PEFINDO affirms the ratings of PT Pelabuhan Indonesia I (Persero) and its bond at “idAA-”

(June 12, 2020)--PEFINDO has affirmed the ratings of PT Pelabuhan Indonesia I (Persero), hereafter referred to as PIGN, and its bond I Year 2016 at “idAA-”. The outlook for the corporate rating is “stable”.

An obligor rated idAA differs from the highest rated obligors only to a small degree, and has a very strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. The Minus (-) sign indicates that the rating is relatively weak within the respective rating category.

The corporate rating reflects the potential strong government support for PIGN due to the strategic importance of seaports, its strong market position in the Sumatra region, and its high profitability margins compared to its peers. The corporate rating, however, is constrained by its high financial leverage and weakened cash flow protection measures, and the nature of the seaport industry, which is highly dependent on economic and regulatory conditions.

The rating could be raised if PIGN improves its business position within its service areas and realizes the expected returns from new investments, particularly from the expansion of Kuala Tanjung port and the Belawan container terminal, and improves its credit profile.

The rating could be lowered if we view a reduction in government support, such as through a material divestment of ownership. The rating could also be under pressure if the Company incurs substantially larger debt than projected and/or its new investments in Kuala Tanjung port and Belawan port are not well executed, and if there are material decreases in the volume of container and cargo movement that result in a weaker financial profile, particularly if its debt to EBITDA ratio exceeds 6.5x on a sustained basis. PEFINDO is of the view that the Coronavirus Disease (COVID-19) pandemic and containment measures worldwide expose global seaport operators to the risk of lower port activities, which could negatively impact their business growth, profitability, and financial profile in the near term. However, we are of the view that the Company’s credit profile is still within the current rating category amid the pandemic.

Although we expect slower international container and cargo traffic volume growth, we expect the domestic container and cargo traffic to remain resilient due to the necessity to ensure logistics for critical goods like food, medicine, and other daily needs. PEFINDO will closely monitor these conditions to continually assess the impact of the pandemic, and should there be any material development, we will conduct the necessary rating actions.

PIGN is a government-owned port operator that provides seaport service facilities through 17 ports in the provinces of Aceh, North Sumatra, Riau, and Riau Islands, as of March 31, 2020. Its flagship terminals are the Belawan International Container Terminal (BICT) and the Belawan port (TPKDB) in North Sumatra near the city of Medan. The port is the country’s busiest outside Java. (ends)