Moody's assigns Ba3 rating to PLN's bonds

Moody's Investors Service has assigned a Ba3 senior unsecured rating to PT Perusahaan Listrik Negara's ("PLN") proposed bond issuance.
At the same time, Moody's has affirmed PLN's Ba3 corporate family rating. The outlook for the ratings is positive, which is in line with the sovereign's positive outlook.
The proceeds from the bond issuance will be used to partially fund thecapital expenditure requirements in connection with transmission and distribution construction projects and for general corporate purposes.
"In light of PLN's 100% ownership by the Ministry of State-OwnedEnterprises ("MSOE"), strategic importance as Indonesia's only vertically-integrated electricity utility, as well as the government subsidies to ensure its financial viability and operational soundness, Moody's considers PLN's rating to be closely linked to the government's credit quality," says Jennifer Wong, a Moody's AVP/Analyst.
Given the close link between PLN's rating and the sovereign rating, an upgrade in the latter would lead to a rating upgrade of PLN.Similarly, a downgrade in the sovereign rating would also trigger a rating downgrade for PLN. Furthermore, a partial privatization of PLN or any government plan to cease subsidy support -- a scenario that Moody's considers unlikely in the near to medium term -- would have a negative impact on the rating.