20231006_PPAP_Laporan Hasil Pemeringkatan_31436319_lamp4.pdf

immediate substitute for SOE restructuring and NPL management. Therefore, we expect that a PPA
default would provide temporary disruption to the government's plan on these policy roles to some
extent. However, the assessment is limited at 'Moderate' due to relatively low size of the current NPLs
under its management.

Financial Implications of Default: 'Moderate'

PPA's market debt relative to Indonesia's GDP is smaller than that of other government-related entities
(GREs) in the country. This implies that a PPA default would have only a 'Moderate' impact on the
availability and cost of finance for other GREs. However, Fitch believes the government has sufficient
incentive to retain PPA's access to market funding, otherwise, it would have to be funded by the
government or private sector, which would be unviable under the current SOE restructuring policy.

Standalone Credit Profile

Revenue Defensibility 'Weaker'

Fitch has changed its assessment of revenue defensibility to 'Weaker', from 'Midrange', following the
2022 disposal of PPA's majority ownership in Nindya Karya group, which comprised manufacturing and
construction companies. The disposal reduced PPA's revenue diversification and increased its
exposure to volatile demand from the construction services segment, which saw revenue drop by 69%
to IDR0.4 trillion in 2022. As the transformation is still ongoing, we expect the company to remain
exposed to high volatility in demand.

Revenue from NPL management soared to IDR685 billion in 2022, from IDR131 billion in 2021. Fitch
expects the company to gradually increase its revenue and profitability through its main business of
SOE and NPL recovery management. Following PPA's greater focus on NPL management in the coming
years, Fitch expects greater diversification in revenue sources in the company's portfolio in the next
five years as PPA intends to put more focus on NPL management.

Operating Risk 'Midrange'

Identified cost drivers, mainly interest and employee expenses, have exhibited low volatility, averaging
at 20% of operating expenditure in the last two years. After the disposal of its ownership in Nindya
Karya group, we expect PPA's expenditure structure will change significantly, with higher contribution
from core business-related, interest and employee expenses to the total operating expenditure.

PPA states that its debt is entirely at fixed interest rates. This should limit cost fluctuation, which should
be further supported by PPA's SOE status, especially in the domestic market. In addition, PPA's
business is not capex intensive and its strong local presence, which lets it borrow at more favourable
rates, should partly offset the risks from rising interest rates.

Financial Profile 'Weaker'

PPA's revenue fell by 69% after the disposal of its stake in Nindya Karya group. However, PPA booked a
higher margin in 2022, with EBITDA/operating revenue of 10.6% (2021: 3.4%), as Nindya Karya had a

relatively low margin. EBITDA stood at IDR0.2 trillion, similar to 2021, and covered interest expenses by
11.4x, against an average of 5.0x in the past four years. We forecast net adjusted debt/EBITDA at 1.1x
and 7.8x in 2023 and 2027, respectively. The attribute assessment is underpinned by the 'Weaker'
revenue defensibility, 'Midrange' operating risk assessment and leverage forecast for 2027.

Derivation Summary

PPA's Long-Term Foreign-Currency IDR reflects our assessment of its government linkage and support
incentive, resulting in a weighted score of 30 based on our GRE Rating Criteria. The rating is notched
down twice from the sponsor, the Indonesian government (BBB/Stable). We assess the SCP under our
Public Sector, Revenue-Supported Entities Rating Criteria. PPA's National-Long Term Rating is derived
from its Long-Term Local-Currency IDR.

National Ratings

Sovereign support is reflected in the National Long-Term Rating, as PPA's credit profile is stronger on a
supported basis than on a standalone basis. The support assessment underpins PPA's top-down
rating.

Issuer Profile

PPA is Indonesia's only public-policy asset management institution. The Ministry of State-Owned
Enterprises administers PPA, which manages the assets of distressed SOEs. PPA was established to
continue the work of the Indonesian Bank Restructuring Agency, which was created in the aftermath of
the Asian financial crisis in 1998.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/
Downgrade

- A multiple-notch downgrade of the Indonesian sovereign rating

- A deterioration in the linkage to the government or the government's incentive to provide support

- A downgrade of PPA's National Long-Term Rating would result in similar action on its national long-
term senior unsecured issue ratings

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

- An upgrade of the Indonesian sovereign or increased incentive for the government to provide
support

- An improvement in PPA's SCP

- An upgrade of PPA's National Long-Term Rating would result in similar action on its national long-
term senior unsecured issue ratings

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This
means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to
their nature or the way in which they are being managed by the entity. For more information on Fitch's
ESG Relevance Scores, visit www.fitchratings.com/esg

Public Ratings with Credit Linkage to other ratings

PPA's ratings are credit linked to the Indonesian sovereign's ratings; we adopt a top-down approach to
derive PPA's ratings.

Best/Worst Case Rating Scenario

International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-
case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a
positive direction) of three notches over a three-year rating horizon; and a worst-case rating
downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative
direction) of three notches over three years. The complete span of best- and worst-case scenario credit
ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance. For more information about the methodology used to determine
sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/
10111579.

References for Substantially Material Source Cited as Key Driver Rating

The principal sources of information used in the analysis are described in the Applicable Criteria.

Fitch Ratings Analysts

Ethan Lee
Director
Primary Rating Analyst
International
+65 6796 2726
Fitch Ratings Singapore Pte Ltd. 1 Wallich Street #19-01 Guoco Tower Singapore 078881

Ghaida Gunarti
Associate Director
Primary Rating Analyst
National
+62 21 4000 0748
PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor, Suite 2403 Jl. Prof.Dr. Satrio Kav 3-5 Jakarta
12940

Ghaida Gunarti

Associate Director
Secondary Rating Analyst
International
+62 21 4000 0748

Ines Callahan
Director
Committee Chairperson
+34 93 467 8745

Media Contacts

Leslie Tan
Singapore
+65 6796 7234
leslie.tan@thefitchgroup.com

Peter Hoflich
Singapore
+65 6796 7229
peter.hoflich@thefitchgroup.com




Rating Actions

 ENTITY/DEBT           RATING                           RECOVERY      PRIOR

 PT
 Perusahaan
                  Natl LT         AA(idn)   Affirmed               AA(idn)
 Pengelola
 Aset


                  LT IDR          BB+       Affirmed               BB+


                  LC LT IDR       BB+       Affirmed               BB+



       • senior
                 Natl LT          AA(idn)   Affirmed               AA(idn)
         unsecured




       • senior   LT              WD        Withdrawn              BB+

 ENTITY/DEBT           RATING                                            RECOVERY            PRIOR


           unsecured



RATINGS KEY OUTLOOK WATCH
POSITIVE

NEGATIVE

EVOLVING

STABLE



Applicable Criteria

Government-Related Entities Rating Criteria (pub.30 Sep 2020)

National Scale Rating Criteria (pub.22 Dec 2020)

Public Sector, Revenue-Supported Entities Rating Criteria (pub.27 Apr 2023) (including
rating assumption sensitivity)



Additional Disclosures

Solicitation Status



Endorsement Status


 PT Perusahaan Pengelola Aset       EU Endorsed, UK Endorsed


 PT Perusahaan Pengelola Aset       EU Endorsed, UK Endorsed



DISCLAIMER & DISCLOSURES

All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and disclaimers. Please read
these limitations and disclaimers by following this link: https://www.fitchratings.com/
understandingcreditratings. In addition, the following https://www.fitchratings.com/rating-definitions-
document details Fitch's rating definitions for each rating scale and rating categories, including

definitions relating to default. ESMA and the FCA are required to publish historical default rates in a
central repository in accordance with Articles 11(2) of Regulation (EC) No 1060/2009 of the European
Parliament and of the Council of 16 September 2009 and The Credit Rating Agencies (Amendment etc.)
(EU Exit) Regulations 2019 respectively.

Published ratings, criteria, and methodologies are available from this site at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies
and procedures are also available from the Code of Conduct section of this site. Directors and
shareholders' relevant interests are available at https://www.fitchratings.com/site/regulatory. Fitch
may have provided another permissible or ancillary service to the rated entity or its related third
parties. Details of permissible or ancillary service(s) for which the lead analyst is based in an ESMA- or
FCA-registered Fitch Ratings company (or branch of such a company) can be found on the entity
summary page for this issuer on the Fitch Ratings website.

In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch
relies on factual information it receives from issuers and underwriters and from other sources Fitch
believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon
by it in accordance with its ratings methodology, and obtains reasonable verification of that
information from independent sources, to the extent such sources are available for a given security or
in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party
verification it obtains will vary depending on the nature of the rated security and its issuer, the
requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the
issuer is located, the availability and nature of relevant public information, access to the management
of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit
reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal
opinions and other reports provided by third parties, the availability of independent and competent
third- party verification sources with respect to the particular security or in the particular jurisdiction of
the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that
neither an enhanced factual investigation nor any third-party verification can ensure that all of the
information Fitch relies on in connection with a rating or a report will be accurate and complete.
Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide
to Fitch and to the market in offering documents and other reports. In issuing its ratings and its
reports, Fitch must rely on the work of experts, including independent auditors with respect to
financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts
of financial and other information are inherently forward-looking and embody assumptions and
predictions about future events that by their nature cannot be verified as facts. As a result, despite any
verification of current facts, ratings and forecasts can be affected by future events or conditions that
were not anticipated at the time a rating or forecast was issued or affirmed.

The information in this report is provided “as is” without any representation or warranty of any kind,
and Fitch does not represent or warrant that the report or any of its contents will meet any of the
requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a
security. This opinion and reports made by Fitch are based on established criteria and methodologies
that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective

work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a
report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk
is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have
shared authorship. Individuals identified in a Fitch report were involved in, but are not solely
responsible for, the opinions stated therein. The individuals are named for contact purposes only. A
report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled,
verified and presented to investors by the issuer and its agents in connection with the sale of the
securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of
Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy,
sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of
any security for a particular investor, or the tax-exempt nature or taxability of payments made in
respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and
underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the
applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues
issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single
annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency
equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a
consent by Fitch to use its name as an expert in connection with any registration statement filed under
the United States securities laws, the Financial Services and Markets Act of 2000 of the United
Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic
publishing and distribution, Fitch research may be available to electronic subscribers up to three days
earlier than to print subscribers.

For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian
financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to
wholesale clients only. Credit ratings information published by Fitch is not intended to be used by
persons who are retail clients within the meaning of the Corporations Act 2001.Fitch Ratings, Inc. is
registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical
Rating Organization (the “NRSRO”). While certain of the NRSRO's credit rating subsidiaries are listed on
Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see
https://www.fitchratings.com/site/regulatory), other credit rating subsidiaries are not listed on Form
NRSRO (the “non-NRSROs”) and therefore credit ratings issued by those subsidiaries are not issued on
behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings
issued by or on behalf of the NRSRO.

dv01, a Fitch Solutions company, and an affiliate of Fitch Ratings, may from time to time serve as loan
data agent on certain structured finance transactions rated by Fitch Ratings.

Copyright © 2023 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY,
NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or
retransmission in whole or in part is prohibited except by permission. All rights reserved.

Endorsement policy

Fitch’s international credit ratings produced outside the EU or the UK, as the case may be, are
endorsed for use by regulated entities within the EU or the UK, respectively, for regulatory purposes,
pursuant to the terms of the EU CRA Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU
Exit) Regulations 2019, as the case may be. Fitch’s approach to endorsement in the EU and the UK can
be found on Fitch’s Regulatory Affairs page on Fitch’s website. The endorsement status of international
credit ratings is provided within the entity summary page for each rated entity and in the transaction
detail pages for structured finance transactions on the Fitch website. These disclosures are updated on
a daily basis.