PGEO's Internal Cash Threatened To Be Drained Due To Having To Pay Debt Next Month

JAKARTA - PT Pertamina Geothermal Energy Tbk (PGEO) must be ready to bear the risk of losing almost all of its internal cash to pay the remaining maturing debt due to failing to achieve the global bond emission target of 600 million US dollars.

Head of Equity Ekuator Swarna Sekuritas David Setyanto said that this option is very likely to be taken considering the company's debt due next month. Meanwhile, PGEO is predicted to only be able to raise a maximum of 400 million US dollars through the issuance of foreign debt securities, even though the short-term debt that must be repaid is 600 million US dollars.

"I see that there is still cash as of December 2022 amounting to 262 million US dollars. Maybe the rest of the cash is to pay the remaining debt," he told reporters.

In fact, said David, with an intense capital business pattern, the company itself also needs large cash to carry out its operations. But on the other hand, PGEO is required to take a quick and measurable policy to cover the remaining debt if it does not want default, one of which is from internal cash.

Due to threats to erode cash to pay the remaining debt, continued David, the company's business activities were also questioned so that PGEO was projected to take several further corporate action steps after the bond issuance for operational activities.

This is interesting, because this kind of business requires large capital continuously. So we'll see later on from the corporate action that they will take. I think later bonds will be issued again or rights issue," he explained.

David revealed that the world bond market is currently experiencing a decline in investor interest due to the trend of increasing global interest rates which has forced low-cost bond prices to be corrected. However, due to unfavorable financial conditions and debt deadlines that are in sight, PGEO was forced to seek funds through debt securities instruments.

"Oleb, therefore, the publisher, in this case PGEO, must provide attractive coupons so that investors are interested," he concluded.

As is known, PGEO has cut the target value for issuing green bonds outside Indonesia to 400 million US dollars from the previous target of 600 million-800 million US dollars. The coupons offered are 5.15 percent per year with a tenor of 5 years.

The international rating agency Fitch Ratings rates BBB- for the bonds implying the lowest-grade investment with a high risk of default.

It is planned that all bond emissions will be used to pay off the remaining short-term debt of 600 million US dollars which will mature on June 23, 2023.