(Fitch Ratings - Jakarta/Singapore - 14 May 2025)--Fitch Ratings has affirmed PT Pertamina (Persero)'s Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB' with a Stable Outlook. Fitch has also affirmed the senior unsecured rating, and the ratings on its USD20 billion global medium-term note programme and existing senior unsecured notes at 'BBB'.
Pertamina's IDR is equalised with that of Indonesia (BBB/Stable) as we look through the direct owner, Indonesia's new sovereign wealth fund, Danantara, while applying Fitch's Government-Related Entities (GRE) Rating Criteria. The equalisation of the ratings is based our assessment that extraordinary state support to Pertamina, should it be required, is virtually certain, based on the government's 'Very Strong' responsibilities and incentives to support.
Pertamina's Standalone Credit Profile (SCP) is 'bbb-', reflecting its large scale, vertically integrated operations and modest leverage profile. We see limited risk to Pertamina's operations from the recent transfer of the state's ownership in the company to Danantara. A sustained record of reimbursements for selling fuel below market prices and an absence of larger-than-expected dividends over the next year could lead to an upward revision of Pertamina's SCP.
Key Rating Drivers
'Very Strong' Support Responsibility: We evaluate the government's involvement in Pertamina's decision-making and oversight as 'Very Strong'. The government uses Pertamina to keep prices of several key fuels below the market. The government reimburses the company by providing regular subsidies and compensation, despite compensation being contingent on the government's budget. These payments of billions of US dollars each quarter support Pertamina's SCP and underscore our assessment of 'Very Strong' precedents of support.
'Very Strong' Support Incentive: Fitch views Pertamina's role in the preservation of government policy as 'Very Strong' as it is highly important to Indonesia's energy security. A default is likely to significantly affect oil imports and fuel availability, and could derail the company's substantial investments to increase capacity. We also assess the contagion risk if Pertamina defaults to be 'Very Strong', with financial consequences for the state and other state-owned enterprises likely to be material, as Pertamina is widely considered a reference issuer in Indonesia.
Limited Impact from Shareholder Change: The government transferred its ownership in Pertamina to Danantara's operational holding company in March 2025, but retains a Series A (Golden) share that gives it special powers in matters such as appointment of management. We think the shareholding change is unlikely to result in material adverse changes to Pertamina's subsidy mechanism, dividend payments and capex strategy. Nonetheless, we await clarity on Danantara's plans to increase investments in sectors such as downstream processing.
Leverage Likely to Increase: We expect Pertamina's EBITDA net leverage to rise to around 2.0x by 2027 (2024: 0.6x), as we forecast lower EBITDA and higher capex for capacity growth. Our estimate of lower EBITDA during 2025-2027 incorporates weaker oil prices of USD65 per barrel over the period, based on Fitch's price deck. The lower oil prices would hit EBITDA from upstream oil and gas production, which form the majority of Pertamina's consolidated EBITDA. We also forecast large dividend payments, negative FCF and a rise in debt over 2025-2027.
Large-Scale Output, Healthy Reserves: Pertamina, through upstream subsidiary PT Pertamina Hulu Energi (PHE, BBB/Stable), has a high output of around 1 million barrels of oil equivalent (boe) per day. PHE also has substantial proved oil and gas reserves of 2.4 billion boe, with a reserve life of around eight years. We forecast production to grow at low single-digit rates in the next three years. Higher domestic oil and gas output is a priority for the government, but many of PHE's assets are facing a natural decline in output. We expect PHE to incur higher spending on field development and M&A in the next few years to raise output.
Timely Compensation to Continue: We expect Pertamina, through fuel distribution and trading subsidiary PT Pertamina Patra Niaga (PPN, AAA(idn)/Stable), to continue receiving compensation for the sale of certain grades of gasoline and diesel substantially in full. The compensation dues are assessed quarterly and the government generally pays PPN two to six months from the quarter's end. Compensation depends on the government's budgetary capacity, and carries some risk compared with subsidy payments for fuels, such as kerosene and liquefied petroleum gas, which are mandated by regulation.
Refinery Capacity Enhancements: Oil refining subsidiary PT Kilang Pertamina Internasional (KPI, BBB/Stable) aims to add 100,000 barrels per day (bpd) to its 1 million bpd refining capacity by September 2025. The expansion will also improve KPI's average Nelson Complexity Index, increasing its flexibility to optimise product and crude feedstock mix. We expect KPI to take on more projects to enhance refining and petrochemical capacity. However, we do not incorporate any large greenfield refinery projects in our forecast due to significant uncertainty.
Peer Analysis
Pertamina's assessment of the likelihood of government support under Fitch's GRE criteria can be compared with that of peers such as Malaysia's Petroliam Nasional Berhad (PETRONAS, BBB+/Stable, SCP: aa-), Thailand's PTT Public Company Limited (BBB+/Stable; SCP: bbb+) and India's Oil and Natural Gas Corporation Limited (ONGC, BBB-/Stable; SCP: bbb+).
Fitch thinks the state's responsibility to support Pertamina is stronger than for peers, based on an assessment of 'Very Strong' for the factors of parental decision-making and oversight, and precedents of support. The government's strong influence over Pertamina's pricing of downstream products and the subsidy and compensation payments it receives for its public-service obligation differentiates Pertamina from peers. The weaker state control and support for peers result in factor assessments of 'Strong'.
Pertamina shares the 'Very Strong' assessment for preservation of the government's policy role and contagion risk with PETRONAS and PTT. The three GREs are very important to their respective states' energy security and are widely regarded as reference issuers for their respective sovereigns. The assessment of 'Strong' for ONGC is based on the company's lower share of domestic oil and gas supply and the presence of several other GREs in India that are regarded as high profile for the government.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
- Average Brent price of USD65/barrel during 2025-2027, based on Fitch's price deck;
- Total oil and gas production growth of 2% in 2025, 3% in 2026 and 4% in 2027;
- EBITDA per unit production declines to USD12/boe by 2027, from USD15/boe in 2025 (2024: USD19/boe);
- Refinery crude throughput of around 335 million barrels in 2025, increasing to around 370 million barrels by 2027;
- Gross refining cash profit per barrel of crude throughput of USD2.0 in 2025, improving to USD2.5 in 2026 and USD3.0 in 2027;
- Petroleum product sales volume CAGR of 1% over 2025-2027;
- Compensation for selling gasoline and diesel below market prices received substantially in full, albeit with some delay;
- Average annual capex, including acquisition-related outflow, of USD9.2 billion during 2025-2027;
- Annual dividend payments of USD1 billion during 2025-2027.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
- Negative rating action on the sovereign
- Significant weakening of the likelihood of state support
Factors that could, individually or collectively, lead to positive rating action/upgrade:
- Positive rating action on the sovereign, provided there is no significant weakening in the likelihood of government support
For the sovereign rating of Indonesia, the following sensitivities were outlined by Fitch in a rating action commentary on 11 March 2025:
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
- Public Finances: A material increase in the overall public debt burden closer to the level of 'BBB' category peers, resulting, for example, from a substantial rise in fiscal deficits, or materialisation of contingent liabilities.
- External Finances: A sustained decline in FX reserve buffers, resulting, for example, from outflows stemming from deterioration in investor confidence or large FX interventions.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
- Public Finances: A marked improvement in the government revenue ratio closer to the level of 'BBB' category peers, including from better tax compliance or a broader tax base, which would strengthen public finance flexibility.
- External Finances: A material reduction in external vulnerabilities, for instance, through a sustained increase in FX reserves or lower exposure to commodity price volatility.
- Structural: Significant improvement in structural indicators, such as governance standards, closer to those of 'BBB' category peers.
Liquidity and Debt Structure
The Pertamina group had consolidated cash of around USD15 billion as of end-2024, significantly higher than 2025 debt maturities of around USD3 billion. Pertamina has a further USD2 billion of debt maturing in 2026. We estimate that cash would be sufficient to repay the debt due in 2025 and 2026 despite negative FCF.
At the holding-company level, Pertamina had cash of USD7 billion as of end-2024, significantly higher than the total debt due in 2025-2026 of USD2 billion. The group's liquidity and financial flexibility are also supported by robust banking access.
Issuer Profile
Pertamina is Indonesia's integrated national oil and gas company, whose businesses include upstream oil and gas production, midstream gas transmission and distribution, and downstream refining, petrochemicals and fuel retail. Pertamina has the state mandate to distribute subsidised fuel in the country.
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.
Public Ratings with Credit Linkage to other ratings
Pertamina's IDR is equalised with Indonesia's sovereign rating.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts 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.
ESG Considerations
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)
