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Related Issuers
Rating Action:

Moody's assigns provisional (P)Baa3 rating to Pertamina's notes

Global Credit Research - 06 May 2013

Singapore, May 06, 2013 -- Moody's Investors Service has assigned a provisional (P)Baa3 rating to PT Pertamina (Persero)'s proposed USD5 billion global medium-term notes program (GMTN).

At the same time, Moody's has affirmed Pertamina's Baa3 issuer rating and existing senior unsecured notes ratings.

The ratings outlook is stable.

The notes to be issued under the proposed GMTN program will rank pari passu with Pertamina's other senior unsecured obligations.

Proceed from the notes to be issued will be used for financing capital expenditures and for general corporate purposes.

RATINGS RATIONALE

The Baa3 rating combines (1) Pertamina's fundamental credit quality as expressed in its baseline credit assessment (BCA) of baa3; 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 moderate leverage, however Moody's expects Pertamina's leverage to rise with the company's planned USD36.5 billion capital expenditure program from 2013 to 2016.

Pertamina's strengths are balanced by its exposure to moderate regulatory risks associated with a transitioning framework, and 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 as well as 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. However, should its fundamental credit profile falls to ba2, its issuer rating may still be maintained at Baa3.

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.

Moody's would consider a downgrade if Pertamina's large capex program fails to result in a meaningful increase in production and reserves; and/or the company continues to stretch its balance sheet by taking on additional debt, such that (1) Adjusted debt to total proved reserves exceeds $8.0/boe consistently; (2) retained cash flow (RCF) to net debt remains below 15% on a sustained basis; or Adjusted debt to capital exceeds 60% consistently.

Also, Pertamina would experience downward rating pressure, if there were a downgrade in Indonesia's sovereign rating.

The methodologies used in this rating were the Global Integrated Oil & Gas Industry Methodology published in November 2009, and Government-Related Issuers: Methodology Update 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

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Simon Wong
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Philipp L. Lotter
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Moody's assigns provisional (P)Baa3 rating to Pertamina's notes
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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