Moody's Ratings affirms Star Energy Geothermal Darajat II Limited's Baa3 ratings; outlook stable

(Singapore, September 23, 2025)--Moody's Ratings (Moody's) has affirmed the Baa3 ratings on the senior secured US dollar notes due 2029 and 2038 co-issued by Star Energy Geothermal Darajat II Limited (Darajat) and Star Energy Geothermal Salak, Ltd (Salak), which are both wholly-owned subsidiaries of Star Energy Geothermal (Salak-Darajat) B.V. (SEGSD). The outlook remains stable.

"The rating affirmation reflects the project's long operating track record and predictable cash flows under take or pay arrangements, as well as progress on its Salak–Darajat expansion program, balanced against execution and resource risks," says Zi Zhu, a Moody's Ratings Analyst.

RATINGS RATIONALE

The Baa3 ratings are underpinned by fully contracted revenues with Indonesia's state utility PLN (Persero) (P.T.) (Baa2, stable), expectations that availability will continue to meet requirements, and strong cash flow coverage in our base case, with average debt service coverage ratio (DSCR) of about 2.07x from 2025 until the maturity of the notes. Liquidity is supported by a Major Maintenance Reserve Account (MMRA), equivalent to 33% of the total capital spending for the next three years, and a 12-month Debt Service Reserve Account (DSRA). These strengths are tempered by exposure to drilling/resource risk, which is common for geothermal power projects, and the ongoing expansion project. Although the capital expenditure is mostly funded by the shareholders, further clarity on the potential refinancing arrangements and operating performance after commissioning of the new capacity will inform our forward-looking view.

SEGSD has maintained a long track record operating across its Darajat and Salak units, generally meeting or exceeding take or pay availability levels over time. However, there had been sporadic episodes where individual units experience availability issues. Following an unplanned outage at Darajat Unit 2 in 2024, availability rebounded in 1H 2025 to around 99% at both Darajat Unit 1 and Units 2&3. The take or pay framework under the Energy Sales Contracts with PLN provides a high degree of revenue visibility. PLN's credit quality and the project's role in meeting demand in its catchment areas support the predictability of cash flows.

SEGSD is advancing its capacity expansion comprising a new 40MW Salak Unit 7 and retrofits that add roughly 14.7MW across Salak Units 4–6 and Darajat Unit 3. Fixed price and fixed term EPC contracts are in place with established counterparties. Salak Units 4–6 retrofits were completed in August 2025, with tested capacity of 7.7MW, higher than planned. We view construction risk as manageable given technology continuity, contractors' experience and SEGSD's expertise in managing geothermal power projects.

We expect the expansion to enhance revenue and cash flow post-completion, targeted by the company at end of 2026 for Salak Unit 7 and Q3 2026 for Darajat Unit 3 retrofit, with minimal disruption to existing operations. The project independent geothermal resources consultant has confirmed that both Darajat and Salak fields have sufficient reserves to support existing and expanded capacity through 2054 and 2046, respectively.

SEGSD and its shareholders have secured a loan facility agreement totaling USD 121 million for the capacity expansion, including a USD 25 million senior secured loan at SEGSD level, which is permitted under the indenture of the issued notes. The remaining funding will be channeled from shareholders to SEGSD through either subordinated shareholder loans or equity injection. We view the funding has no immediate impact on the debt servicing of the issued notes, subject to clarity on potential refinancing plans post the completion of the capacity expansion.

In our base case, we assume that if the refinancing takes place at the project level for the shareholders' funding to SEGSD after the completion of the expanded capacity, the projected average DSCR of 2.07x over 2025–2038 would still support the current rating level. Yearly DSCR will fluctuate with debt amortization profile, drilling and reserve account movements.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

A sustained improvement in the company's average DSCR to more than 2.2x, clarity on potential refinancing plans for the expansion-related debt, and a more stable operating performance with minimal forced outage could exert upward rating pressure.

The ratings could be downgraded if the projected financial metrics drop below our base-case expectations, including the average DSCR falling below 1.65x on a sustained basis. Such a decline in metrics could occur if a faster-than-expected decrease in steam production leads to a prolonged increase in drilling costs and/or if we see a lower-than-expected operational performance of the existing and expanded capacity after the expansion is complete. The rating could also be downgraded in case of a significant shareholder change, or reduced willingness or ability of its shareholders to provide support, potentially driven by significantly weaker credit quality.

The principal methodology used in these ratings was Power Generation Projects published in June 2023 and available at https://ratings.moodys.com/rmc-documents/404382. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

The net effect of any adjustments applied to rating factor scores or scorecard outputs under the primary methodology(ies), if any, was not material to the ratings addressed in this announcement.

Star Energy Geothermal Darajat II Limited (Darajat) and Star Energy Geothermal Salak, Ltd (Salak) are wholly owned subsidiaries of Star Energy Geothermal (Salak-Darajat) B.V. and are part of Star Energy Group Holdings Pte Ltd (SEG). SEG, in turn, is majority owned by Barito Pacific, whose largest shareholder is Prajogo Pangestu, with a 71.3% stake as of 31 December 2024. The remaining shares of Barito Pacific are publicly traded.

Upon completion of the expansion project, the Salak and Darajat sites in West Java will have a combined capacity of 726.8 MW across 11 units, of which seven are operated by the restricted group and will have a total capacity of 491.8 MW. The restricted group also supplies the steam produced at the fields to the remaining four units operated by PLN. The projects have a long operating history, with the PLN units having commenced operations in 1994 and 1997. Units operated by SEGSD gradually entered operations in 1997, 2000 and 2007. (ends)