The much anticipated Initial Public Offering (IPO) of PT Pertamina Geothermal Energy (PGE) has been oversubscribed 3.8 times on the first day of its listing despite the fluctuating price per share which touched IDR 825 from the offering of IDR 875 on February 24, 2023.
The subsidiary of state-owned oil and gas giant company PT Pertamina conducted its primary public offering on February 20-22, 2023, and collected IDR 9.05 trillion (US$ 594 million). It ranked as top 5 biggest IPO at the Indonesian Stock Exchange (IDX).
IPO funds to support future progress
PGE President Director Ahmad Yuniarto explained that the company would use the IPO funds to support its plan to develop an installed capacity of 600 Megawatts (MW) until 2027. The company has also targeted to increase its self-operated installed capacity base from the current 672 MW to 1,272 MW in 2027.
“The funds will also used to support PGE’s ambitions to continue to grow and develop the entire value chain from Indonesia’s geothermal resources, in accordance with the PGE Energizing Green Future tagline,” he said, as quoted by investor.id on February 24, 2023.
Yuniarto said further that PGE has completed a number of visits to several countries such as Singapore, Hong Kong, London and New York to invite more foreign and domestic investors to participate in the IPO. The investors consist of the Indonesia Investment Authority (INA) and Masdar, which is a clean energy company from the United Arab Emirates (UAE).
“The company’s IPO was oversubscribed by up to 3.81 times from the pooling portion, exceeding the previously set target. This is a very bright achievement for the company and a positive indicator of the level of investor confidence in PGE,” he said in his statement on February 24, 2023.
Read also: Pertamina Geothermal Energy eyes to raise IDR 9.78 trillion from IPO
Indonesia has strong growth in the geothermal sector, with its Compound Annual Growth Rate (CAGR) reached a growth of 10.4% compared to the global average of 3.9%. In the future, the country can contribute 28% of the global projection. This potential is supported by qualified geothermal resources, high and large market demand, as well as government policy support in the contribution of renewable energy.
Public Policy Analyst from Trisakti University Trubus Rahadiansyah said as quoted by Antara news agency that the IPO offer could build public trust in the government and give the opportunity to the public to supervise companies.
Challenges in PGE’s IPO
However, there are several challenges in the IPO by the company, which include:
- Rejection from unions: The Federation of Pertamina United Labor Unions (FSPPB)’s 2,000 members staged a protest from all work locations on February 16, 2023. The protest demanded the cancellation of the privatization plan through an IPO, as well as stopping PGE’s reasons for seeking cheap funds.
- Legal hindrance: Lawmaker Mulyanto of the House of Representatives (DPR) Commission VII overseeing energy and mineral resources called on the PGE and the government to cancel the IPO due to its potential to harm the state.
“There are two crucial reasons why we must reject the IPO of PGE. First, it is related to the change of ownership status of assets in a state-owned enterprise (SOE), which was originally state assets to become a company asset. Second, it is related to the ownership status of companies that were originally state-owned to a private ownership,” Mulyanto said in the House official website on February 23, 2023.
Read also: SOEs’ subsidiaries continued to be IPOed, privatized amidst controversy
Due to the change of asset ownership status, which is deemed dangerous, there are still other methods for PGE to get fresh funds other than privatization. Mulyanto urged SOE Minister Erick Thohir to “refuse and cancel the PGE’s IPO.”
