Moody's Ratings downgrades Indika Energy to B1; outlook stable

(Singapore, February 12, 2026) -- Moody's Ratings (Moody's) has downgraded to B1 from Ba3 the corporate family rating (CFR) of Indika Energy Tbk (P.T.) (Indika). At the same time, we have also downgraded the rating on Indika's $455 million senior secured notes due in May 2029 to B1 from Ba3.

The outlook has been revised to stable from negative.

"The downgrade reflects Indika's already strained credit metrics, which will deteriorate further because of the increase budgeted capital spending at the Awak Mas gold project amid still subdued thermal coal prices," says Anthony Prayugo, a Moody's Ratings analyst.

"While sustained high gold prices will support sizable earnings once operations begin, the company currently has limited headroom to absorb further debt at its previous rating level," adds Prayugo.

RATINGS RATIONALE

We estimate the latest budgeted capital spending at Awak Mas has increased by around $100 million–$150 million, lifting total project costs to up to $567 million, which we expect Indika to fund largely through additional debt. As a result, Moody's-adjusted debt is likely to rise to about $1.4 billion in 2026, from $1.1 billion in 2025, while capital spending increases to around $380 million, including roughly $300 million for Awak Mas.

Indika attributes the higher capital spending budget partly to delays in land acquisition during 2025, which require the company to accelerate construction to meet its targeted completion by end 2026. To support smooth operations once production begins, the company is upgrading worker camps and building all weather access roads, which will further increase spending. Costs are also rising because contractors are demanding higher payments for equipment and procurement amid stronger gold prices.

Awak Mas was approximately 50% complete as of December 2025, and trial production is expected to begin by end 2026. With an initial all-in-sustaining cost of around $1,150/ounce (oz), and assuming gold price of $3,000/oz, we expect Awak Mas will be able to generate around $130 million of EBITDA once annual production ramps up to around 100,000 oz.

However, until Awak Mas starts to meaningfully contribute to earnings, Indika's credit quality will remain anchored by its 91%-owned subsidiary, Kideco Jaya Agung (P.T.) (Kideco), whose earnings will remain constrained amid soft thermal coal price environment. That said, the company retains the ability to adjust its strip ratio throughout the cycle, which should help mitigate the impact of weaker coal prices.

Assuming an average selling price of around $51 per metric ton of thermal coal in 2026, we expect Indika's EBITDA to remain roughly flat compared to its 2025 level at around $200 million.

With higher debt and still subdued coal earnings, we expect Indika's leverage, as measured by Moody's adjusted debt/EBITDA, to increase to around 7.0x in December 2026 from an estimated 6.0x in December 2025. Earnings will improve once Awak Mas fully starts commercial operations in early 2027; however, the large increase in debt means leverage is likely to improve towards 4.0x only sometime in 2027.

Our projections do not incorporate potential policy risks, including possible changes to Indonesia's mining regulations such as introduction of coal export levy, which could further pressure the company's earnings.

Indika will maintain adequate liquidity over the next 12-18 months, with its cash balance, undrawn committed credit facilities, and projected operating cash flow sufficient to meet its planned cash needs during this period.

However, the increase in budgeted Awak Mas capital spending will reduce Indika's covenant headroom, particularly in relation to net debt/EBITDA not exceeding 3.75x in 2026, absent meaningful earnings upside or asset divestments. Nevertheless, the company has previously obtained covenant relaxations or waivers when needed. Continued compliance with covenants, and the timely securing of waivers ahead of any potential breaches, will therefore remain critical.

OUTLOOK

The stable outlook reflects our expectation that the execution risk for its gold mine will be reduced going forward such that the project will be earnings accretive by 2027, supporting a recovery in credit metrics, and that the company will continue to maintain adequate liquidity.

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

Upward rating momentum could emerge once Awak Mas begins production, ramps up, and contributes to materially higher earnings and debt reduction that support a sustained improvement in Indika's credit metrics while maintaining adequate liquidity over the next 12-18 months.

Specific upgrade triggers include Moody's adjusted debt/EBITDA below 4.0x and Moody's adjusted EBIT/interest above 2.0x, both on a sustained basis.

On the other hand, downward ratings pressure would emerge if (1) Indika's gold mine faces further delays or cost overruns ; (2) its internal cash sources are insufficient to meet its cash needs over the subsequent 12-18 months; or (3) the company engages in aggressive investments or shareholder distributions.

Specific indicators we would consider for a downgrade include adjusted debt/EBITDA maintained above 4.5x or adjusted EBIT/interest falling below 1.5x, after the commencement of gold mine operations.

The principal methodology used in these ratings was Mining published in April 2025 and available at https://ratings.moodys.com/rmc-documents/440607. 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.

Indika Energy Tbk (P.T.) is an Indonesian firm with investments primarily within the energy value chain. Its principal investment is a 91% stake in Kideco Jaya Agung (P.T.), one of Indonesia's largest coal producers. Indika is listed on the Indonesian Stock Exchange with a market capitalization of around IDR18.9 trillion ($1.1 billion) as of 11 February 2026.

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