(Singapore, July 23, 2025)--Moody's Ratings (Moody's) has affirmed the Ba3 senior secured rating on the US dollar notes due 2033 issued by Star Energy Geothermal (Wayang Windu) Limited (SEGWW) and revised the outlook to positive from stable.
SEGWW's rating was earlier constrained due to uncertainties related to its proposed capacity addition and the renewal of Unit 1's production period and tariff level beyond 2030. The outlook revision reflects the project's consistent operational outperformance, effective cost control, and more importantly greater visibility on its capacity expansion, including funding plan and resource sufficiency, and Unit 1's tariff and production period.
"The positive outlook signals the potential for an upgrade should the company successfully execute its capacity expansion project as it planned and continue to maintain its financial metrics," says Zi Zhu, a Moody's Ratings Analyst.
RATINGS RATIONALE
SEGWW's operational performance has consistently met or exceeded expectations in recent years, with higher availability level, higher net capacity factor and lower-than-expected capital spending (capex) to maintain steam supply. The project's historical five-year average net capacity factor stands at 96.1%, with availability factors above 99% for both Unit 1 and 2.
The company is advancing its expansion plans, which include retrofitting Unit 1 and 2 with an additional 18.4 megawatts (MW) of capacity and constructing a new 30MW Unit 3. The project independent geothermal resources consultant has confirmed that the Wayang Windu field has sufficient reserves to support both existing and expanded capacity through 2055.
SEGWW and its shareholder Star Energy Geothermal Pte Ltd (SEGPL) have secured financing arrangements totaling USD 139.5 million, including a USD 25 million senior secured loan at the project level. The remaining funding will be channeled from SEGPL to SEGWW through either subordinated shareholder loans or settlement of existing intercompany loans lent from SEGWW to SEGPL. We view the funding from SEGPL has no immediate impact on the debt servicing of the issued notes until a potential refinancing on the project level post the completion of the capacity expansion.
Under our base case projection, we assume the refinancing of the funding from SEGPL at the SEGWW level after the completion of Unit 3 and project SEGWW's average debt service coverage ratio (DSCR) from 2025 until the maturity of the notes to be 1.30x, which is supportive of an upgrade. The projection incorporates conservative assumptions, including full amortization of the refinanced loan and a premium on expansion capex, drilling cost and operating expenses. We expect the project to maintain sufficient liquidity to manage near-term obligations while keeping the required debt service reserve account fully funded, including a scheduled USD 40.7 million debt service in October 2025.
We view that the fixed-price and fixed-term EPC contracts with experienced contractors, as well as SEGWW's expertise in managing geothermal power projects, mitigate construction risk. We expect the expansion to enhance revenue and cash flow post-completion, targeted at end of 2025 for Unit 1 and 2 retrofit and end of 2026 for Unit 3, with minimal disruption to existing operations.
We understand from a legal opinion provided by SEGWW's counsel that the production period of Unit 1 is automatically extended until 2039 to coincide with the term of contracts with Pertamina Geothermal Energy Tbk (PT) (PGE, Baa3 stable) and PLN (Persero) (P.T.) (PLN, Baa2 stable). In addition, SEGWW, PGE and PLN have reached an agreement which confirms a flat tariff of USD 10.589 cents per unit for Unit 1 from June 2022 until the end of production period. We view the legal interpretation and the tripartite agreement have improved the cash flow visibility for Unit 1.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The rating could be upgraded if:
• SEGWW materially completes its expansion within the company's projected timeline.
• We can confirm the subordinated nature and terms of the shareholder's funding to SEGWW.
• Average DSCR across the remaining tenor of the notes exceeds 1.30x upon completion of the expansion project, with or without refinancing for the funding from shareholder.
The outlook could revert to stable if:
• There are significant delays in the completion of the expansion project, including the retrofitting of the existing two units.
• Average DSCR across the remaining tenor of the notes declines to below 1.30x after the completion of the project, potentially due to factors such as lower-than-expected operational performance or a potential refinancing for the funding from shareholder that negatively affects the DSCR.
The principal methodology used in this rating was Power Generation Projects published in June 2023 and available at https://ratings.moodys.com/rmc-documents/404382. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
The net effect of any adjustments applied to rating factor scores or scorecard outputs under the primary methodology(ies), if any, was not material to the ratings addressed in this announcement.
Star Energy Geothermal (Wayang Windu) Limited (SEGWW) owns and operates one of the largest geothermal power stations in Indonesia (Baa2 stable) by generation capacity. The company is the exclusive contractor appointed by PGE, a subsidiary of Pertamina (Persero) (P.T.) (Pertamina, Baa2 stable), to generate electricity using geothermal resources within the contract area in Wayang Windu under a joint operations contract (JOC). In return, SEGWW pays an annual royalty fee of 4% of net operating income to PGE as long as it operates under the JOC.
SEGWW's Java Island plant has a gross operational capacity of 230.5 MW, comprising 113.5 MW for Unit 1 and 117 MW for Unit 2. Unit 1 commenced operations in June 2000, followed by Unit 2 in March 2009. Each unit has an initial 30-year production period under the ESC, starting from the beginning of commercial operations. All of the electricity produced by the facility will be sold to PLN under the ESC.
In September 2024, SEGWW announced it capacity expansion plan, which, if executed as announced, will increase capacity to 278.9MW from 230.5MW (including a 30MW new generation unit and 18.4MW capacity increase on existing units). (ends)
