S&P warns of Indonesian SOEs’ poor financial records

JAKARTA (The Jakarta Post/ANN) - International rating agency Standard & Poor’s (S&P) Global Ratings has raised concerns over the worsening balance sheets of state-owned enterprises (SOEs) that engage in the country’s massive infrastructure projects.

The agency noted that as the SOEs, primarily those working in electricity generation and construction, have relied heavily on the capital market or other external sources to secure fresh funds, they have increasingly put themselves in danger with a significant upward trend in their debt-to-equity ratio over the past few years.

While only 10 percent of state companies had a fourfold or greater debt-to-earnings ratio before interest, taxes, depreciation and amortization (EBITDA) in 2011, the figure went up to 60 percent by 2017, according to S&P data.

S&P lead analyst for Indonesia and Malaysia, Xavier Jean, said that if the government could not help the state companies seek refinancing instruments for the debt, Indonesia would reach a heavy debt maturity by 2020.

“The debt maturity period between 2016 and 2018 is better because the market environment has been very benign and positive for investors to seek yields and to be exposed to Indonesia,” Jean told reporters in a press conference on Tuesday.

The agency said that, consequently, it was important that the government create conditions favorable toward leveraging the ratio by then and pay off all the debts.

“Given that the state is not injecting money at a substantial level to these SOEs [...] it will take a lot of execution care for these companies to do the projects given the amount of all the projects,” Jean added.

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