PEFINDO: PT Elnusa Tbk and “idAA-” with stable outlook

(April 11, 2022)--PEFINDO has affirmed its “idAA-” rating to PT Elnusa Tbk (ELSA) and its “idAA-(sy)” rating for ELSA’s Shelf Registration Sukuk Ijarah I Phase I Year 2020. The outlook for the corporate rating is “stable”.

An obligor rated idAA differs from the highest rated obligors only to a small degree, and has a very strong capacity to meet its long-term financial commitments relative to those of other Indonesian obligors. The minus (-) sign indicates that the rating is relatively weak within its category.

The suffix (sy) denotes the rating mandates compliance with Islamic principles.

The rating reflects ELSA’s strong business synergy with Pertamina Group, strong presence and diversification in the oil and gas services business, and strong financial profile. The rating is constrained by the exposure to oil price volatility and exposure to project risk.

The rating may be raised if ELSA significantly strengthens its business position, validated by significant growth in revenue and earnings, while maintaining its conservative capital structure and strong cash flow protection measures on a sustained basis. However, the rating may be lowered if ELSA aggressively finances its expansion with debt that is substantially larger than projected, which may weaken its capital structure and cash flow protection measures, without being compensated for by stronger business performance, and if we view a significant weakening support from and ownership by its Parent. The rating may also be under pressure in the event of significantly lower service fee, resulting in significantly lower revenue, cash flow, and/or profitability.

Established in January 1969, ELSA is engaged in integrated upstream oil and gas services, upstream oil and gas support services, and logistics and distribution services related to the downstream oil and gas sector. As part of Pertamina’s group, most of its revenue were generated by Pertamina and its subsidiaries with more than 60% of revenue contribution. In September 2021, Ministry of SOEs officially established Pertamina’s subholdings, one of them is upstream subholding lead by Pertamina Hulu Energi (PHE). The upstream subholding will synergizes all activities of Pertamina’s upstream businesses that include exploration and production of oil and gas taking place across all business locations of Pertamina both domestically and abroad. This recent establishment of upstream subholding resulting in a change of Elnusa's ownership structure. As of December 31, 2021, PHE was ELSA’s major shareholder with a 51.1% stake.

The remaining shares were owned by others, including the public with ownership stakes below 5% each, with 49.1% stake. (ends)