Release: Fitch downgrades Sumber Segara Primadaya, assigns negative outlook; withdraws ratings

Fitch Ratings-Sydney/Jakarta/Singapore-28 May 2008: Fitch has today downgraded Indonesia-based PT Sumber Segara Primadaya's (S2P) Long-term foreign currency and local currency Issuer Default Ratings (IDRs) to 'B-' (B minus) from 'B' and National Long-term rating to 'BB+(idn)' from 'BBB(idn)'. A Negative Outlook has been assigned to these ratings and the ratings simultaneously withdrawn. At the same time, the agency has downgraded the expected rating of the company's previously proposed senior unsecured notes to 'B-' (B minus)/'RR4' from 'B'/'RR4' and withdrawn the rating on these notes as they were not issued. Fitch will no longer maintain analytical coverage on this issuer.

"The downgrades and the Negative Outlook reflect Fitch's concerns about S2P's poor liquidity and operational challenges," said Steve Durose, regional co-head of Fitch's Asia-Pacific energy and utilities team. "S2P has not yet been able to obtain new long-term finance and the company has relied on periodic shareholder equity injections to meet its liabilities," added Mr. Durose.

S2P operates a 2x300 MW coal-fired power plant in Cilacap, South Java that connects to Perusahaan Listrik Negara's (PLN) Java-Bali transmission grid. The company has USD50 million maturing each in July 2008, March 2009 and September 2009. Although Fitch understands that the first of these can be met through cash collateral already provided, in the absence of new third-party finance, the 2009 maturities will only be met through a sustained improvement in operational performance and/or further shareholder support.

In 2008, plant availability is unlikely to be greater than 57%, well below the 80% specified in S2P's power purchase agreement with state-owned PLN, and below Fitch's downside sensitivity used when assigning the initial rating. This low availability is primarily due to maintenance work conducted on the power station's two generating units during the year, and to a lesser extent by poor weather in late-2007 which prevented coal being delivered and a vibration problem with the second generating unit. A temporary solution has been found to the vibration issue and the company is hopeful that a permanent solution will be found when the unit is taken offline for maintenance in September and October 2008. However, the long-term performance of this unit is still uncertain. Fitch understands that the company now has 20 days worth of fuel stocks which should mitigate some of the future fuel supply interruption risk.

The Negative Outlook reflects the risk that the plant will not be able to achieve 80% availability after the maintenance overhaul of the second generating unit and that liquidity will continue to rely on capital injections from shareholders PT Sumberenergi Sakti Prima (SSP - 51% owner) and PT Pembangkitan Jawa Bali (PJB - 49% owner). SSP is a private energy company, having interests in a number of power plants outside Java. PJB is wholly owned by PLN and engages in electricity generation in Java and Bali. The shareholders have provided liquidity support on a number of occasions and Fitch expects that support would continue to be made available. However, the Negative Outlook reflects the absence of legally binding shareholder funding commitments or new third-party long-term finance. (end of release)