Fitch Affirms Indika at 'B+'/'A(idn)'; Outlook Stable

(Fitch Ratings - Jakarta/Hong Kong/Singapore - 27 Mar 2026)--Fitch Ratings has affirmed Indonesia-based PT Indika Energy Tbk's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B+'. The Outlook is Stable. Fitch has also affirmed the rating on Indika's US dollar notes at 'B+' with a Recovery Rating of 'RR4'. At the same time, Fitch Ratings Indonesia has affirmed the National Long-Term Rating at 'A(idn)' with a Stable Outlook.

The 'B+' IDR reflects Indika's position as a mid-sized thermal coal producer in Indonesia, its upcoming diversification into gold, a healthy reserve life profile and sufficient liquidity. The Stable Outlook reflects Fitch's expectation that firm gold prices and the commencement of the Awak Mas gold project by early 2027 will support deleveraging to below the negative rating sensitivities in 2027. Recent firmer thermal coal prices also support an EBITDA recovery at its existing thermal coal operations. Indika also has financial flexibility from potential asset disposals and the ability to scale back uncommitted capex to absorb any impact from Indonesia's introduction of an export duty and preserve its balance sheet.

'A' National Ratings denote expectations of a low level of default risk relative to other issuers or obligations in the same country or monetary union.

Key Rating Drivers

Sensitivity Breach Temporary; 2027 Deleveraging: We forecast Indika's EBITDA net leverage will breach Fitch's negative sensitivity, rising to about 5.2x in 2026 (2025E: 3.2x), while EBITDA interest coverage is expected to remain around 2.0x as capex peaks to complete the construction of the Awak Mas gold project. Fitch forecasts EBITDA net leverage will fall below 3.5x while interest coverage will revert to around 3.1x by 2027 following the commissioning of Awak Mas, planned for early 2027.

Indika has limited rating headroom before the completion. Weaker commodity prices and/or further delays or execution setbacks at Awak Mas would increase negative rating pressure. Fitch believe Indika retains some flexibility to scale back capex for its other new businesses and could pursue potential non-core asset disposals to support its balance sheet, if required.

Manageable Execution Risk; Higher Investment Costs: Management indicates the construction of the Awak Mas project is around 50% complete, with first production targeted in early 2027. The remaining milestones are largely related to the completion of construction works. Indika attributes the 33% rise in project costs to USD568 million to infrastructure upgrades at Awak Mas, as well as higher staffing and procurement costs to accelerate delivery.

Indika expects to fund the incremental capex primarily with debt. Fitch believes the higher investment costs should be mitigated by stronger cash flow generation, supported by elevated gold prices, once the project is operational.

Concentration Risk, Upcoming Gold Diversification: Successful execution of the Awak Mas development is key to diversifying Indika's commodities and cash flow. Indika's EBITDA remains heavily concentrated in cash flow from the PT Kideco Jaya Agung thermal coal mine until Awak Mas starts production. We expect Awak Mas, once ramped up meaningfully by 2027, to contribute 35%-40% of Indika's EBITDA.

Tighter Coal Market in 2026: Fitch expects Indika's thermal coal operations to improve modestly in 2026 as thermal coal prices have risen following the US-Iran conflict, reflecting stronger energy-security-driven demand and supply uncertainty in Indonesia. However, Fitch expects structural demand weakness from the energy transition to weigh on prices over the next few years. Indika's EBITDA underperformed in 2025 as cost-reduction measures were insufficient to offset lower average selling prices (ASPs) due to softer demand.

Regulatory Risk: The Indonesian thermal coal sector faces rising policy risk such as potential lower production quota and export duties, which Fitch has not fully reflected given the uncertainty. Significant policy changes that dampen cash flow could increase Indika's negative rating pressure, although this is not in Fitch's base case. We also believe that an export duty, if implemented, would likely be offset by stronger ASPs, as it is in the government's interest to balance higher state revenue without impairing miners' cash flow generation.

Mid-Sized Coal Producer: Indika produces around 30 million tonnes per annum (mtpa) of thermal coal and has a Fitch-estimated reserve life of more than 13 years, positioning the company as a mid-sized producer. We expect the EBITDA of Indika's thermal coal operations to average USD5.50-7.00 per tonne (2025E: USD6.1/tonne) under Fitch's price deck for the next 24 months. Indika is in the third quartile of the cost curve and has historically been able to adjust its mine plan to lower costs if coal prices fall materially.

Capex Discipline for New Business: Fitch views large debt-funded capex for other new businesses or continued losses in new businesses as negative for the ratings. Indika's electric two-wheeler business has yet to break even and partly contributed to weaker EBITDA in 2025. Management expects losses to start narrowing. The company has budgeted USD130 million in capex for other new businesses but these are largely uncommitted with the flexibility to reduce the scale if required.

Rated on Standalone Basis: Indika's ultimate majority shareholder, PT Indika Inti Investindo, is privately held, and we have no financial information for it. However, we believe the majority shareholder's access to Indika's cash is limited to shareholder returns, as Indika is listed with public shareholders. In addition, material related-party transactions with the parent are subject to disclosure requirements and approval from independent shareholders.

Peer Analysis

PT Golden Energy Mines Tbk (GEMS, BB-/A+(idn)/Stable) is rated higher due to its stronger financial profile, larger operating scale and lower execution risk. Both GEMS and Indika have adequate reserve life in key thermal coal mines. Indika's financial profile is weaker due to higher net leverage as it executes its diversification strategy. Indika's commodity diversification should improve relative to GEMS's once its gold mining operations ramp up by 2027, although this benefit is likely to be moderated by Indika's higher leverage.

Mongolian Mining Corporation (MMC, B+/Stable) is a single-product hard coking coal producer with a high concentration of end-customers, mainly in northern China, and faces higher country risk for its mining operations in Mongolia (B+/Stable). However, MMC is more profitable in terms of EBITDA/tonne and has lower net leverage than Indika.

Fitch’s Key Rating-Case Assumptions

- Kideco's average coal selling prices moving in line with Fitch's coal price deck for the Newcastle 6000 index: USD110/tonne in 2026, USD95/tonne in 2027, and USD90/tonne in 2028;

- Gold prices in line with Fitch's gold price deck: USD3,800/ounce (oz) in 2027 and USD3,300/oz in 2028;

- Kideco's coal-mining production volume of 30mtpa in 2026-2028 (2025: 31mtpa);

- Kideco's cash production costs (excluding royalty) of around USD32-35 per tonne during 2026-2028;

- Awak Mas' production volume at about 70,000oz in 2027 before reaching 110,000oz by 2028. Cash costs of around USD1400/oz per year;

- Capex of about USD400 million in 2026 and USD170 million-180 million per year in 2027 and 2028.

Corporate Rating Tool Inputs and Scores

Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the Standalone Credit Profile (SCP):

- Business and financial profile factors (assessment, relative importance): management (bb+, lower), sector characteristics (bb+, moderate), market and competitive positioning (bb-, higher), diversification and asset quality (bb, moderate), company operational characteristics (bb, moderate), profitability (b-, moderate), financial structure (b, higher), and financial flexibility (b, moderate).

- The quantitative financial subfactors are based on custom CRT financial period parameters: 20% weight for the forecast year 2025, 20% for the forecast year 2026, 40% for the forecast year 2027 and 20% for the forecast year 2028.

- 'B+' to 'CC' considerations apply in our analysis and result in no adjustment.

- The governance assessment of 'Good' results in no adjustment.

- The operating environment assessment of 'bbb-' results in no adjustment.

- The SCP is 'b+'.

To derive the Long-Term IDR:

Fitch made no adjustments to the SCP, resulting in an IDR of 'B+'.

Recovery Analysis

Fitch's recovery analysis assumes Indika would be reorganised as a going-concern in a bankruptcy scenario. Fitch assumed a 10% administrative claim.

- Fitch applies an enterprise value (EV) multiple of 3.5x, reflecting the company's business profile, including its thermal coal operations and the contribution expected from its gold business.

- Fitch assumes a going-concern EBITDA of USD300 million, representing an average level of earnings derived mainly from Kideco and Awak Mas and based on Fitch's mid-cycle price assumptions for thermal coal and gold.

- In the recovery waterfall, we have assumed all secured debt as prior ranking debt. The company's US dollar bonds rank pari passu with its bank borrowings.

- Using these assumptions in the recovery calculation, the recovery of Indika's US dollar bonds corresponds to an 'RR3' Recovery Rating.

- According to Fitch's Country-Specific Treatment of Recovery Ratings Criteria, the Recovery Rating for corporate issuers in Indonesia is capped at 'RR4'.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

- Lower coal or gold prices, or weaker execution at the Awak Mas gold project, leading to EBITDA net leverage remaining above 3.5x in 2027.

- EBITDA interest coverage remaining below 3.0x in 2027.

- Weakened external funding access.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

- Evidence of reduced execution risk, leading to EBITDA net leverage sustained below 2.5x.

Liquidity and Debt Structure

Indika's liquidity is adequate. The company's term loan maturities in 2026 are manageable at around USD50 million and should be covered by its cash balance of about USD520 million. We expect Indika to maintain funding access to fund higher capex for its Awak Mas project, premised on its sufficient liquidity and upcoming diversification into the gold project.

Issuer Profile

Indika's main asset is Indonesia's fifth-largest thermal coal mine, Kideco, in which it owns a 91% stake. Indika also has direct and indirect ownership of 100% in Awak Mas, 100% in EMI (electric vehicles), 100% in Interport (fuel storage and logistics, and port terminal), 51% in EMITS (roof-top solar), 100% in Natura (essential oil) and 100% in Mekko (bauxite mine).

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Indika's ultimate majority shareholder, PT Indika Inti Investindo, is privately held, and we have no financial information for it. However, we believe the majority shareholder's access to Indika's cash is limited to shareholder returns, as Indika is listed with public shareholders. In addition, material related-party transactions with the parent are subject to disclosure requirements and approval from independent shareholders. We believe our assumptions about financial policy, governance and shareholder returns adequately incorporate the risk of the parent extracting cash from Indika, despite the lack of financial information on its ultimate parent.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

Climate Vulnerability Signals

The Climate.VS for 2035 for PT Indika Energy Tbk is 79. The elevated signal reflects energy transition risks, including reduced demand for coal-fired power generation and the increasing availability of renewable energy as an alternative source of generation. The elevated Climate.VS has not affected the current rating due to the longer energy transition timeline, particularly in emerging markets such as Indonesia, and thermal coal remains a key base load for power generation among major consuming countries in Asia.

ESG Considerations

PT Indika Energy Tbk has an ESG Relevance Score of '4' for GHG Emissions & Air Quality as it derives most of its revenue from thermal coal and faces the risk of declining demand in the medium-to-long term because of coal's high carbon footprint. Funding access for thermal coal companies has also progressively tightened, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. (ends)