratings limit ranks PGN.
- Major changes in the regulatory environment and / or the material weaknessoperational or financial risk profiles PGN. However, given the strength of the profilePGN above standalone credit ratings are constrained AUD today at BBB-,in the medium term, Fitch does not see the development that will impactnegative IDRs and National rankings.
Positive: future developments that individually and collectively canraise levels:
- Measures positive ranking on Indonesia’s sovereign ratings.