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28 June 2010

Pertamina may float geothermal stock

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PT Pertamina, the state-owned oil and gas firm, may sell part of its geothermal business unit PT Geothermal Energi (PGE) in an initial public offering (IPO) by year-end to generate capital to fund its upstream expansion program.

“PGE is one of our subsidiaries that is ready and set for an IPO,” Pertamina’s investment planning and risk management director Ferederick ST Siahaan said last week to the Jakarta Post.

Pertamina previously said it also plans to sell a 20 percent stake in upstream oil and gas business unit PT Pertamina Hulu Energi (PHE).

Ferederick said Pertamina also planned to offer 20 percent of PGE in the IPO.

He said Pertamina expected to launch the IPO by the end of this year, but that much work still needed to be done.

PGE president director Abadi Poernomo hailed Pertamina’s plan.

“The IPO will be very positive for PGE as this will increase its leverage — and because the company’s management will be more transparent, auditable and accountable,” he said in a text message.

PGE manages 15 geothermal activity areas: nine directly, one through a joint venture and five through partners.

The company’s directly-managed activities have produced more than 272 megawatts (MW) of geothermal power from the Kamojang field in West Java, Lahendong field in North Sulawesi and Sibayak field in North Sumatera.

PGE expects to produce an additional 1,070 MW by 2014 as part of the second phase of the government’s fast-track electricity program. “We will need as much as Rp 2.5 trillion (US$275 million) in investment to develop geothermal energy at that level,” PGE president director Abadi said in February.

PGE’s capital expenditures increased from US$130 million in 2009 to more than $200 million in 2010, most of which funded drilling 27 geothermal wells.

PGE signed four steam sales agreement with state power firm PT Perusahaan Listrik Negara (PLN)at the last world geothermal congress in April in Bali.

PGE agreed to supply steam from its geothermal fields to four PLN geothermal power plants.

The power plants are unit IV of the Lahendong power plant in North Sulawesi, units I to IV of the Kotamobagu power plant (also in North Sulawesi), units I and II of the Hulu Lais power plant in Bengkulu and units I and II of the Sungai Penuh power plants in Jambi.

Geothermal steam is priced at 4.3 US cents per kilowatt hour, but this will increase 2 percent each year.

Ferederick said IPOs were needed to help Pertamina raise more capital to meet its high oil and gas production target.

The current production rate stands at about 432,000 barrels of oil equivalent per day (boepd). Pertamina expects to boost the level to 700,000 boepd by 2014.

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