PT Pupuk Indonesia (Persero) plans to issue sustainable bonds II phase II in 2021, amounting to Rp2.5 trillion, which is part of the sustainable bond II program to obtain funds as much as Rp8 trillion.

Fitch Ratings Indonesia on Monday (8/2) in its release said it had assigned a long-term national rating at 'AAA (idn)' for the issuance of the second tranche of bonds.

This rating reflects the lowest expected risk of default relative to other issuers or debt securities in Indonesia.

PTPI plans to use the funds raised to refinance maturing corporate bonds and bank loans to several of its subsidiaries.

"We estimate PTPI's free cash flow will be depressed as its capital spending plan resumes, which could reach a peak in 2022 and 2023 of around Rp10 trillion for future large-scale projects in several of its subsidiaries,"  said Fitch.

This loan-financed capital expenditure is estimated to have made net debt / EBITDA increase by more than 3.5 times during these years.

PTPI regularly receives subsidies for the production and distribution of subsidized fertilizers. The allocation of subsidies for fertilizer in the 2021 State Budget reaches Rp25.3 trillion (8.2 million tons) or around 14.4% of Indonesia's total 2021 subsidy budget.

Also, food security is one of the government's priorities in 2021, with a budget allocation of Rp99 trillion, increasing more than 20% from 2020. Sales of subsidized fertilizers, including subsidized income, contribute more than half of PTPI's total revenue.