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Rating Action:

Moody's assigns first-time Baa3 issuer rating to Jasa Marga

22 Nov 2017

Singapore, November 22, 2017 -- Moody's Investors Service has assigned a first-time Baa3 issuer rating to Jasa Marga (Persero) Tbk (PT) and its proposed senior unsecured global IDR bond.

The ratings outlook is positive.

This is the first time Moody's has assigned a rating to Jasa Marga.

The proceeds from the issuance will be used to assist in funding Jasa Marga's capital expenditure requirements.

RATINGS RATIONALE

Jasa Marga's Baa3 ratings reflect: (1) its baseline credit assessment (BCA) of ba2; and (2) a two-notch uplift based on Moody's expectation that the company will receive a high level of support from the Indonesian sovereign (Baa3 positive) in times of need. We believe that Jasa Marga plays a critical role in Indonesia's plan to develop transport infrastructure, particularly the toll roads sector.

"Jasa Marga's BCA reflects its leading position in Indonesia's toll roads sector, which we expect to benefit from resilient demand dynamics given economic growth and favourable demographics of a growing middle class," says Ray Tay, a Moody's Vice President and Senior Analyst.

"Offsetting these strengths are its significant expansionary capex requirements, estimated at more than IDR17 trillion each year for at least the next three years, pressuring the company's financial metrics." adds Tay.

Jasa Marga's leading position is reflected in its large toll road network in Indonesia, accounting for nearly two-thirds (measured by the number of kilometres) of the total operational toll roads in Indonesia. A large number of these roads have been operational since before 2004 and benefit from stable and resilient traffic, thereby providing key support for Jasa Marga's credit profile.

Consistent with Indonesia's plan to extend its toll road network, Jasa Marga has an active capital expenditure plan which will take the number of toll roads in the company's portfolio to 31 from 19 and almost double the toll road length to 1,260 km from the current 665 km, over the next three to five years. We consider execution risk related to the expansion plan to be manageable within the BCA, albeit it will elevate financial leverage and provide limited headroom within the BCA.

The proposed issuance of the global IDR senior unsecured notes could broaden the market access of Indonesian infrastructure companies, and its successful completion may provide greater funding diversity.

The ratings outlook is positive, reflecting the positive outlook on Indonesia's sovereign rating and Jasa Marga's strategic role as the flagship toll road operator in Indonesia, with the majority of its toll road portfolio located in Jakarta and the island of Java.

Given Jasa Marga's BCA of ba2 and the high level of support, an upgrade of the Indonesian sovereign could lead to an upgrade of Jasa Marga's ratings if the company's underlying credit quality remains consistent with its BCA.

Absent an upgrade to the sovereign rating, an upgrade to Jasa Marga's ratings is highly unlikely, because the company's business profile is highly dependent on the Indonesian economy.

We expect Jasa Marga's financial metrics to remain at the lower end of its ba2 BCA for the next two to three years, due to its expansion plans, thereby limiting the potential for an upgrade of its BCA.

Given the positive outlook, Jasa Marga's ratings are unlikely to be downgraded. However, the outlook could return to stable if Moody's lowers the company's BCA because of a weaker financial performance due to: (1) significant cost overruns and delays in the commissioning of its toll roads under construction; (2) weak traffic growth due to a weaker macroeconomic environment or stronger competition; and/or (3) unfavorable policy/regulatory decisions.

Metrics indicative of a downward revision of its BCA include funds from operations (FFO)/debt falling below 3.5%, and/or cash interest coverage falling below 1.3x-1.4x on a sustained basis.

The methodologies used in these ratings were Privately Managed Toll Roads published in October 2017, and Government-Related Issuers published in August 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Jasa Marga is a listed company that is 70% owned by the government of Indonesia. The government's shareholding level has remained at the same level since the company's initial public offering in 2007.

As of November 2017, the company operated 665km of toll roads in various parts of Indonesia, representing 63% of the country's toll roads in operation by length. Jasa Marga's market share in terms of toll road transaction volume is 80%. In terms of total toll road concessions, it has the right to build, own and operate 1,260km of toll roads in total.

The Indonesian Toll Road Authority is the regulator for the industry and the concession counterparty for Jasa Marga.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Ray Tay
VP - Senior Credit Officer
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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