Fitch Assigns Indonesia's PLN's Proposed USD Notes 'BBB' Rating

(Fitch Ratings - Hong Kong - 25 Jan 2026)--Fitch Ratings has assigned a long-term 'BBB' rating to Indonesia-based PT Perusahaan Listrik Negara (Persero)'s (PLN, BBB/Stable) proposed unsecured US dollar notes. The notes are issued under PLN's medium-term note programme and are rated at the same level as PLN's senior unsecured debt as they will constitute the direct, unconditional, unsubordinated and unsecured obligations of PLN.

PLN's ratings are equalised with those of its parent, the Indonesian sovereign (BBB/Stable), in line with Fitch's Government-Related Entities (GRE) Rating Criteria. The equalisation is based on a very strong likelihood that PLN, as a state electricity company, would receive government support.

PLN's Standalone Credit Profile (SCP) of 'bbb-' reflects a track record of timely subsidy and compensation receipts amid a steady regulatory environment and our 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 under the state's public-service obligation mandate. The government has 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 64% 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' in a default. 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 capex to rise to IDR80 trillion-140 trillion annually between 2025-2028, from IDR50 trillion-60 trillion in the past few years, driven by energy-transition capex. The timing may vary, but we expect a big acceleration due to intensified efforts towards renewables. We expect negative FCF in the medium term to push up EBITDA net leverage from 2024's 3.3x. Nevertheless, we forecast this to remain below 4.0x in 2025-2027, supported by solid domestic demand and timely government reimbursements.

Robust Reimbursement Mechanism: PLN recovers operating and financing expenses, earns a predetermined margin, and partially covers investment costs via a combination of tariffs, which are set below cost, and reimbursements in the form of subsidies and compensation. The government has made timely subsidy payments within a month. The compensation process was streamlined by 2022 legislation and payments have since been received in a timely manner, with receivable days around three months by end-2024. Government regulation issued in November 2025 requires 70% of the compensation to be disbursed monthly, which we believe will keep receivable days steady.

Reliance on Subsidies and Compensation: We expect subsidies and compensation income to remain substantial and PLN to remain reliant on state support to sustain operations over the medium term. PLN had subsidies and compensation income of IDR95 trillion versus EBITDA of IDR59 trillion in 1H25. The government gave a 50% tariff discount to certain households in January and February 2025 as part of a broader economic stimulus, with PLN to be compensated for the discount provided. Tariffs remain unchanged year to date, apart from the temporary discount.

Demand Aligned with Economic Growth: We expect Indonesia's electricity demand to rise by about 5% in 2026, mirroring 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

The Electricity Generating Authority of Thailand (EGAT, BBB+/Negative. SCP: bbb+) and PT Pertamina Persero (BBB/Stable, SCP: bbb-) have state linkages comparable with those for PLN.

EGAT. Pertamina, 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.

EGAT is 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. Conversely, PLN and Pertamina are assessed at 'Very Strong', as the Indonesian government supports both issuers through subsidies and compensation mechanisms for products sold under the state's public-service obligation mandate.

PLN, EGAT and Pertamina have 'Very Strong' assessments for their roles in preservation of government policy. PLN's and EGAT's assessments reflect their significant majority in electricity generation in their respective countries, and ownership of the entire transmission and distribution network. Pertamina's assessment reflects its high importance to Indonesia's energy security. Defaults by the three companies 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 public markets and are considered reference issuers their respective countries.

PLN's SCP is at the same level as Pertamina's, reflecting timely government compensation and modest leverage. EGAT's SCP is two notches higher, reflecting its independence from government subsidies to support its financial profile.

Fitch’s Key Rating-Case Assumptions

- Electricity sales to increase by around 5% annually

- Cost of coal at the lower of Fitch's price deck or the Indonesian government's price cap for domestically purchased coal

- Average tariff to increase slightly in 2025 and stay flat thereafter

- Continued appropriate reimbursements for selling electricity below cost

- Annual capex to average IDR80 trillion-140 trillion

- Annual dividend payout ratio around 18%

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 (a-, Moderate), market and competitive positioning (bbb, Moderate), diversification and asset quality (bbb+, Lower), company operational characteristics (bbb, Moderate), profitability (bb+, Higher), financial structure (bbb+, Moderate) and financial flexibility (bbb+, Moderate).

The quantitative financial subfactors are assessed based on standard financial period parameters of 20% weight for the historical year 2024, 40% for the forecast year 2025 and 40% for the forecast year 2026.

The governance assessment of 'Good' results in no adjustment.

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

The SCP is 'bbb-'.

To derive the IDR:

Application of Fitch's Government-Related Entities Rating Criteria results in an equalised 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 Positive Rating Action/Upgrade

- Positive rating action on the sovereign.

For the sovereign rating of Indonesia, the following sensitivities were outlined by Fitch in our Rating Commentary of 11 March 2025:

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

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

-External Finances: A sustained decline in FX reserve buffers, resulting, for example from outflows stemming from deterioration in investor confidence or large FX interventions.

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

-Public Finances: A marked improvement in the government revenue ratio closer to the level of 'BBB' category peers, including 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.

-Structural: Significant improvement in structural indicators, such as governance standards, closer to those of 'BBB' category peers.

Liquidity and Debt Structure

PLN's cash balance of IDR48 trillion at end-June 2025, along with its robust access to funding, was adequate to meet its short-term debt maturities of around IDR43 trillion. PLN also benefits from well-spread-out debt maturities, with average annual maturities of below IDR45 trillion. We expect PLN to generate about IDR80 trillion-90 trillion in annual cash flow from operations during 2025-2028, 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 63.8% of the country's total installed generation capacity of76GW as of end-2024. The company also purchases power from independent producers for distribution across the country.

Date of Relevant Committee

13 January 2026

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 Vulnerability Signal (Climate.VS) screener did not indicate an elevated risk for PLN. The Climate.VS for 2035 is 36 out of 100. This reflects a physical risk (VSp) signal of 20 and a transition risk (VSt) signal of 32.

The Climate.VS does not influence the current ratings of PLN. Any potential impact on the rating may differ from the illustrative rating impact in the Climate.VS framework, reflecting the evolution of Fitch's assessment of the risks

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)