S&P upgrades Paiton Energy bond to B

Standard & Poor's said it raised its rating on Paiton Energy Funding BV's $180 million senior secured bond issue to B from B-. The bond is guaranteed by Indonesia-based PT Paiton Energy.

The outlook is stable.

The upgrade is in tandem with the recent rating upgrade of the sovereign credit ratings on the Republic of Indonesia (foreign currency BB-/Stable/B; local currency BB+/Stable/B), which reflected the country's improving fiscal and external performance and declining debt burdens.

S&P said Paiton faces high counterparty risk from the sale of its power to its sole off-taker, state-owned utility PT PLN (Persero), which has a weak credit profile. PLN relies on government subsidies to meet its financial obligations, and the sovereign's stronger financial profile should therefore strengthen its ability to support PLN's obligations.

The rating on Paiton Energy's notes also reflects the relatively uncertain legal and operating conditions in Indonesia, the agency said. Government policies on subsidies and exchange-rate management could potentially affect Paiton adversely.

S&P said these weaknesses are, however, partially mitigated by Paiton's contractual agreement with PLN, its low cost of power generation and favorable demand prospects for power in Indonesia.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.