Fitch Affirms Minejesa Capital BV's (Paiton Energy) Notes at 'BBB-'; Outlook Stable

(Fitch Ratings - Singapore/Hong Kong - 03 Nov 2025)--Fitch Ratings has affirmed the ratings on Minejesa Capital BV's USD2.1 billion notes at 'BBB-'. The Outlook is Stable.

The notes are guaranteed by PT Paiton Energy, an entity that is controlled by the same shareholder as Minejesa, and consist of USD1.2 billion 4.625% notes due 2030 and USD900 million 5.625% notes due 2037.

RATING RATIONALE

The rating reflects Indonesia-based Paiton's revenue that is insulated from merchant-market exposure due to its long-term take-or-pay power purchase agreement (PPA) with PT Perusahaan Listrik Negara (Persero) (PLN, BBB/Stable), which expires in 2042. The rating is also supported by effective pass-through of fuel cost to the off-taker, Paiton's solid operational record, the use of commercially proven technology and a stable financial profile under the Fitch rating case that is commensurate with the rating.

KEY RATING DRIVERS

Favourable Long-Term PPA: Revenue Risk - Stronger

Paiton's long-term PPA includes capacity payments tied to the plant's available capacity that cover debt service and fixed operating costs beyond the debt tenor, providing revenue visibility and insulating the project from electricity demand volatility and merchant risk. The PPA also provides energy payments for variable operation and maintenance (O&M) and fuel costs based on contracted heat rates and permits cost pass-through for environmental legislation and permit changes. Termination provisions are assessed as 'Stronger' than those of peer projects.

Paiton's cash flow is independent of PLN's dispatch levels, another 'Stronger' attribute. A portion of Unit P3's capacity payment is indexed to the Japanese yen until 2029, creating a mismatch between Paiton's revenue and the servicing of the 2030 notes, which we view as a 'Weaker' feature. However, yen exposure is limited to the 2030 notes and represents about 13% of Paiton's total capacity payments. Currency mismatch for the 2037 notes is restricted to interest payments, as principal amortisation begins in 2032 after the yen indexation expires.

Experienced Shareholder-Owned Operator: Operation Risk - Midrange

Paiton's coal-fired power units have an established operational record using conventional proven supercritical technology. O&M is performed in-house by an entity owned by Paiton's shareholders, ensuring strong alignment of interests. The expense forecast has been validated in a desktop review by an independent technical advisor, Leidos.

Indonesia's extensive fleet of coal-fired plants also suggests adequate availability of alternative operators, if needed. That said, operational risk is assessed at 'Midrange', reflecting moderate historical cost variability and the cost-plus structure of the O&M contract.

Fuel Cost Pass-Through: Supply Risk - Midrange

Paiton maintains supply contracts with primary coal vendors, including two of Indonesia's largest producers. These contracts are shorter than the debt tenor and lack delivery liquidated damages, but risk is mitigated by the depth of the domestic coal market and the presence of reputable suppliers. The coal pricing mechanism aligns with the PPA, passing coal costs through to PLN via energy payments, subject to meeting the specified fuel-efficiency (heat-rate) requirements.

The PPA also permits Paiton to source alternative coal in the event of supply disruptions. If such disruptions increase costs, Paiton is entitled to reimbursement from PLN, provided it complies with requirements to minimise the impact.

Fully Amortising Debt: Debt Structure - Midrange

The notes are fully amortising with a fixed rate. The notes due in 2030 started to amortise in 2024 and the notes due 2037 will start to amortise from 2032. Covenants include limitations on indebtedness, business activities and asset disposals. The notes do not benefit from a default covenant, but this is partly offset by maintenance of a debt-service reserve account covering the next six months of debt servicing.

The notes also benefit from a distribution lockup covenant of 1.2x the debt service coverage ratio (DSCR), though it is only backward-looking and there is no cash sweep mechanism in place. The attributes are collectively aligned with a 'Midrange' assessment.

Financial Profile

Fitch's metric analysis focuses on the minimum and average profile DSCRs as the debt is fully amortising. The average DSCR excludes years when debt is not amortised.

Paiton's profile annual DSCR under Fitch's base case averages 1.51x with a minimum DSCR of 1.37x (previously 1.52x and 1.35x, respectively, in our November 2024 review). The Fitch rating case incorporates a number of stresses on availability (-5% from sponsor case), heat rate (Unit 7/8: 4.8% above PPA target and Unit 3: 1.5% above PPA target), operating costs (10% above sponsor case) and capex (25% higher for unit 7/8 and 15% higher for unit 3 than sponsor case), which results in average annual DSCR of 1.38x and minimum DSCR of 1.22x (previously 1.38x and 1.20x, respectively).

Achieved average and minimum DSCRs under the Fitch rating case based on the individual notes' amortisation profile are as follows:

- Notes due 2030: 1.41x average annual DSCR and 1.22x minimum DSCR (previously 1.43x and 1.20x, respectively).

- Notes due 2037: 1.34x average annual DSCR and 1.21x minimum DSCR (previously 1.33x and 1.27x, respectively).

PEER GROUP

Paiton's closest peer is PT Lestari Banten Energi (LBE). The senior notes guaranteed by LBE are issued by LLPL Capital Pte. Ltd. and rated 'BBB-' with a Stable Outlook. LBE is an independent power producer in Indonesia's Banten province, western Java, with installed capacity of 635MW (nett) and 670MW (gross). The project consists of a single unit that started operations in March 2017. LBE is also a critical base-load electricity producer to PLN's Java-Bali grid, serving Banten and the greater Jakarta regions.

Similar to Paiton's Unit P3, LBE also uses supercritical pulverised coal technology. Both projects benefit from long-term PPAs signed with PLN, which effectively pass fuel costs through to PLN based on a contracted heat rate and are run by experienced operational teams. Paiton further benefits from its first-generation PPA that has a few more favourable terms than LBE's PPAs, but these do not result in rating differences.

Paiton has a longer operating history and better economies of scale as it has three units in its structure. LBE has a shorter operating record and greater susceptibility to availability loss because it has only one unit that does not provide any redundancy. Nevertheless, LBE is not exposed to a currency mismatch between revenue and debt servicing as both are denominated in US dollars. LBE's metrics under Fitch's rating case show an average and minimum DSCR of 1.37x and 1.15x, respectively.

RATING SENSITIVITIES

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

- Projected average annual DSCR dropping below 1.30x in Fitch's rating case

- A downgrade of PLN's rating to below 'BBB-' or revision of Paiton's revenue risk assessment to 'Midrange'

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

- Average annual DSCR sustained above 1.40x in Fitch's rating case, provided the revenue risk assessment remains 'Stronger'

CREDIT UPDATE

Paiton's actual average availability factor for Units P7/8 and P3 rose to 85.6% and 96.0%, respectively, in 7M25 (7M24: 84% and 90.9%). All units outperformed the projected average PPA availability at 81.3% and 92.2% for Units P7/8 and P3, respectively.

Unit P3's average heat rate performance was in line with the contracted PPA in 7M25, while in 2024 it was 0.21% better than the contracted requirement. Units P7/8's was 3.62% above that contracted in the PPA, a slight improvement from 2024's 3.8%. The higher-than-contracted heat rate for P7/8 was due mainly to forced outages as the company needed a period for fine tuning after implementing a fix for each outage.

Paiton has completed the first stage of its coal switch programme in Units P7/8 to resolve operational issues caused by varying coal-supply specifications. The change means the units are enabled to use lower-grade coal with higher sulphur content.

Cash flow in 2025 and 1H25 was used to service debt with no breaches. The 1H25 DSCR was 1.68x.

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)