RELEASE: S&P Raises PT Perusahaan Gas Negara To BB-

(SINGAPORE Dec. 21, 2007)--Standard & Poor's Ratings Services said today it raised its corporate credit ratings on PT Perusahaan Gas Negara (Persero) Tbk. (PGN) to 'BB-' from 'B+'. The outlook on the rating is stable. At the same time, Standard & Poor's has raised the rating on the senior unsecured debt issued by PGN Euro Finance 2003 Ltd. (guaranteed by PGN) to 'BB-' from 'B+'.

The upgrade factors in expectation of an improving financial profile in the short to medium term, with revenue increasing as a result of the completion of the two new major transmission lines from South Sumatra into West Java (SSWJ1 and SSWJ2) and the ongoing expansion of its distribution network. The transmission lines and distribution expansion are expected to be completed toward the end of 2008 and 2009, respectively.

"The rating reflects the company's dominant market position, minimal price and volume risk for its transmission business, aggressive capital expenditure, high concentration on industrial customers, gas supply constraints, and mismatch of gas sales contract length and country and regulatory risks," said Standard & Poor's credit analyst Wee Lee Cheng.

"The stable outlook reflects the expectation of an improving financial profile in the short to medium term, with revenue increasing as a result of the completion of the two new major transmission lines from South Sumatra into West Java and the ongoing expansion of its distribution network in West Java," Mr. Cheng added. "The outlook or rating could face downward pressure if there is a significant decline in gas exploration and production activities resulting in lower gas supply reliability, reduction in government support, decrease in pipeline utilization rates, or if significant delays or cost overruns in PGN's capital expenditure plan results in FFO to debt falling below 25% and debt-to-EBITDA ratio rising above 3x."

PGN is a 55% government-owned Indonesian gas utility involved in the transmission, distribution, wholesaling, and retailing of gas. For the first six months of 2007, PGN generated total revenue of Indonesian rupiah (IDR) 3.85 trillion (US$419 million) and EBITDA of IDR1.76 trillion. The company had total assets of IDR19 trillion as of June 30, 2007.(end of release)