PRESS RELEASE: S&P places Paiton Energy on Watch positive

Folowing is a press release from Standard & Poor's:

Standard & Poor's Ratings Services on Tuesday placed its 'CC' rating on Paiton Energy Funding B.V's US$180 million secured bond, guaranteed by P.T. Paiton Energy Co. (PE), on CreditWatch with positive implications.

This action reflects material progress in the company's multiphase restructuring process, including amendments in power purchase and fuel supply agreements and restructuring of debts with commercial banks and export credit agencies, its current servicing of debt, the phased increase in electricity tariff from Perusahaan Umum Listrik Negara (PLN), the state-owned utility, and the continued growth in peak electricity demand at 9.2 percent per year since 1997.

PE owns and operates a 1,230 megawatt coal-fired power plant in East Java, Indonesia. The company signed a binding term sheet in December 2001 with PLN (effective from January 2002) as a step toward finalizing changes to its power purchase agreement. The company's power plant has been operating under an interim agreement with PLN since February 2000, and has been dispatching electricity at full load since July 2002.

According to PE's management, the company has also entered into new primary 15-year coal supply contracts, as well as secondary supply contracts with the ability to retain alternative suppliers for emergency use. It has also managed to obtain unanimous agreement by commercial bank creditors and export credit agencies to a debt restructured package featuring extended maturity and reduce interest rates. It is the company's intention to retain all key terms of the bonds, including maturity, interest rate, and seniority.

"The progress in the restructure involving multiple parties is encouraging and will provide a framework for the project with more certainty. Standard & Poor's will review the details, documentation, and cash flow generating ability under the new restructured terms and conditions in the coming weeks to give a more affirmative opinion on the credit standing of PE," said Greg Pau, Director at Standard & Poor's Corporate & Infrastructure Rating Group in a statement. (*)