PGE Debt Risks Default Following Low Cash Flow

Illustration: Photo: Doc. Antara

PT Pertamina Geothermal Energy Tbk (PGEO) is in danger of defaulting on short-term debt of 617 million US dollars due in June 2023 following cash balances and insufficient 2022 profit for patching the debt.

"If you only rely on cash and profit, you can certainly fail to pay (default)," said Mirae Asset Sekuritas Senior Investment Information, Muhammad Nafan Aji Gusta Utama, quoted on Friday, April 14.

Agreeing, Head of Research Infovesta Utama Wawan Hendrayana said PGEO would not be able to cover the debt if he relied on cash and cash equivalents.

Like it or not, Pertamina's geothermal issuer must prepare other options, such as borrowing from the parent, or negotiating with creditors.

"With a record that the bank is relatively flexible to be extended compared to, for example, maturing is a bond where if you don't pay according to the due date of the default count," said Wawan.

Meanwhile, CelIOS observer Bhima Yudhistira assessed that it was not only cash and cash equivalent cases that had minimal problems faced by PGEO, but also environmental issues.

"Not only about debt but also about the rejection of the community around the geothermal project that is still ongoing. PGEO must ensure that processes that are claimed to be renewable energy are free from conflicts with the community to meet aspects of good environmental impacts," said Bhima.

It was noted that the company's profit for the current year as of December 31, 2022, reached 127.3 million US dollars, an increase of 49.7 percent from the position on December 31, 2021, of 85 million US dollars. The profit earned by the top line or revenue which rose 4.6 percent from 368.8 million US dollars in 2021 to 386.1 million US dollars in 2022, in line with the sale of carbon credit as new income. However, the contribution is still very minimal, only around 747,000 US dollars or 0.19 percent of total revenue.

Meanwhile, the company's cash equivalent balance as of December 31, 2022 was recorded at USD 262.3 million, up 109.3 percent from the position on December 31, 2021, amounting to USD 125.3 million.

Although cash equivalent balance has increased, if added to all profit for the current year, it still cannot cover short-term debt.

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If detailed, the total short-term bank debt consists of loans from PT Bank Mandiri (Persero) Tbk amounting to 105 million US dollars, MUFG Bank Ltd, Jakarta Branch amounting to 105 million US dollars, and PT Bank UOB Indonesia also 105 million US dollars.

Next from PT Bank HSBC Indonesia amounting to USD 82.5 million, Australia and New Zealand Banking Group Limited Singapore Branch 75 million US dollars, PT Bank BTPN Tbk (BTPN) worth USD 52.5 million, Sumitomo Mitsui Banking Corporation Singapore Branch worth USD 52.5 million and The Hong Kong and Shanghai Bank Corporation Limited worth USD 22.5 million.

Given that many creditors are involved in this short-term debt, the refinancing process or restructuring is considered difficult to achieve.

Just so you know, this short-term debt began when the company took a bridge loan facility from a number of banks that were members of the mandate lead arranger (MLA) on June 23, 2021. The bridge loan facility has a 1 year tenred US $ 800 million ceiling with a maximum extension option of 1 year with an extension fee which is a fixed fee of 0.15 percent of the total loyal participation of MLA. The company made an extension where the maturity of this loan was extended until June 2023.