PEFINDO: PT Kereta Api Indonesia (Persero)’s rated at “idAA+”, outlook revised to stable

(April 13, 2022)--PEFINDO has affirmed its “idAA+” ratings for PT Kereta Api Indonesia (Persero) (KAII) as well as its outstanding bonds. We revised the corporate rating outlook to “stable” following KAII’s better operating environment as indicated by recovery of passenger train confidence following more lax government regulation which stipulate maximum passengers train capacity back to 100% of train capacity, which further support recovery of passenger train in the future. During the first two months of 2022, number of train passengers has increased by 34.3% year-on-year compared to the same period in 2021.

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 plus (+) sign indicates that the rating is relatively strong within its category.

The rating reflects our view of the government’s strong support to KAII due to the strategic importance of railway transportation, its superior business position in the railway sector in Indonesia, and stable revenue from freight transportation segment. The ra ting is constrained by KAII’s moderate financial performance due to Covid-19 pandemic and the high leverage and weak cash flow indicators.

The rating could be raised if KAII consistently achieves its projected revenue and/or EBITDA and improves its financial profile on a sustained basis. However, the rating may be under pressure if KAII adopts a more aggressive financial policy, as reflected in its difficulty to reschedule capital expenditure (capex), leading to higher debt than projected, and if government set stricter restrictions on people movement, which will undermine train passenger traffic. The rating may also be lowered if PEFINDO views the government support to KAII as declining due to the reduced public service role, a significant change in the regulatory framework weakening KAII’s financial and business prospects, a material divestment of ownership, and/or high dividend distribution. KAII is a state-owned rail operator, providing passenger transport and freight rail services. It is the sole user of the government’s railway infrastructure. It is supported by six subsidiaries: PT Kereta Commuter Indonesia (KCI), PT Railink, PT KA Logistik, PT KA Properti Manajemen, PT Reska Multi Usaha, and PT KA Pariwisata. It is 100% owned by Indonesian government. (ends)