High Loan Interest, PGEO's Financial Burden Skyrocketed 208 Percent

JAKARTA - The financial burden of the geothermal issuer PT Pertamina Geothermal Energy Tbk (PGEO) skyrocketed to 208.07 percent year-on-year (yoy) in the first quarter of 2023 due to high loan interest.

Based on PGEO's financial report released late Tuesday, May 30, the company recorded a financial burden that rose to US$6.45 million as of March 31, 2023, from only US$2.09 million in the first quarter of 2022.

This skyrocketing financial burden was caused by the company's large debt, which made loan interest uncontrollable. Short-term loan interest, for example, jumped to 545.35 percent yoy to 4.65 million US dollars from 721,000 US dollars at the end of March last year.

Meanwhile, PGEO's long-term loan interest also recorded an increase of around 33.66 percent yoy from 1.32 million US dollars to 1.76 percent in the first three months of this year. Meanwhile, interest on rentals that contributed a small contribution to financial expenses fell slightly from USD 53,000 to USD 32,000.

Mirae Asset Sekuritas Indonesia Senior Investment Information Nafan Aji Gusta Utama explained that the skyrocketing financial burden could be a concern for market participants considering the increase was quite high on an annual basis.

Moreover, Nafan continued, the company's increasing net profit was also supported by the high foreign exchange difference income which was uncontrollable variable in a financial performance.

"So the increase in profit from the difference in exchange rates and the high financial burden is deemed less than ideal," he told reporters, quoted on Sunday, June 4.

As a company that has been listed on the stock exchange, he explained, PGEO must have implemented the Good Corporate Governance (GCG) system with strong risk mitigation.

"GCG and related to risk mitigation that issuers like PGEO need to face," he said.

As is known, the company is actively seeking loan funds through various instruments. After raising public funds of Rp9.05 trillion through the initial public offering (IPO), PGEO again issued green bonds (green bond) of US$400 million or around Rp6 trillion.

Not for business development, the bonds proceeds issued on April 27, 2023 were actually used by the company to pay the principal and interest on a syndicated loan (refinancing) of 600 million US dollars which will mature on June 23, 2023.

However, at the end of March 2023 PGEO's short-term loan was still recorded at USD 400 million, or only USD 200 million cut from the short-term debt value of USD 600 million on December 31, 2023.