Bangkok--3 May--Moody's
Approximately US$2,500 million of Debt Securities Affected
Singapore, May 03, 2012 -- Moody's Investors Service has assigned a definitive Baa3 senior bond rating to the US$1,250 million 4.875% and US$1,250 million 6% notes due 2022 and 2042, respectively, issued by PT Pertamina (Persero).
The rating outlook is stable.
RATINGS RATIONALE
Moody's definitive rating on this debt obligation confirms the provisional rating assigned on 20th April 2012. Moody's rating rationale was set out in a press release published on the same day.
The bond proceeds will be used for financing capital expenditures and for general corporate purposes.
The Baa3 rating combines (1) Pertamina's fundamental credit quality, as expressed in its baseline credit assessment (BCA) of 10, which is equivalent to a Baa3 rating on Moody's global scale; and (2) its strong support from, and dependence on, the Indonesian government (Baa3/stable) under Moody's joint default analysis (JDA) approach for government-related issuers.
Pertamina is wholly owned by the Indonesian government.
Pertamina's ratings reflect the company's strategically important position as Indonesia's national integrated oil & gas company, contributing significant upstream production, and accounting for all the current refining capacity in the country. It operates at a low-cost and a moderate level of leverage. But Moody's expects leverage to rise with the company's planned investments.
Pertamina's strengths are balanced by its exposure to the moderate regulatory risks associated with a transitioning framework, and the execution risks associated with increasing investments in upstream exploration and production, refineries, and potentially acquisitions.
The credit profiles of Pertamina and the Indonesian government are closely linked, given Pertamina's strategic roles in oil & gas exploration and product distribution for the country. Additionally, the government closely supervises Pertamina's strategies and budgets. To enable the distribution of subsidized fuels, Pertamina receives compensation from the government. This compensation forms part of the government's annual budget.
As Pertamina's fundamental credit profile is Baa3, which is equivalent to, and already linked to, that of the government, Moody's view of additional, exceptional, and high level government support does not result in any further rating uplift.
The outlook on the rating is stable, reflecting the stable outlook of Indonesia's sovereign rating. At the same time, Moody's expects Pertamina's operating and financial metrics to remain strongly supportive of its rating, despite its ambitious capex plans.
An upgrade of the sovereign rating could trigger an upgrade in Pertamina's rating, given the close links between the two ratings.
Conversely, Pertamina would experience downward rating pressure, if there were a downgrade in Indonesia's sovereign rating.
The principal methodology used in rating PT Pertamina (Persero) was the Global Integrated Oil & Gas Industry Methodology published in November 2009, and Government-Related Issuers: Methodology Update Industry Methodology published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
PT Pertamina (Persero) is a 100% Indonesian government-owned, fully-integrated oil and gas corporation, with operations in upstream oil, gas and geothermal exploration and production, downstream oil refining, marketing, distribution, transportation and trading of petroleum products.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
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