Fitch Affirms Indonesia's Perusahaan Listrik Negara at 'BBB'; Outlook Negative

(Fitch Ratings - Hong Kong - 15 Jun 2026)--Fitch Ratings has affirmed Indonesia-based PT Perusahaan Listrik Negara (Persero)'s (PLN) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB'. The Outlook is Negative. Fitch has also affirmed the senior unsecured rating on PLN's medium-term note programme, the notes issued under the programme, and the US dollar notes issued by Majapahit Holding BV, which are guaranteed by PLN, at 'BBB'.

PLN's ratings are equalised with those of Indonesia (BBB/Negative) under Fitch's Government-Related Entities Rating Criteria, reflecting a very strong likelihood of state support. The Standalone Credit Profile (SCP) is 'bbb-'. It reflects PLN's record of timely subsidy and compensation receipts, a steady regulatory environment, and Fitch's expectation that EBITDA net leverage will remain below 4.0x.

Key Rating Drivers

Strong Links with Government: We evaluate the sovereign's involvement in PLN's decision-making and oversight as 'Very Strong'. The state fully owns PLN, appoints its board and senior management, and directs and approves investments. PLN serves as the nation's electricity company, meeting the state's public-service obligation by selling power at government-controlled prices.

We assess the precedents of support from the sovereign as 'Very Strong'. The government supports PLN through numerous mechanisms, including subsidy reimbursements for electricity sold at controlled prices. The government provided equity of IDR5 trillion annually in 2020, 2021 and 2022, and guarantees about one-fifth of the company's borrowings.

High Incentive to Provide Support: We view PLN's role in preservation of government policy as 'Very Strong', as it accounts for about 61% of Indonesia's power generation capacity and is its sole power wholesaler. A default would disrupt power supply nationwide as PLN would find it difficult to procure feedstock for generation and power from independent producers.

We assess the contagion risk as 'Very Strong'. A default by PLN would significantly affect the availability and cost of funding for the state and other state-owned companies. We also consider PLN a reference issuer in Indonesia.

Moderate Leverage, Higher Capex: We expect PLN's capex to stay high at IDR125 trillion-142 trillion a year in 2026-2028, on generation, transmission, grid strengthening and energy-transition investments. The investments will keep PLN reliant on external funding and medium-term free cash flow (FCF) is likely to remain negative. We expect EBITDA net leverage to decline in 2026 after rising to 4.3x at end-2025 due to delayed compensation receipts. Thereafter, net leverage is likely to rise towards 4.0x by 2028, which we view as commensurate with the current SCP.

Robust Reimbursement Mechanism: PLN recovers operating and financing costs, earns a predetermined margin and partly covers investment costs through below-cost tariffs and government reimbursements via subsidies and compensation. Subsidy payments have been made broadly monthly with compensation moving to monthly payment of 70% (remaining 30% paid after the annual audit process) from quarterly settlement in full, from 19 November 2025. Compensation receipts were slower during the transition to the new mechanism in 2025, but the mechanism operated broadly on time in early 2026, supporting our view that weaker cash conversion in 2025 was temporary.

Reliance on Subsidies and Compensation: We expect subsidies and compensation income to remain critical for PLN to sustain operations in the medium term. PLN had IDR200 trillion of subsidies and compensation income in 2025 (EBITDA: IDR93 trillion). The Iran conflict has increased energy prices, but we expect the effect on PLN to be limited given the high share of coal in its generation mix, relatively modest increase in domestic coal prices, long-term fuel procurement and government support under a cost-plus framework with a 7% return.

Demand Aligned with Economic Growth: We expect Indonesia's electricity demand growth to be broadly in line with Fitch's GDP growth forecasts. We expect stable domestic demand, due to public spending on the key social assistance measures and infrastructure projects.

Peer Analysis

Electricity Generating Authority of Thailand (EGAT, BBB+/Negative) and Korea Electric Power Corporation (KEPCO, AA-/Stable) have state linkages comparable with those for PLN. EGAT and PLN have 'Very Strong' assessments for decision-making and oversight, as they are wholly state-owned entities and their strategies, operations and investment are highly controlled and influenced by the respective governments. The assessment is 'Strong' for KEPCO as the sovereign owns around 51% and is less involved in business and policy decisions.

EGAT and KEPCO are assessed to have 'Strong' precedents of support. Government support to EGAT is infrequent due to its financial strength, but should be forthcoming due to its strategic importance in Thailand's power sector. The South Korean government has directed banks to provide liquidity to KEPCO, and we believe direct support from government would be likely if needed. PLN is assessed at 'Very Strong', as it receives government support through various mechanisms for electricity sold under the state's public-service obligation mandate.

PLN's, EGAT's and KEPCO's 'Very Strong' assessments for preservation of government policy role reflect their significant majority in electricity generation in their respective countries, and their ownership of the entire transmission and distribution network. Hence their defaults would severely disrupt the entire energy value chain in their respective countries.

The 'Very Strong' assessment of contagion risks for all three entities reflects our expectation that a default would affect the availability and cost of financing for the state and other GREs, as all three are key borrowers in their respective countries.

State-owned PT Pertamina (Persero)'s (BBB/Negative) ratings are also equalised with those of the sovereign with similar assessment as PLN. Pertamina, Indonesia's national oil company, has a near monopoly in refining and retailing petroleum products and accounts for a significant share of the country's crude output. Like PLN, Pertamina performs a government-directed public-service obligation, which in this case is by selling refined products at below-market prices set by the state.

Fitch’s Key Rating-Case Assumptions

-- Electricity sales to increase by around 5% annually

-- Cost of coal in line with Fitch's price deck subject to the Indonesian government's price cap for domestically purchased coal

-- Average tariff to increase in 2026 and stay flat thereafter

-- Continued appropriate reimbursements for selling electricity below cost

-- Annual capex of IDR125 trillion-142 trillion

-- Annual dividend payout of IDR2 trillion

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 ('bbb', lower), sector characteristics ('bbb+', moderate), market and competitive positioning ('bbb', moderate), diversification and asset quality ('a-', lower), company operational characteristics ('bbb+', moderate), profitability ('bb+', higher), financial structure ('bbb', moderate), and financial flexibility ('a-', moderate).

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

The governance assessment of 'good' has no impact.

The operating environment assessment of 'bbb-' has no impact.

The SCP is 'bbb-'.

To derive the Long-Term IDR:

Application of Fitch's Government-Related Entities Rating Criteria results in an equalized approach.

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 support from government, including weaker government links or lower government reliance on PLN for policy implementation, although we see this as a remote prospect in the medium term.

Factors that Could, Individually or Collectively, Lead to a Stable Outlook:

- The Outlook will be revised to Stable if the Outlook on the sovereign's IDR is revised to Stable, 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 our Rating Action Commentary of 4 March 2026:

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

- Macro: Buildup of macroeconomic vulnerabilities, for example from a further weakening of policy framework.

- Public Finances: A material increase in the overall public debt burden, resulting, for example, from a substantial rise in fiscal deficits, or materialisation of contingent liabilities.

- External Finances: A sharp decline in FX reserve buffers, resulting, for example, from outflows stemming from deterioration in investor confidence or further weakening in governance.

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

- Macro: Increased confidence that disciplined policies will continue to support macroeconomic stability, which could lead to a revision of the Outlook to Stable.

- 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.

Liquidity and Debt Structure

PLN's cash balance of IDR42 trillion at end-December 2025, along with its robust access to funding, was adequate to meet its short-term debt maturities of around IDR64 trillion. PLN also benefits from well-spread-out debt maturities, with average annual maturities of below IDR42 trillion. We expect PLN to generate about IDR81 trillion-115 trillion in annual cash flow from operations during 2026-2028, but to remain reliant on external funding for its large annual capex plan. We believe it can secure adequate funding due to its close links with the sovereign.

Issuer Profile

PLN is Indonesia's integrated electric utility company and is wholly owned by the state. It has a monopoly over power transmission and distribution, and accounts for about 61% of the country's total installed generation capacity of 80GW as of end-2025. The company also purchases power from independent producers for distribution across 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

The ratings of PLN are linked directly to the credit quality of its parent, the Indonesian sovereign. A change in Fitch's assessment of the credit quality of the parent would automatically result in a change in the rating on PLN.

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 results of our Climate.VS screener did not indicate an elevated risk for PT Perusahaan Listrik Negara (Persero).

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)