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Indonesia plans to form world’s largest geothermal holding firm
The government appears set to steam ahead in developing the country's geothermal potential, with a plan to form a joint geothermal holding company by merging three SOEs.
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he State-Owned Enterprises (SOEs) Ministry plans to merge PT Geo Dipa Energi, PT Pertamina Geothermal Energy (PGE) and PT PLN Gas and Geothermal (PLN GG) this year to form a giant geothermal holding company to push green energy use in the country.
Together, the three companies have an installed geothermal capacity of 1,022.5 megawatts (MW), or nearly half of Indonesia’s 2,130.7MW installed capacity, according to the Energy and Mineral Resources Ministry.
“The joint [geothermal holding] company will be the biggest in the world in terms of installed capacity,” SOEs Deputy Minister Pahala Mansury told The Jakarta Post by text message on Feb 22.
“The holding company will combine their strengths in development or drilling, in transmitting energy to end users and in financing,” he said.
Indonesian Geothermal Association (INAGA/API) chairman Priyandaru Effendi said the merger would enable the three companies to better manage human resources, combine capital and execute the government’s geothermal program.
“[The holding company] will carry out the government’s mission of optimizing and accelerating geothermal development,” he told the Post by text message on Monday.
Of the three companies slated to form the as-yet-unnamed joint holding company, PLN GG and PGE are subsidiaries of two state-owned energy giants: the former a subsidiary of state electricity company PLN and the latter a subsidiary of oil and gas holding company Pertamina. The two energy giants are respectively the first and fourth largest SOEs by assets.
The third company, Geo Dipa, is a special mission vehicle (SMV) under the Finance Ministry. It drills geothermal exploration wells to reduce upfront costs and risks for other developers of geothermal power plants. Geo Dipa also runs the Dieng geothermal working area (WKP) in Central Java and the Patuha WKP in West Java.
According to a 2017 technology brief by the International Renewable Energy Agency (IRENA), drilling geothermal exploration, production and injection wells account for around 24 percent of a project’s total installed costs, the second biggest cost after power plant and infrastructure costs at 49 percent.
Read also: Geologic time: Indonesia’s geothermal dreams deferred for 5 years
Representatives of Geo Dipa and PLN GG have confirmed the planned merger, but did not disclose either a time frame or any details.
Geo Dipa corporate secretary Endang Iswandini said the company was still looking into the ministry’s plan with relevant stakeholders.
“We are still waiting to see the scheme,” Endang told the Post by email on Feb 22.
She also pointed out two important takeaways from the planned merger: “Conducting PGE’s initial public offering and executing government orders to reduce business and exploration risks, including resistance from local communities.”
Separately, PLN GG operations director Yudistian Yunis told Kontan.co.id: “Right now, we are discussing the possible mechanisms to merge our existing geothermal operations.”
Meanwhile, PGE government and public relations manager Sentot Yulianugroho declined to comment on the planned merger, saying only that the company was focusing on developing geothermal capacity with both private and state-owned companies.
Indonesia is the world’s second largest geothermal power producer after the United States, but the energy ministry estimates that it is harnessing just 9 percent of its 23,900MW total geothermal potential.
Due to the limited development of renewable energy, the country achieved a green energy mix of 11.5 percent last year, short of the 13 percent target in the National Energy Plan (RUEN).
Read also: Indonesia misses green energy mix target in 2020
Stakeholders have cited low offtake prices as well as complicated licensing and land permit issues, with much unexploited geothermal potential located in protected forests, as key hurdles in developing geothermal power plants as a substitute to fossil fuel power plants for baseload generation.
The SOEs Ministry has been on a mission to reorganize the country’s SOEs into holding companies to improve efficiency and to list them on the Indonesia Stock Exchange (IDX) to reduce their reliance on state capital injections.
In the energy sector, the government ceded ownership of gas distributor PGN to Pertamina in 2018 to form an oil and gas holding company. A year earlier in 2017, it gave coal miner PT Bukit Asam (PTBA) to PT Indonesia Asahan Aluminium (Inalum) to form mining holding company MIND ID.
The energy ministry ultimately aims to quadruple Indonesia’s geothermal capacity to 8,008 MW by 2030. The sector contributed 52 percent of green energy investments last year, worth $1.36 billion.
The ministry’s geological agency has allocated Rp 450 billion ($31.99 million) this year to drill exploration wells in the Cisolok Cisukarame WKP in West Java, the Bituang WKP in South Sulawesi and Nage WKP in East Nusa Tenggara.
