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Energy transition, sustainability to boost Pertamina geothermal arm IPO: Analysts
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n initial public offering (IPO) by Pertamina Geothermal Energy (PGE), the geothermal arm of state-owned oil and gas giant Pertamina, is expected to receive a positive response from the market with its business being in line with the world’s shift toward renewables and sustainable investments.
PGE, under the ticker PGEO, plans to raise up to Rp 9.78 trillion (US$ 653.7 million) through an IPO in February, mainly aimed at covering working capital needs, including capital expenditure (capex) for future projects.
Analysts have told The Jakarta Post the IPO comes at the right time, considering green investments are expected to shoot higher as countries commit to cutting their greenhouse gas emissions by moving toward renewables.
“The story investors are going to keep in mind is that fossil energy, such as oil and coal, will be replaced by renewable energy in the long run. The opportunity now is fitting because of the renewable energy campaign,” Teguh Hidayat, director of PT Avere Mitra Investama told the Post on Friday.
An impressive $1.1 trillion flowed into the clean energy sector in 2022, the “Bloomberg New Energy Finance” (BNEF) report shows. Almost every sector hit record levels of investment last year with renewable energy receiving the lion’s share of $495 billion, marking 17 percent year-on-year growth.
Read also: Pertamina geothermal unit slated to go public in H1
Ahmad Zuhdi Dwi Kusuma, an industry and area analyst at state-owned Bank Mandiri, said investors would have an interest in investing in PGE given the prospects of geothermal in the future.
Moreover, there are still few players in geothermal energy, leaving the IPO well-positioned to tap the renewable energy opportunities in the market, he said.
“Geothermal energy is largely unexplored in Indonesia, and from the investors’ perspective, they look at renewable energy as an alternative to break free from the fossil fuel crisis,” Zuhdi said on Friday.
Indonesia holds the world’s largest geothermal reserves and it is aiming to have a total of 3.35 gigawatts of geothermal power installed capacity by 2030, according to the long-term electricity procurement plan (RUPTL).
According to the Energy and Mineral Resources Ministry, the country has 23.7 GW of geothermal energy potential, but only 9.2 percent, 2.18 GW, had been successfully exploited as of last year.
The ministry plans to add at least another 1.33 GW to installed capacity by 2035.
PGE plans to offer 10.35 billion new shares, equivalent to 25 percent of its capital at a price between Rp 820 and Rp 945 apiece to raise a maximum Rp 9.78 trillion. The offering will take place between Feb. 20 and 27.
“All funds obtained from the IPO will be used to develop the company’s business until 2025,” the company said in its prospectus.
Read also: Low tariffs still hinder geothermal power growth in Indonesia
The State-owned Enterprises (SOEs) Ministry has long been pushing state-run firms to raise money on their own by going public, hoping to cut back reliance on state capital injections.
The company will allocate 85 percent of the proceeds for capex and the rest will be allocated to repay part of a loan.
Around half of the capex will be used to expand the installed capacity of several PGE geothermal working areas (WKP). Two of which are WKP Lumut Balai and Margabayur in South Sumatra and WKP Hululais in Bengkulu, with each seeing additional capacity of 55 and 110 megawatts, respectively.
The rest of the capex will be used for working capital to develop conventional and co-generation technology utilization to anticipate new market demand and to develop digital capabilities and analytics.
Currently, PGE manages 15 WKP with a production capacity of 1,877 MW, comprising 672 MW operated on its own, and the rest operated under joint contracts.
Deputy SOEs Minister Pahala Nugraha Mansury explained that the IPO proceeds obtained by PGE would be used to achieve a target of 600 MW of geothermal electricity capacity over the next five years.
To support PGE, the ministry will ensure the electricity generated by PGE geothermal plants is absorbed by state-owned electricity monopoly PLN.
“Currently we already have a power purchase agreement contract with PLN and several others, so we hope that the 600 MW will be developed in the next five years,” Pahala said during a meeting with House Commission VI, which oversees trade, industry and SOEs, in Jakarta on Dec. 7.
