Release: Fitch revises Indika's outlook to positive; affirms at 'B+'

(Jakarta/Singapore, 10 April 2012) -- Fitch Ratings has revised Indonesia-based Indika Energy Tbk's (Indika) Outlook to Positive from Stable. At the same time the agency has affirmed Indika's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'B+'.

Indika's USD65m notes due in 2012, USD230m notes due in 2016 and its USD300m notes due in 2018 have also been affirmed at senior unsecured 'B+' with Recovery Ratings of 'RR4'.

The Positive Outlook reflects Fitch's expectation of a sustained improvement in Indika's credit profile, owing to both robust dividend inflows from its 46%-held associate, PT Kideco Jaya Agung (Kideco) and increasing scale and diversity of the rest of its operations. Fitch expects Indika to deleverage post-2012, with debt net of cash to operating EBITDA (including dividends from Kideco) below 1.5x. The ratings may be upgraded if Indika's credit metrics evolve as per Fitch's expectations. Conversely, the Outlook could be revised back to Stable if Indika undertakes any large debt-funded investments or is unable to reduce its leverage below 1.5x post-2012 on a projected basis.

Dividends from Kideco have accounted for about 70%-80% of Indika's operating EBITDA in the past four years. Kideco has distributed over 95% of its net income over this period, higher than the minimum 80% set in its shareholder agreement. Fitch expects the high dividend payout from Kideco to continue given increasing coal production, robust profitability, a nearly debt free status and low capex.

As of 31 December 2011, adjusted debt net of cash to operating EBITDA was 1.9x and fund flows from operations to interest coverage was over 3.8x. Fitch expects Indika's leverage in 2012 to remain broadly unchanged from 2011 levels, owing to the acquisition of coal assets and high capex, mainly to ramp up production at its 69%-owned mining sub contractor; PT Petrosea Tbk (Petrosea). Fitch however expects increasing earnings contribution from Petrosea and PT Mitrabahtera Segara Sejati - its newly acquired 51%-owned logistics service supplier to the coal industry - plus strong dividend flows from Kideco, to aid Indika's deleveraging in the next two to three years.

Indika's liquidity position is healthy, with IDR4.5trn of cash (excluding restricted cash balances of IDR583bn) at end-December 2011 and stable dividend inflows from Kideco. As a result Fitch expects Indika to be able to comfortably cover its IDR3trn debt maturities due in 2012. Indika incurred about IDR240bn to acquire 60% of PT Mitra Energy Agung and is expected to incur about IDR1.1trn to acquire 85% of PT Multi Tambangjaya Utama in 2012. The company also raised IDR1trn through its sale of 30% equity of Petrosea. (ends)