(The following statement was released by the rating agency)
Dec 13 - Fitch Ratings has affirmed the Long-term Issuer Default Rating (IDR) PT Perusahaan
Listrik Negara (PLN) at 'BBB-' with a stable outlook. Fitch also affirmed the senior
unsecured global program PLN and medium-term notes (GMTN) PLN some $ 2 billion, and the bonds
issued under this program at 'BBB-'.
PLN ranks comparable to the Indonesian soveign ratings ('BBB-' / stable) as a shareholder,
which reflects the legal ties, strong operational and strategic based methodology "Parent and
Subsidiary Linkage" owned by Fitch.
This assertion also reflects Fitch's view that the government will continue to provide
strong financial support in the future given the position of PLN as one state-owned enterprises
and important public service obligations entrusted to PLN. PLN is the owner and operator of the
electricity transmission and distribution networks in Indonesia and currently manages more than
80% of electricity generation capacity. PLN also is the main entity used by the government to
implement the national electricity infrastructure development program.
Electricity rates set by the government for public services and on average lower than the
cost of production. Therefore, the government continues to support PLN through the
implementation of subsidy mechanism in which PLN will recover operating costs and financing and
also get revenue "fee" in accordance with the agreements made each year that can be used in part
to cover the cost of the investment company.
Fitch found that the service function of PLN will continue to cling to remember a large
investment program until 2020, and the difficulties in raising electricity rates in Indonesia.
Proposals rate increases in 2011 and 2012 could not be implemented due to the large resistance
and revision rates in the future may not be large enough to warrant the level of profits for PLN
when subsidies eliminated. The government is also not likely to significantly increase
electricity tariffs before the presidential election in 2014. However, Fitch found that
government subsidies will gradually decrease due to the increased capacity of coal-based power
plants are cheaper, gas and other renewable fuels, under the scheme of "fast track" in 2020,
resulting in lower average costs of production electricity.
In addition to direct subsidies, PLN also receive real support from government in the form
of direct loans, two-step loans from multinational agencies, capital injections and guarantees
of bank loans for expansion programs PLN.
Including government subsidies, PLN generate sufficient internal cash and have liquidity to
manage debt maturities, which is now no more than USD 25 trillion per year. In late September
2012, PLN has USD 15 trillion of cash and cash equivalents and approximately IDR50 trillion
unused bank facilities as compared to short-term debt amounted to IDR22trilyun. PLN, however,
require external funding to manage a large annual capital expenditures. Fitch found the company
will be able to obtain financing to consider its position as a strong body which has close ties
to the government.
What could change the rating?
Positive: future developments that individually and collectively can trigger level rise
-Improved Indonesia sovereign ratings if not weaken ties with the government of the legal,
operational and strategic.
Negative: future developments that could, individually or collectively, triggering the
-Weakening ties with the government or government reduced dependence on PLN. According to
Fitch's view, this is not going to happen in the medium term.