Fitch Affirms Perusahaan Gas at 'BBB-'/'AA+(idn)'; Outlook Stable

(Fitch Ratings - Hong Kong/Jakarta - 02 Apr 2026)--Fitch Ratings has affirmed Indonesia-based PT Perusahaan Gas Negara (Persero) Tbk's (PGN) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB-'. The Outlooks are Stable. At the same time, Fitch Ratings Indonesia has affirmed PGN's National Long-Term Rating at 'AA+(idn)' with a Stable Outlook.

PGN's IDRs are one notch below those of its immediate parent, PT Pertamina (Persero) (BBB/Negative), based on our assessment of 'Medium' strategic, operational, and legal incentives for Pertamina to support PGN, under Fitch's Parent and Subsidiary Linkage Rating Criteria. PGN's National Rating is also based on the same criteria. We assess PGN's Standalone Credit Profile (SCP) at 'bb+'/'aa(idn)'.

The Stable Outlook on PGN reflects our assessment that the issuer's rating will be equalised with the rating of its immediate parent, Pertamina, if the parent's rating is downgraded by one notch to 'BBB-', provided PGN's SCP remains at 'bb+', based on our PSL criteria.

'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

Medium Support Incentives: We believe Pertamina has a 'Medium' strategic incentive to support PGN, which owns most of Indonesia's gas infrastructure and is key to state efforts to expand gas use. PGN has moderate growth potential, supported by strong demand for distributed gas, but domestic gas shortages and limited supply constrain growth. Distribution volumes should rise as supply constraints ease. Still, PGN's financial contribution to Pertamina is likely to remain modest, at below 10% over the medium term, given the parent's much larger scale.

We also assess Pertamina's legal and operational incentives to support PGN as 'Medium'. PGN is a material subsidiary under the cross-default provisions of Pertamina's senior unsecured notes, and Fitch believes these provisions apply to most of PGN's debt. Pertamina appoints most of PGN's directors and senior management. PGN's gas infrastructure is strategically important to Pertamina's role as an integrated oil and gas company, and PGN also benefits from access to a significant portion of its gas supply from Pertamina at competitive rates.

LNG to Bridge Supply Gap: PGN will continue to ramp up the volume of liquefied natural gas (LNG) to fill the gap between rising domestic demand and declining domestic gas production. LNG represented 12% of PGN's total gas supply in 2025, and the company expects this to rise to around 20% in 2026. We therefore forecast PGN's distribution volumes to recover by about 2.5% in 2026, following a decline of about 2% in 2025 due to lower domestic production and limited alternative supplies.

PGN's LNG supply is unlikely to be disrupted by the current Middle East conflict, as it sources LNG domestically from Pertamina. PGN's input costs may rise alongside global prices, but Pertamina's feedstock price cap and PGN's ability to pass through the remaining costs should limit the impact. Indonesia remains a net LNG exporter, although the government has increasingly redirected LNG exports to the domestic market to support energy security, in 2025. PGN requires about 20 LNG cargoes in 2026, with 14 already delivered from domestic sources by early March.

Price Caps Constrain Margins: We expect PGN's gas distribution spreads to remain modest, averaging about USD1.9 per one million British thermal units (mmbtu) over the next four years (2025: USD1.9/mmbtu; 2024: USD2.0/mmbtu). This reflects a substantial volume of gas distributed to special industries subject to regulated price caps, as well as higher gas procurement costs under new contracts. Current regulations cap selling prices for certain industries - mostly at USD6.5-7.0/mmbtu for pipeline gas and up to USD11.31/mmbtu for LNG - through 2029. We expect actual volume delivered to special industries to account for about 30%-40% of total distribution.

Regulatory Risks Constrain SCP: PGN's SCP is constrained by regulatory risk in Indonesia's gas distribution and transmission sector, which offsets its dominant domestic market position. Regulatory changes could significantly affect PGN's profitability.

Conservative Financial Metrics: Fitch expects PGN to remain in a net cash position in 2026-2029, as in recent years, supported by stable earnings from gas distribution and transmission and diversification from its upstream business and LNG trading. We expect annual EBITDA of around USD850 million in 2026-2029, even under the current price-cap regulation. We expect PGN's capex to rise gradually over USD600 million in 2029, from around USD200 million in 2025, mainly for its distribution, transmission and upstream businesses.

Upstream Segment Remains Supportive: The operating profile of PGN's wholly owned upstream subsidiary, PT Saka Energi Indonesia, continues to support PGN's cash flow amid steady prices and volumes. We estimate Saka's EBITDA contribution at around USD180 million in 2026, representing just over 20% of PGN's consolidated EBITDA, and expect it to remain at 20% on average over the medium term.

Peer Analysis

PGN's IDR is comparable with that of another Pertamina subsidiary, PT Pertamina Hulu Energi (PHE, BBB/Negative). PHE's IDR is at the same level as its SCP of 'bbb', which is on a par with Pertamina's IDR. PHE's IDR will be constrained by Pertamina's rating if the parent's rating is downgraded, due to the absence of legal ringfencing and Pertamina's control over PHE's cash flow.

We would equalise PHE's IDR with Pertamina's if PHE's SCP weakens, reflecting Pertamina's 'High' legal, strategic, and operational incentives to support PHE. This stems from PHE's importance as Pertamina's largest upstream subsidiary, contributing to over 90% of EBITDA, its high operational integration with the parent and debt guarantees.

In contrast, Pertamina's strategic incentives to support PGN are more modest and assessed as 'Medium', as PGN is less strategically important than Pertamina's upstream operations, accounts for less than 10% of the parent's EBITDA and has more limited growth prospects. Pertamina's operational incentives to support PGN are also more modest than for PHE, given PGN's lower integration with the parent's core upstream oil and gas business.

PGN's SCP of 'aa(idn)' is comparable with that of its 51%-owned subsidiary, PT Pertamina Gas (Pertagas, AA+(idn)/Stable). PGN operates on a larger scale and has a more diversified business profile than Pertagas, although it faces greater margin pressure from regulatory price caps. By contrast, Pertagas benefits from stronger revenue visibility, supported by regulated gas transportation tariffs, long-term oil and gas transportation contracts, and ship-or-pay clauses. Nevertheless, both entities maintain strong financial profiles.

Fitch’s Key Rating-Case Assumptions

- Gas distribution margin to remain around USD1.9/mmbtu on average in 2026-2029;

- Distribution volumes to rise to 857 million standard cubic feet per day (mmscfd) in 2026, from 836 mmscfd in 2025;

- Revenue from the LNG trading business to rise gradually to over USD400 million in 2028 from under USD200 million in 2025;

- Oil price of USD70/barrel (bbl) in 2026, USD63/bbl in 2027 and USD60/bbl thereafter, in line with Fitch's oil and gas price deck;

- Consolidated capex of USD318 million in 2026 and USD450 million-680 million in 2027-2029.

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

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

- The governance assessment of 'good' results in no adjustment.

- The operating environment assessment of 'bbb-' results in no adjustment.

- The SCP is 'bb+'.

To derive the IDR:

- Application of Fitch's Parent and Subsidiary Linkage Rating Criteria results in a top-down -1 approach.

RATING SENSITIVITIES

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

-- Downgrade of Pertamina's IDR by more than one notch or a weakening of Pertamina's incentive to support the subsidiary.

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

-- An upgrade of Pertamina's IDR, provided the parent's incentive to support PGN remains intact;

-- Stronger incentives for Pertamina to support PGN.

Liquidity and Debt Structure

PGN's liquidity is robust, supported by its net cash position. Cash was around USD1.34 billion at end-December 2025, against total consolidated debt of USD742 million. The maturity schedule of its remaining debt is adequately spread out. PGN's access to funding from domestic and international banks benefits from its linkages with Pertamina and its own solid credit profile.

Issuer Profile

PGN, in which Pertamina owns 57%, is the leader in Indonesia's natural gas transmission and distribution sector, with over 90% market share in gas distribution and 100% in gas transmission.

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

PGN's ratings are one notch below those of its parent, Pertamina. Any upgrade of Pertamina's IDR, or any downgrade of Pertamina's IDR by more than one notch, would lead to a revision of PGN's ratings.

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 PGN.

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)