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Indonesia's PLN obtains loan for power station project

Jakarta

INDONESIA'S state-owned power utility Perusahaan Listrik Negara (PLN) said it has secured a US$1.62 billion syndicated loan facility to support its role in the country's ambitious 35 gigawatt power station development programme.

The offshore US dollar credit facility with 20 international banks, signed on Oct 25, was the first of its kind for PLN, the company said in a statement issued on Monday.

"We see this as strong proof that PLN and Indonesia's credit profile are very good," PLN finance director Sarwono Sudarto said.

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Australia and New Zealand Banking Group Ltd, Bank of China (Hong Kong) Ltd, Citigroup Global Markets Singapore Pte Ltd, Mizuho Bank Ltd, Oversea-Chinese Banking Corporation Ltd, Sumitomo Mitsui Banking Corp Singapore Branch, and United Overseas Bank Ltd were the lead arrangers and bookrunners.

The new loan facility follows the issuance of around US$1.5 billion in 7, 10 and 30-year global bonds in US dollar and euro denominations by PLN in mid-October.

"This shows that overseas financial institutions are very interested in Indonesian infrastructure projects, especially in electricity," PLN spokesman I Made Suprateka told Reuters by text message on Tuesday.

PLN has an investment-grade credit rating of Baa2 from Moody's and BBB- from Standard & Poor's ratings agencies, ratings that are equivalent to Indonesia's sovereign credit ratings in each case and reflect the firm's state-owned status.

According to the Organisation for Economic Cooperation and Development (OECD), however, debt taken on by PLN and other Indonesian state-owned companies to finance infrastructure projects could expose them to cash flow constraints, "particularly if interest rates increase or projects are delayed".

This, in turn, could result in higher fiscal risks for the government, it said in a report last month.

PLN reported a net loss of 18.48 trillion rupiah (S$1.7 billion) for the January-September period, compared to a profit of 3.04 trillion rupiah in the same period a year earlier, according to a financial statement published in late October.

The earnings showed a nearly 20 per cent increase in fuel and lubricant costs in that period, a 13 per cent increase in power purchase costs and a near seven-fold increase in foreign exchange losses.

PLN is expected to receive a 6.5 trillion rupiah injection from the government in 2019, part of government efforts to shield the company from the impact of a currency slide - the rupiah has weakened around 8.6 per cent this year.

The government's decision not to raise power tariffs until 2019 has also hurt PLN, as coal prices have climbed significantly this year.

The last year for which PLN reported a net loss was 2013. That year, it posted a 26.23 trillion rupiah loss that the company attributed to a 21 per cent plunge in the rupiah's value, according to its financial statements. REUTERS