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tate oil and gas firm Pertamina is finalizing a hedging facility deal with three state lenders in its effort to ease pressure from foreign exchange (FX) volatility.

The deal '€” between Pertamina, Bank Negara Indonesia (BNI), Bank Mandiri and Bank Rakyat Indonesia (BRI) '€” is expected to be wrapped up in early June at the latest, according to Pertamina finance director Arief Budiman.

He said the company had entered the final discussion stage with the three banks. '€œThe infrastructure is ready, the [facility] line from the banks is ready. What'€™s left is the completion of the technical details,'€ he said in a message recently.

Pertamina will work with state lenders only for its first hedging activity, a move that has been long waited by the financial industry and its regulators.

By implementing hedging, Pertamina expects to shield its business from FX volatility due to the company'€™s high exposure to foreign currency.

It regularly performs large FX-denominated transactions, which include imports of fuel to meet domestic fuel needs and FX-debt settlements.

Its own data shows that in the January-April period, it already procured at least 12.45 million barrels of crude oil, 2.14 million barrels of gasoline and other fuels.

Pertamina'€™s need to hedge is highlighted even more because it suffered from FX losses in 2013 and 2014 due to the weakening of the rupiah.

It posted US$195.61 million and $22.75 million in losses in 2013 and 2014, respectively.

Its financial reports also revealed that it spent more than $27 billion for purchases of oil and other products in both years.

Arief said the upcoming hedging facility would cover any FX mismatch within its balance sheet.

He declined to reveal the amount of facility to be obtained, saying that it was still engaged in an intensive discussion with the lenders and Bank Indonesia (BI).

Meanwhile, as reported before, the central bank has been calling on companies, including state-owned enterprises, to take on hedging measurements to help reduce pressure on the rupiah.

According to statistics from BI, so far 26.5 percent of all companies with FX debts have carried out hedging.

Separately, BNI finance director Rico Rizal Budidarmo said the amount of hedging facility to be provided to Pertamina would be higher than the $950 million facility that the three lenders jointly provided to state electricity firm PLN in April.

'€œIt will be in the form of forex, the same as what was provided to PLN, but at a much higher amount,'€ he said.

BRI finance director Haru Koesmahargyo said each lender'€™s contribution to the facility would be determined by their own allowable maximum credit allocation and risk appetite.

'€œUp until now, we have served around $750 million of Pertamina'€™s FX needs through forex value [the spot market] and now we are looking to serve them through derivative transactions,'€ he said.
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'€œThe infrastructure is ready, the [facility] line from the banks is ready. What'€™s left is the completion of the technical details.'€