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Tax dispute leads PGN to book $265 million net loss for 2020

The Supreme Court ruled in December 2020 that PGN had to pay $278.4 million to the tax office for unpaid value-added tax incurred between 2012 and 2013.

Norman Harsono (The Jakarta Post)
Jakarta
Wed, April 14, 2021

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Tax dispute leads PGN to book $265 million net loss for 2020

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tate-owned gas distributor Perusahaan Gas Negara (PGN) booked a US$264.77 million net loss last year, reversing the previous year’s net profit, mainly due to a doubled tax dispute expense.

The company’s annual financial report shows operational income dropped 25.03 percent year-on-year (yoy) to $2.89 billion last year, led by falling gas sales to businesses and by falling crude oil and gas sales, which outpaced an 22.5 percent yoy decline in operational costs to $2.03 billion.

However, the biggest blow to PGN’s profit came from non-operational expenses, mainly its tax dispute expenses that doubled yoy to $278.37 million last year.

“In relation to this tax dispute, PGN will follow existing regulations, but still attempt legal steps to mitigate risks as best as possible,” said PGN finance director Arie Nobelta Kaban in the statement on Saturday.

The Supreme Court ruled in December 2020 that PGN had to pay $278.4 million to the tax office for unpaid value-added tax (PPN) incurred between 2012 and 2013. The sum represents 18 out of 24 PGN-related tax disputes filed by the tax office.

The court is still processing the remaining six disputes worth $38.3 million in unpaid taxes. PGN wrote in the statement that it would pass down the tax dispute expense to its customers.

PGN’s statement also noted that the other ballooned non-operational expense last year was oil and gas asset impairment, which reached $78.9 million, as oil and gas blocks dry up and as the company lets go of other blocks.

Going forward, PGN’s Arie said the company would focus on restructuring its subsidiaries and expanding infrastructure to improve the company’s business performance.

Read also: PGN to develop three domestic LNG hubs for power plant gasification plan

The infrastructure includes building gas pipes to the lucrative Rokan block in Riau and to the Balikpapan refinery in East Kalimantan, as well as building liquefied natural gas (LNG) infrastructure for the Cilacap refinery in Central Java and for new metal smelters across the archipelago.

PGN saw its gas distribution and transmission volumes respectively dip 13 percent yoy to 828 billion British thermal units per day (​bbtud) and 8.3 percent yoy to 1,255 million standard cubic feet per day (mmscfd) last year, as businesses and industries cut back operations, while the gas company’s user base grew 1.2 percent yoy to 495,935 customers.

PGN expects to improve its business performance this year through the government’s cheap gas for industries program and state-owned electricity firm PLN’s power plant gasification program.

Read also: 197 companies secure cheap gas prices, contracts to be signed in May

“These policies will push industrial customers to consume more gas and thus, raise gas transmission and distribution volumes,” Henan Putihrai Sekuritas research head Robertus Yanuar Hardy told kontan.co.id.

He expects PGN to raise gas distribution and transmission volume by between 10 percent and 15 percent this year as Indonesia's economic recovery spurs gas demand.

PGN, listed at the Indonesia Stock Exchange (IDX) as PGAS, saw its share price dip 6.82 percent Tuesday morning, a sharper drop compared to the benchmark Jakarta Composite Index's (JCI) dip of 2 percent.

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