EM ASIA CREDIT
5y - z+128bp (T+98bp)
10y - z+170bp (T+130bp)
20y - z+213bp (T+151bp)
30y - z+238bp (T+157bp)
- Indonesia’s State owned electricity company, PT Perusahaan Listrik Negara (PLNIJ), is reported to be in the market for $1.5bn of funding, either in the bonds or via loans. We take a look at where fair value might be if a $ issue was to come today, consider it a guide, which we will firm up if and when there is a deal.
- PLNIJ is Indonesia's state owned electricity provider - generating, transmitting and distributing electricity. The energy mix remains heavily weighted to coal (67% of mix, end '23) and a core strategy of the company is to transition to net zero by 2060. PLNIJ has estimated near-term investments (2024-2033) could reach $110bn, of which $45bn would be PLNIJ-led. Indeed PLNIJ may become a more frequent issuer.
- In terms of fair value, we will assume a multi-tranche deal, in which maturities could fall into 5y, 10y, 20, or 30y buckets.
- The PLNIJ curve is relatively large, but we note there hasn’t been $ issuance since 2020. In terms of peers, the Indian State oil & gas company, PT Pertamina Persero (PERTIJ, Baa2/NR/BBB), is relevant…the same parent, sector, rating and similar shaped curve.
- As noted in the charts, PLNIJ trades wide of the PERTIJ curve, despite the same rating. This is likely explained by the fact that PLNIJ has a weaker underlying credit profile. In addition, PERTIJ would have a higher probability of State support given it critical role as a major Indonesian exporter. Moody's agrees, with a baseline credit rating assessment of Baa3 for PERTIJ and Ba2 for PLNIJ.
- In terms of FV, we would expect any new and hence more liquid deal to come wide (c. 5bp) of the existing PLNIJ curve. Investors are still likely to be cautious about PLNIJ's coal usage, despite efforts to reduce this over time.
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