Fitch: PT Pertamina's notes 'BBB-(exp)'

(Jakarta/Hong Kong/Singapore-19 April 2012) -- Fitch Ratings has assigned PT Pertamina's proposed senior unsecured US-dollar bonds an expected 'BBB-(exp)' rating. The final rating of the proposed notes is contingent upon the receipt of documents conforming to information already received.

The net proceeds from the bond issue will be used for Pertamina's capex and general corporate purposes. Pertamina is expected to step up it capex to significantly increase production and refinery operating flexibility over the medium term.

Pertamina's rating ('BBB-'/Stable) is at the same level as that of its parent, Republic of Indonesia, reflecting its strong legal, operating and strategic linkages, as per Fitch's parent and subsidiary linkage methodology.

Pertamina remains one of the most important state-linked entities in executing Indonesia's national energy policy. It is the dominant refiner and retailer of petroleum products in Indonesia. It performs a public service obligation by selling certain refined products at below market prices, for which it is paid a subsidy by the government.

The government's intention to reduce the fiscal burden through gradually reducing fuel subsidies is challenging, as evidenced by the recent aborted attempt to increase retail prices of certain refined products amid high oil prices. Fitch believes Pertamina's policy role is unlikely to diminish in the foreseeable future. (ends)