Indonesian power firm seeks $1.5 billion loan

International Herald Tribune

By Denise Kee Bloomberg News, Published: November 14, 2007

SINGAPORE: Perusahaan Listrik Negara, the state power company in Indonesia, is seeking a $1.5 billion loan to meet rising energy needs in the nation, according to three bankers with knowledge of the loan.

The utility wants a 10-year term on the loan, which will be guaranteed by the government and covered by China Export & Credit Insurance, said the bankers, who declined to be identified because the information is private. Parno Isworo, Listrik Negara's finance director, could not be reached for comment.

Listrik Negara owns and operates about 85 percent of the electricity-generating capacity in the nation. It plans to spend $9 billion from 2006 to 2010 to develop 9,000 megawatts of coal-fired generation capacity, according to Moody's Investors Service's June 14 report, as accelerating economic expansion increases demand for power.

"It is normal that utilities have to grow in emerging markets because of their economic growth and they need money for that," said Saida Eggerstedt, who helps manage the equivalent of $45 billion of debt at Union Investment in Frankfurt. "Listrik is a monopoly in the country."

The Indonesian central bank said Monday that it expects the $364 billion economy to grow as much as 6.8 percent next year, up from estimated growth of 6.2 percent for this year.

Listrik Negara is expected to finance 85 percent of the $9 billion capital expenditure plan with secured export-credit agency loans with the rest from bonds, Moody's said in the report. Funds will be spent on coal-fired plants to replace the dependence of the nation on oil, Moody's said.

The company used coal to generate 37 percent of its electricity as of the end of last year.

Listrik Negara plans to generate 66 percent of power using coal by 2016, and reduce oil-fired to 5 percent, from 35 percent at the end of last year, it said June 4.

Moody's raised its rating on Listrik Negara on Oct. 18 by one level to Ba3, three levels below investment grade. Standard & Poor's gave it a BB- rating, the same level, on Oct. 4, 2006.

Last year, Listrik Negara made the biggest bond sale by an Indonesian company, raising $1 billion, after it attracted six times its target size.

Its $550 million of 10-year securities were trading at 332 basis points more than similar-maturity Treasuries on Monday, according to Merrill Lynch. They were sold at a spread of 3.13 percentage points in October last year. A basis point is 0.01 percentage point.

Listrik Negara may have to pay more for new borrowing as global credit spreads are widening due to concern over losses in U.S. subprime mortgages.

"Deals are doable, but people get scared quickly for large amounts," said Miklos Endreffy, who manages $1.2 billion of Asian bonds in Hong Kong for the Bank for International Settlements. "It is more the sentiment that counts now."

China Export & Credit Insurance, which specializes in export-credit insurance, is based in Beijing.