Fitch Affirms LLPL Capital's (Lestari Banten Energi) Notes at 'BBB-'; Outlook Stable

(Fitch Ratings - Hong Kong - 23 Oct 2025)--Fitch Ratings has affirmed the 'BBB-' rating on the USD775 million of 6.875% notes due 2039 that are guaranteed by Indonesia-based PT Lestari Banten Energi (LBE). The Outlook is Stable. The notes are issued by LLPL Capital Pte. Ltd., a Singapore-domiciled SPV that is wholly owned by Lestari Listrik Pte. Ltd. (LLPL), which has a 95% stake in LBE.

RATING RATIONALE

The affirmation reflects the notes' credit profile, which is underpinned by the predictable revenue stream from LBE's 25-year power-purchase agreement (PPA) with PT Perusahaan Listrik Negara (Persero) (PLN, BBB/Stable), which expires in 2042. The credit profile is further supported by a mechanism to pass-through fuel costs to PLN with a performance requirement, the use of commercially proven technology and LBE's veteran management team.

LBE's financial profile under the Fitch rating case demonstrates an average debt-service coverage ratio (DSCR) of 1.37x (previously 1.38x), with a minimum DSCR of 1.15x (previously 1.17x). The DSCR is commensurate with the 1.3x 'BBB-' rating threshold that applies to projects with a 'Stronger' revenue risk attribute, in accordance with Fitch's Thermal Power Project Rating Criteria.

KEY RATING DRIVERS

Proven Technology, Experienced In-House O&M: Operation Risk - Midrange

The cost-plus operation and maintenance (O&M) structure places cost volatility risk with the plant. However, LBE employs conventional commercially proven technology and benefits from a well-budgeted O&M plan, validated by an independent engineer and carried out by an experienced in-house team. Protection is also provided by a six-year, extendable service agreement with the engineering, procurement and construction contractor, Harbin Electric International Co. Ltd., which was renewed in March 2025.

LBE has underperformed the PPA heat-rate targets since commissioning in 2017. While recent data indicate improvement, Fitch considers sustained heat-rate gains ambitious given the historical record. However, the plant benefits from its strong position on PLN's Java-Bali grid merit order.

Coal Cost Pass-Through: Supply Risk - Midrange

LBE has coal-supply agreements with two reputable Indonesian coal producers, PT Kideco Jaya Agung and PT Antang Gunung Meratus. The agreements secure coal supply until 2031, ahead of the note maturity, but the presence of multiple reputable suppliers mitigates residual exposure. Prices are tied to the benchmark price of Indonesian thermal coal and adjusted for specifications as received. The pricing mechanism aligns with PPA provisions on passing coal costs through to PLN via energy payments. However, the effectiveness of this mechanism depends on maintaining the specified fuel efficiency.

Robust Long-Term PPA: Revenue Risk - Stronger

LBE's 25-year, fixed-price, availability-based take-or-pay PPA with PLN insulates cash flow from demand volatility and merchant risk. Capacity payments are determined by net dependable capacity and plant availability, independent of dispatch, and are structured to cover debt service, fixed O&M costs (US dollar and rupiah, indexed), Indonesian taxes, and returns on capital. Energy payments are based on net energy output and cover variable O&M costs (US dollar and rupiah, indexed) with pass-through of actual fuel costs referenced to specified heat rates. As a result, cash flows are largely independent of dispatch through contract expiry in 2042, which extends beyond the debt tenor.

Termination provisions are another strong feature of the PPA. These provide for a buy-out price that is sufficient to cover the repayment of the outstanding notes under non-remediable events at PLN, government action or inaction, and PLN's exercise of a purchase option. These attributes lead to a 'Stronger' revenue assessment.

Fully Amortising Project-Financing Debt: Debt Structure - Midrange

The fixed interest-rate notes are fully amortising, with typical project-finance structural projections. These include a six-month debt service reserve, a major maintenance reserve, secured accounts and a standard cash flow waterfall in addition to an adequate security package for noteholders. The notes further benefit from a distribution lockup covenant of 1.2x DSCR although it is only backward looking, a 'Midrange' feature.

Financial Profile

Fitch's metric analysis focuses on the average and minimum DSCR due to the fully amortising nature of the debt and definite term of the PPA, which terminates in 2042.

Fitch's base case largely follows management's forecast on key operating assumptions except heat rate, which is projected to be 4% above the PPA's target, and factors in Fitch's macroeconomic assumptions for US CPI, Indonesia CPI and exchange rates. The DSCR profile averages 1.43x (previously 1.43x), with a minimum of 1.20x (previously 1.22x).

Fitch's rating case applies a combination of stresses on heat rate that is 5.5% above the PPA's target, and a 12% increase on the operating costs and capex in accordance with Fitch's Thermal Power Project Rating Criteria. The DSCR profile averages at 1.37x (previously 1.38x), with a minimum of 1.15x (previously 1.17x).

PEER GROUP

LBE compares well to PT Paiton Energy, which guarantees the notes issued by Minejesa Capital BV (senior secured notes: BBB-/Stable). Paiton, located in eastern Java, is Indonesia's second-largest independent power producer, with a net installed capacity of 2,045 megawatts for its three-unit power complex. One of Paiton's three units uses supercritical pulverised coal technology.

Both projects benefit from long-term PPAs with fuel costs effectively passed through to the off-taker, PLN, and are run by experienced operation teams. Paiton has a longer proven operating record and greater economies of scale through its three units, while LBE is more susceptible to a loss of availability due to its single-unit configuration, which does not provide for redundancy. Nevertheless, LBE demonstrates better foreign-exchange risk mitigation, as it is not exposed to currency mismatch between revenue and debt service, while there is a minor mismatch at Paiton.

RATING SENSITIVITIES

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

Projected average annual DSCR drops below 1.3x in Fitch's rating case on a sustained basis;

A downgrade of the rating of PLN, the counterparty to the PPA, to below 'BBB-' or a revision of the revenue risk assessment for LBE to 'Midrange' due to cash flow instability.

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

Projected average annual DSCR stays above 1.4x in Fitch's rating case on a sustained basis, provided the revenue risk assessment remains 'Stronger'.

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.

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)