Fitch Affirms Pertagas at 'AA+(idn)'; Outlook Stable

(Fitch Ratings - Jakarta - 06 Apr 2026)--Fitch Ratings Indonesia has affirmed PT Pertamina Gas' (Pertagas) National Long-Term Rating at 'AA+(idn)'. The Outlook is Stable.

We equalise Pertagas' rating with that of parent PT Perusahaan Gas Negara (Persero) Tbk (PGN, BBB-/AA+(idn)/Stable), which owns 51% of the subsidiary, under Fitch's Parent and Subsidiary Linkage Rating Criteria. We see 'High' strategic incentives and 'Medium' operational incentives for PGN to support Pertagas, despite a reassessment of the legal incentives to 'Low'. This leads to equalization approach under our criteria because Pertagas' standalone credit profile (SCP), at 'aa(idn)', is only one notch below PGN's rating.

We expect support to flow from the ultimate parent, PT Pertamina (Persero) (BBB/Negative), through PGN. This reflects Pertagas' role in Indonesia's gas infrastructure and its importance to energy security.

'AA' National Ratings denote expectations of a very low level of default risk relative to other issuers or obligations in the same country or monetary union. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.

Key Rating Drivers

'High' Strategic, 'Medium' Operational Support Incentives: Fitch expects Pertagas to remain central to PGN's strategy in Pertamina's gas operations and to support other upstream businesses under the parent. Pertagas' gas transmission network provides critical competitive advantage to PGN and gives PGN broad end-market access and reasonable operating benefits through capital-intensive gas infrastructure. Fitch expects Pertagas to contribute about 35%-40% of PGN's consolidated EBITDA in 2026-2028 (2025: 45%).

'Low' Legal Support Incentives: We have reassessed PGN's legal support incentive to 'Low', from 'Medium', as Pertagas' joint borrowing facility with PGN will no longer carry joint and several liability. Instead, the facility now is based on several liabilities. This shift is aligned with the wider Pertamina group's policies. PGN currently does not provide corporate guarantees, apply joint and several liability clauses, or have any cross-default linkage with Pertagas.

Negative FCF; Net Cash: We forecast Pertagas to post negative free cash flow (FCF) in 2026-2028 after generating positive FCF in the past four years. This is driven by our expectation of higher capex. Project spending still carries timing and size risk. We also assume dividends stay high at 100% of prior-year net profit, in line with 2024-2025. Pertagas started 2026 with strong cash and no debt at end-2025, giving it room to absorb higher spending. We therefore expect Pertagas to retain a net cash position through 2028.

Manageable Middle East Conflict Impact: A prolonged Strait of Hormuz disruption could raise input costs for the gas distribution business, but Pertagas' strong financials and low leverage provide sufficient buffer. The gas transportation business carries ship-or-pay clauses with regulated tariffs, which allow for cost pass-through. Also, the Rokan oil pipeline in Indonesia contributes 85%-90% of Pertagas's oil transportation volumes and earns fixed lump-sum tariffs. A large part of the gas supply is sourced domestically from ultimate parent Pertamina.

Regulated Gas Transportation Tariffs: Fitch expects gas transportation to remain Pertagas' largest revenue source, at 35%-40% of revenue in 2026-2028 (2025: 38%). Regulated gas transportation tariffs, based on infrastructure spending and operating costs, keep margins stable and support reasonable pipeline returns. Most of the transportation contracts are for 10 to 20 years and ship-or-pay clauses cover 90% of reserved capacity, supporting revenue visibility. A longer record from newer pipelines under this framework would strengthen Pertagas' SCP.

Earnings to Normalise: We project EBITDA margin to settle at 35%-40% in 2026-2028 (2025: 45%). We believe the 2025 margin increase is temporary, driven by timing effects in customer pass-through in gas distribution spread as Pertagas passed higher input costs to customers during gas shortages. Some gas processing fees, including the LNG Gassing Up and Cooling Down services, remain linked to commodity prices. We expect higher own-use fuel costs to slightly reduce gas processing margins over the medium term.

Contracted Infrastructure Revenues: Apart from gas transportation, a significant share of revenue is from lump-sum, fixed-tariff and take-or-pay contracts, mainly in oil transportation and regasification. This limits exposure to short-term volume swings. We expect these revenues to account for 20%-25% of revenue in 2026-2028 (2025: 21%). Strong counterparties, including Pertamina group companies and PT Perusahaan Listrik Negara (Persero) (BBB/Negative), add to revenue visibility.

Leader in Gas Infrastructure: We believe Pertagas maintains a strong position in Indonesia's gas infrastructure sector. The company owns and operates the country's longest gas transmission pipeline. It also holds a leading position in oil and gas transportation services. Its portfolio spans regasification, LPG, LNG, and fuel infrastructure. This breadth raises barriers to entry and supports earnings resilience.

Peer Analysis

Pertagas' rating can be compared with that on PGN. PGN's rating sits one notch below its parent, Pertamina. We base this on our view that Pertamina has 'Medium' strategic, legal, and operational incentives to support PGN. PGN's legal linkage are 'Medium' because as a material subsidiary of Pertamina, a default on PGN's debt could trigger cross-default clauses in Pertamina's senior unsecured notes. In contrast, we assess PGN's legal incentives to support Pertagas as 'Low' in the absence of guarantee, cross default, or other legal ties for Pertagas' debt.

We see Pertagas as more strategically important to PGN than PGN is to Pertamina. Pertagas adds meaningful earnings and owns infrastructure that strengthens PGN's competitive position, driving PGN's 'High' strategic incentive to support Pertagas. On the other hand, Pertamina's larger scale limits PGN's financial contribution, even though PGN remains important as the gas holding arm of the parent, resulting in a 'Medium' assessment for PGN on this factor.

Operational incentives for both PGN and Pertagas are 'Medium', reflecting parental control over key management appointments and reasonable operating synergies.

Pertagas' SCP of 'aa(idn)' is comparable to that of PGN. PGN operates on a larger scale than Pertagas, but the subsidiary has a stronger business profile. Regulated gas transportation tariffs, long-term oil and gas transportation contracts and ship-or-pay clauses support Pertagas' revenue visibility. In contrast, PGN faces greater margin pressure from regulatory price caps. Still, both entities have strong financial profiles.

Fitch’s Key Rating-Case Assumptions

- Gas transport volume to increase by about 5% in 2026, decline by about 10% in 2027, before increasing by about 5% in 2028 (2025: 4%), reflecting normalisation after a tight market and only limited contribution from new pipeline projects before 2028.

- Oil transport volume to increase by about 5% in 2026, then decline by about 5% in 2027 and remain broadly flat in 2028 (2025: 8%), reflecting natural decline at Tempino-Plaju.

- EBITDA margin of 35%-40% in 2026-2028 (2025: 45%), reflecting softer processed gas and gas distribution margins.

- Capex of about USD75 million in 2026, around USD250 million-300 million in 2027, and around USD350 million-400 million in 2028 for expansion projects (2025: USD66 million), driven by the ramp-up of major pipeline and LPG infrastructure projects.

- Dividend payout ratio of 100% in 2026-2028, in line with the recent record.

RATING SENSITIVITIES

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

Negative rating action on PGN or a material weakening of PGN's incentives to support Pertagas.

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

Positive rating action on PGN, provided that PGN's incentives to support Pertagas remain intact.

Liquidity and Debt Structure

Pertagas ended 2025 with USD658 million in cash and no debt. We expect its existing cash and operating cash flows to fully fund operations and capex through 2027 with no new borrowing required. Fitch anticipates Pertagas will incur modest new debt each year in 2028 and 2029 to fund rising capex for large infrastructure projects, including gasification pipelines and LPG-related infrastructure.

Issuer Profile

Pertagas operates in gas and oil transportation, gas processing and storage and gas distribution in Indonesia, managing 2,930 km of gas pipelines and 605 km of oil pipelines. Pertagas' ultimate parent, Pertamina, is the state-owned national oil and gas company.

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

Pertagas's rating is directly linked to the rating of its parent company, PGN. A change in PGN's rating would result in a change in the rating of Pertagas.

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. (ends)