S&P: Pertamina Patra Niaga PT Assigned 'BBB' Ratings on Merger With Kilang Pertamina; Outlook Stable

SINGAPORE (S&P Global Ratings) Feb. 6, 2026--S&P Global Ratings today took the rating actions listed above.

We equalize our 'BBB' issuer credit rating on PPN with the overall credit quality of its parent, Pertamina (Persero) PT (BBB/Stable/--), given our view of PPN as a core subsidiary.

The merger creates a larger, integrated downstream subholding within the Pertamina group, in our view. On Feb. 1, 2026, Kilang Pertamina Internasional PT and the captive business of Pertamina International Shipping PT merged with Pertamina Patra Niaga PT. Following the merger, Kilang Pertamina's refining assets, business operations and liabilities will be novated to the surviving entity and will cease to exist.

After the merger, PPN will gain an effective monopoly over Indonesia's domestic refining sector, in addition to the company's extensive network of downstream distribution and marketing channels across Indonesia's 17,000 islands. PPN is the only entity in Indonesia with a public-service mandate to provide government-subsidized petroleum products to domestic consumers.

We assess PPN as a core subsidiary of its parent, Pertamina (Persero) PT. The combined entity will have an expanded role as the sole supplier of petroleum products in Indonesia at government-mandated prices. Without PPN's refining operations, Pertamina would likely have to import refined fuel at higher prices. This would, in turn, weaken the nation's energy security as well as potentially weaken its trade balance.

The integration of the captive businesses of Pertamina International Shipping will enable the continued transport of crude oil feedstock and refined products to ensure petroleum products are readily available for domestic consumption.

We believe the merger will improve operating efficiencies across Pertamina group's downstream operations. PPN will have a larger earnings base, which will allow the merged entity to realize the earnings potential of Pertamina's downstream oil and gas operations and focus on a turnaround of any loss-making operations.

Prior to the merger, the capital-intensive refining operations under Kilang Pertamina were exposed to inherently volatile refining margins. This meant the subsidiary bore the brunt of higher costs. On the other hand, the less capital-intensive marketing and distribution operations depend on timely cash compensation from the government under its public-service mandate.

Post-merger, the mismatch between earnings, cash flows, and capital needs will be eliminated. This is because internal transfer pricing and arm's length transaction mechanisms between KPI and PPN will no longer exist. The deeper integration aided by the subsummation of Pertamina International Shipping's captive fleet will further increase this synergy.

On a consolidated Pertamina group level, the merger could also reduce the negative carry on the group's cash balances and diminish the need for shareholder loans to fund intercompany working capital deficits. This would free up capital for other uses.

We believe PPN will benefit from considerable financial support as the second-largest subsidiary in the group. Shareholder loans from Pertamina will remain an important feature of PPN's capital structure in the initial phases following the merger, in our view. Pertamina has extended a combined amount of US$6.7 billion in shareholder loans to both Kilang Pertamina and Patra Niaga as of Dec. 31, 2024, to support their working capital needs.

We expect the group to continue to exercise flexibility over the interest servicing on this layer of capital, and to extend maturities on the shareholder loans. With greater operational integration and improved performance, the newly merged PPN downstream subholding will ultimately aim to establish its own independent funding profile in order to finance its operations and growth.

Our assessment of PPN's stand-alone credit profile (SACP) will depend on its management's business and financial strategy, though this is unlikely to materially affect our final ratings on the company. We will formulate our assessment of PPN's SACP once we have more information on its combined financials, as well as the new management's business strategy.

The stable rating outlook on PPN mirrors that on the parent, Pertamina. It also reflects our view that PPN will receive timely financial support from the Pertamina group and maintain its strong operational integration with the group for at least the next two years.

We may lower the rating on PPN if we lower our ratings on Pertamina, or if we believe the company's importance to its parent has diminished. This may materialize as a dilution of Pertamina's shareholding in PPN, reduced supply and offtake within the group, and delays in financial and operational support from the parent.

We could raise the rating on PPN if we upgraded Pertamina while continuing to assess PPN as a core subsidiary of the group. This would likely occur if we raised the sovereign credit rating on Indonesia. (ends)