Release: Moody's ups Paiton Energy to B1, positive outlook
Monday, June 18 2007 - 07:49 AM WIB
Sydney, June 18, 2007 -- Moody's Investors Service has upgraded the senior secured rating of Paiton Energy Funding B.V., the obligations of which are guaranteed by PT Paiton Energy Company (Paiton), from B3 to B1. The outlook is positive.
"The rating action reflects the rise in Paiton's debt service coverage ratio (DSCR) - from less than 1.2x in 2005 to 1.48x in 2006 - and an expectation that higher DSCRs will be maintained, as debt is gradually repaid" says Dr. David Howell, a Moody's VP/Senior Analyst.
"In Moody's view, further interest rate hikes and an expected rise in scheduled principal repayments from 2008 will keep the DSCR at 1.3-1.5x in the medium term," says Dr. Howell, adding, "This level reflects a B1 credit when compared with other rated project companies in the region."
"In addition, Paiton has maintained a stable operational performance since it restructured its power purchase agreement in 2003 and kept the availability factor of its plant above 90% over the past three years," says Dr. Howell, Moody's lead analyst for the company.
The rating and outlook consider the credit quality of the offtaker Perusahaan Listrik Negara (P.T.) (PLN) which is rated B1/positive outlook.
"Payments from its off-taker have so far been on time and in accordance with invoices. The rating of Paiton is limited by the rating of PLN" adds Dr. Howell.
Upward pressure may emerge if 1) Paiton's operational and financial performances improve, and 2) Paiton takes further action to lower its interest rate exposure, such that the DSCR is maintained between 1.4 and 1.5x on a sustained basis or 3) PLN's rating is upgraded.
On the other hand, the rating may undergo downward pressure if 1) Paiton's operational and financial performances deteriorate, or 2) interest rates further increase, and Paiton does not take appropriate action, such as raising its hedging ratio, to lower its exposure, such that the DSCR consistently falls to between 1.1 and 1.3x or 3) PLN's rating was downgraded.
Paiton owns and operates two 615MW coal-fired power units in East Java, Indonesia. Paiton Energy Funding B. V. is a special purpose company which was created for the plants' bond program. (end of release)