JBIC to gaurantee PLN's debts

The Japan Bank for International Cooperation (JBIC) will guarantee the debts of state-run electricity company PT Perusahaan Listrik Negara (PLN), an official at the bank said, making it easier for PLN to develop nation's energy infrastructure, Dow Jones Newswires said in a report on Friday.

"Nobody would like to take that risk, but JBIC has been negotiating with them, and we came to an agreement recently," the JBIC official said on condition of anonymity.

JBIC announced the default guarantee Thursday at a conference on infrastructure financing in Singapore, according to a conference participant James Quirk III, who is managing director at Willis, a risk broker.

Under previous financing arrangements the government provided backing for the electricity company.

JBIC's backing is important for PLN as it is seeking an international agency credit rating in advance of plans to tap the global bond market later this year.

"JBIC leading this on the PLN side is a huge signal of...the market changing its perspective on supporting PLN without a ministry of finance guarantee," Quirk said.

Quirk said that JBIC, with its extensive investments in Indonesia, has an implicit stake in the stability of the country. (*)