Moody's: PGN's 1H2016 results are in line with its Baa3 rating and stable outlook
Saturday, September 3 2016 - 01:36 AM WIB
"PGN's 1H2016 operating results -- after excluding non-recurring items such as the asset impairment of oil and gas properties and foreign exchange losses -- are in line with our expectations," says Abhishek Tyagi, a Moody's Vice President and Senior Analyst.
Total distribution and transmission volumes during 1H2016 was up 0.7% and 7.6% higher on an year-on-year basis.
PGN's average selling price at $8.73/mmbtu declined by 2.3% year on year basis, while it reported $2.84/mmbtu distribution margins in 1H2016. We expect PGN will continue to broadly maintain its distribution margins given its tariff setting flexibility and track record of successfully passing through upstream cost increases to customers.
PGN's reported EBITDA increased by 3.1% to $430million for 1H2016 as compared to the corresponding period last year mainly driven by 1.6% year in year growth in revenues and with small expansion in EBITDA margins.
PGN's reported consolidated debt at $2.8 billion as of 1H2016 end increased by 4% as compared to its reported debt at the end of FY2015.
PGN's reported net profit at $155 million for 1H2016 was impacted by $21.9 million impairment of oil & gas properties and $55.7 million foreign exchange loss on change in fair value of derivatives.
Estimated financial leverage, as measured by reported FFO/debt, was around 25% and the reported interest coverage stood at approximately 6.5x for 1H2016. These parameters are within rating expectation but do not factor in Moody's standard adjustments.
Over the next 12-18 months, Moody's expects the PGN's financial position to remain broadly stable.
PGN's Baa3 rating reflects the application of Moody's rating methodology for government-related issuers (GRIs), which combines (1) the company's standalone credit quality, or Baseline Credit Assessment (BCA) of baa3; and (2) our assessment of the credit support that the government of Indonesia is likely to provide to PGN in a distress situation.
The stable outlook for the rating reflects PGN's sustained and strong financial profile, and our expectation that (1) the company can continue to pass through any cost increases of upstream gas to its end-users; (2) it will maintain its dominant position in Indonesia's gas transmission and distribution sector; and (3) its upstream acquisitions will be measured and sustainable.
The methodologies used in these ratings were Regulated Electric and Gas Utilities published in December 2013, and Government-Related Issuers published in October 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.
Established in 1965, PGN is primarily engaged in the transmission and distribution of natural gas. Its transmission business is mainly operated under its 60%-owned PT Transportasi Gas Indonesia (unrated). Its distribution business achieved a strong 83% share of total volumes in Indonesia in 2015. The Indonesian government (Baa3 stable), through the Ministry of State-Owned Enterprises, owns 57% of the company. (ends)