PT Pertamina Geothermal Energy Tbk. (PGEO), a State-owned Enterprise subsidiary issuer with the largest installed geothermal capacity in the world, has a new revenue stream from carbon trading.
Finance Director of PT Pertamina Geothermal Energy Tbk., Nelwin Aldriansyah, states that the Company is committed to actively participating in the energy transition.
"For the first time in 2022, Pertamina Geothermal Energy (PGE) recorded a new revenue post from the sale of carbon credits. This proves that PGE's operations have received certification from various carbon credit institutions in that PGE has the right to monetize the sale of carbon credits from its operations," said Nelwin in his official statement on Friday, March 17, 2023.
The Indonesian Coal Mining Association (APBI) notes that carbon trading in Indonesia can exceed US$300 billion or around IDR 4,625 trillion per year (assuming the JISDOR BI exchange rate is IDR 15,418 per US$), originating from replanting activities of deforested forests and the use of new renewable energy (NRE).
The Ministry of Energy and Mineral Resources (ESDM) has also officially launched carbon trading, where in 2023–2024, carbon trading will be carried out in the power generation sector on a mandatory basis.
Carbon trading is carried out at a coal-fired power plant (PLTU) connected to the PT PLN (Persero) power grid with a capacity greater than or equal to 100 MW. Carbon trading itself is implemented through two mechanisms, namely emission trading and emission offsets.
PGEO continues to carry out a number of strategies and monetization efforts to keep financial performance solid by maintaining revenue, stable EBITDA margins and stable profit margins, as well as maintaining debt ratios, for example.
In the third quarter of 2022, Pertamina Geothermal Energy posted a net profit of US$111 million, growing 67.8% compared to the achievement in the same period the previous year of US$66 million.
"Net profit margin in the first nine months of 2022 reached 38.8%, compared to the same period the previous year of 24%," said Nelwin.
Meanwhile, the Company's revenue until September 2022 amounted to US$287 million, increasing 3.9% compared to the same period the previous year of US$277 million.
In addition, the Company also managed to record EBITDA of US$244 million until September 2022, 10.1% increase from the same period in the previous year of US$221 million.
"PGE's EBITDA margin in the third quarter of 2022 reached 84.7%, a relatively high increase compared to the last three years, which was around 80%," explained Nelwin.
Meanwhile, PGEO's total debt (short-term and long-term) also continued to decline, from US$1.18 billion in 2019 to US$931 in the third quarter of 2022.
While the ratio of total debt to EBITDA was recorded at 4.6 times in 2019 and fell to 3 times as of September 2022, while net debt to EBITDA fell to 2.2 times as of September 2022, from 4 times in 2019.
SOE Deputy Minister I Pahala Mansury has emphasized repeatedly that SOEs are encouraged to start trading carbon, an activity of buying and selling carbon credits in which the buyers produce carbon emissions that exceed the set limits.
Carbon credits are a representation of a company's right to emit a certain number of carbon emissions or other greenhouse gases in its industrial processes. One unit of carbon credit is equivalent to reducing the emission of one ton of carbon dioxide (CO2).
Indonesia has set a target of reducing greenhouse gas emissions by 29% on its own and 41% with international support by 2030. The strategic sectors that are the top priorities are the forestry, energy, and transportation, which already cover 97% of Indonesia's total NDC emission reduction target.
It should be noted that the Nationally Determined Contribution (NDC) is a commitment of each country to the Paris Agreement to reduce carbon emissions in their respective countries.
In the 2021 NDC document, through the long-term strategy for low carbon and climate resilience (LTS-LLTCCR), Indonesia has also committed to achieving net zero emissions (NZE) in 2060.
According to Pahala, there are many ranking standards in carbon assessment, but Verra carbon value standard is the most implemented. The traded value of carbon offsets is around $20 to $40. SOEs can conduct trials at half the price as a reference.
Regarding the economic value of carbon, Pahala explained, most likely the value would be between US$2-3. Carbon Economic Value (NEK) is the value assigned to each unit of carbon emission. NEK is important because it can encourage green investment in Indonesia and can overcome the existing climate change financing gap.
Pahala said that SOEs were asked to seriously start carrying out the energy transition in various ways including through synergy and collaboration.
"We understand that collaboration between SOEs in producing energy and reducing emissions is feasible. The SOEs can also have collaboration with other countries. In the end, it’s how SOEs can jointly carry out the energy transition," said Pahala.