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Carbon exchange, investor hype fuel renewable energy stocks
Analysts say the rise of ESG-focused investment funds and the government's energy transition pledge create upside for renewable energy stocks.
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A geothermal energy power plant owned by Pertamina subsidiary Pertamina Geothermal Energy (PGE) is pictured in this undated photograph.
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ince its initial public offering (IPO) in February, PT Pertamina Geothermal Energy (PGE), a subsidiary of state-owned oil and gas company Pertamina, has seen its stock price increase by 59 percent to Rp 1,390 (0.09 US cents).
Another geothermal energy producer, energy conglomerate Barito Pacific’s PT Barito Renewables Energy (BRE), saw similar investor demand after its IPO on Oct. 9. Its stock price has more than quadrupled since then to Rp 4,140 when the market closed on Friday.
Analysts say investors, especially foreign ones, were drawn to such equities by the rise of investment funds focused on environmental, social and governance (ESG) principles.
However, those experts also opined that there was a “hype” factor among retail investors that pushed the stock prices of renewable energy firms, especially after the introduction of Indonesia’s carbon exchange IDXCarbon in late September.
Inav Chandra, deputy head of institutional research at Sinarmas Sekuritas, said Presidential Regulation No. 112 of 2022 on the acceleration of renewable energy development in the country created an upside for geothermal energy firms.
"According to the regulation, the government will provide special incentives for geothermal power plants, including better electricity [feed-in] tariffs with annual increment, a risk-sharing scheme for exploration work as well as financing facilities," he told The Jakarta Post on Friday.
Aside from that, Inav explained that the emergence of a mandatory ESG focus for foreign investment managers had also contributed to the stock price rise of renewable energy firms.
