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PGE Has Strong Financial Fundamentals in Welcoming the Bright Prospects of Geothermal Development

PT Pertamina Geothermal Energy Tbk (PGE) is ready to welcome the development of new and renewable energy (NRE) projects. The potential for this business is huge because Indonesia has abundant resources reaching 23.7 GW based on data from the Ministry of Energy and Mineral Resources. With a geothermal power plant capacity of 2,276 MW, geothermal utilization in Indonesia ranks second after the United States (US).

Deputy Chairman of Commission VII DPR RI from Partai Amanat Nasional (PAN) Fraction, Eddy Soeparno, is optimistic that PGE as business unit of PT Pertamina can be substantial in the geothermal industry.

"Even though NRE business is high risk and high capital, but it has high prospects going forward and the investor interest is also high. I think PGE's business prospects are good," he said on Friday, March 17, 2023.

Eddy Soeparno stated that PGE’s geothermal power plant projects require a large amount of capital. The total investment prepared by the Company reaches USD 1.6 billion over the next five years or until 2027. This value is equivalent to IDR 24.2 trillion (an exchange rate of IDR 15,133 per US dollar).

Thus, he believes the Company's recent strategy of Initial Public Offering (IPO) and listed as issuer with the PGEO code on the stock exchange, was a right decision, resulting in huge funds earning of around IDR 9 trillion in February 2023.

“The projects’ initial capital can be carried out with this IPO. Then it's up to PGE and partners – both national and foreign private companies – to run the projects. Looking at the high interest in new and renewable energy sector, I don't think PGE will have any difficulties getting partners, and banks will be interested in financing PGE projects in the future," said Eddy Soeparno.

Strong Financial Fundamentals

Meanwhile, PGE's Corporate Secretary, Muhammad Baron, said that as one of the largest geothermal energy developers in the world, PGE has decades of experience and the ambition to increase electricity capacity by 600 MW in the next 5 years.

Funds obtained from the IPO are allocated 85 percent for business development and around 15 percent for paying some debt. Therefore, the Company's financial fundamentals are strong enough to carry out the NRE electricity development projects.

"Funding from the capital market through IPO is expected to support the accelerated development of geothermal power plant capacity," said Muhammad Baron, including the plan to add geothermal installed capacity of 55 MW in one of PGE's operating areas in Lumut Balai, South Sumatra, which is targeted to be completed in 2024.

As of September 2022, PGEO had a cash and cash equivalent value of USD 230 million, an increase of around USD 105 million from the cash balance as of December 31, 2021, indicating that PGEO is able to manage cash well, which comes mainly from the sale of steam and electricity to PLN.

PGEO's steam and electricity sales contract is a long-term contract and is always paid on time. "With the additional IPO fresh funds, PGEO has a fairly strong cash flow and is able to meet debt repayments in a timely manner," said Baron.

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