Moody's: PGN's full-year 2016 results are within expectations; ratings unaffected
Tuesday, March 21 2017 - 03:46 PM WIB
Growth in the total distribution and transmission volumes for FY2016 remained flat at 0.1% and 0.8% respectively on a year-on-year basis.
PGN's average selling price at $8.64/mmbtu declined by 3% on a year on year basis, while it reported $2.7/mmbtu distribution margins in FY2016. 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 declined by 15% to $807million for fiscal 2016 as compared to the corresponding period last year mainly driven by lower EBITDA margins thanks to 10% year on year decline in distribution margins. The lower distribution margins in FY2016 were partly contributed by higher share of LNG in the supply mix and lower gas selling price to Perusahaan Listrik Negara (P.T.) (PLN, Baa3, positive) after the price renegotiation in the middle of FY2016.
PGN's reported consolidated debt at $2.8 billion as of fiscal 2016 increased by 3.5% as compared to its reported debt at the end of fiscal 2015.
PGN's reported net profit at $309 million for FY2016 was impacted by $37 million impairment of oil & gas properties, $5.1 million foreign exchange loss and $4.5 million loss on change in fair value of derivatives.
Estimated financial leverage, as measured by reported FFO/debt, was around 21% and the reported interest coverage stood at approximately 5.5x for FY2016. 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 ratings outlook is positive, reflecting the positive outlook on Indonesia's sovereign rating and PGN's sustained financial profile, as well as 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 Rating 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 positive), through the Ministry of State-Owned Enterprises, owns 57% of the company. (Ends)