Operations Are Not Optimal, PGEO Even Increases Debt

JAKARTA - A number of circles assess that the management of PT Pertamina Geothermal Energy Tbk (PGEO) needs to improve operational performance when the company continues to increase debt to cover short-term debt (refinancing).

The company must improve this performance when its debt accumulates. Currently, PGEO's total debt reaches 943.28 million US dollars, consisting of long-term bank loans after deducting parts that will mature in one year worth 327.7 million US dollars. Meanwhile, PGEO's short-term debt was recorded at around 615.58 million US dollars.

Energy Observer Ahmad Kurtubi admits that there are still a number of problems that occur in the Geothermal Power Plant (PLTP) business. According to him, the company needs to improve the performance of several PLTPs that have not produced optimally.

Kurtubi agrees that one of PGEO's assets, PLTP Karaha, has not been able to record profits due to the high burden that must be borne due to technology left behind compared to geothermal development in other countries.

"The problem, especially from the upstream side, is still not efficient. So the technology must first be developed," he told reporters, quoted on Sunday, May 7.

From an industrial perspective, according to him, domestic development of PLTP is very slow, whereas technically, the exploration and exploitation process is very similar to oil and gas, namely drilling.

"In fact, Pertamina is an expert in this, but why is it so difficult to develop her geothermal business," said Kurtubi.

According to Kurtubi, Indonesia can follow Iceland's example of successfully developing a geothermal business optimally so that it can be profitable.

"I see that there should be investment to improve the quality of its human resources so that it can develop technology and have an impact on efficiency," explained Kurtubi.

PGEO's financial report explains that PLTP Karaha's operations continue to record deep losses by recording current year losses throughout mid-2022 of 13.73 million US dollars, 12.52 million US dollars, and 9.74 million US dollars, respectively.

This was due to the high cost of revenue of the Karaha PLTP with a value of US$15.06 million in 2020, US$16.24 million in 2021 and US$15.44 million in 2022.

Meanwhile, the operating revenue from electricity sales from PLTP Karaha in the same period was only around 7.32 million US dollars, 6.94 million US dollars, and 7.05 million US dollars.

That way, the ratio of costs to income (BOPO) of PLTP Karaha is 205.74 percent, 234 percent, and 219.01 percent. Whereas the BOPO is good, a maximum of 85-85 percent.

Launching the company's official website, PLTP Karaha Unit I with a capacity of 30 MW which was operating commercially on April 6, 2018. The total investment in power plants belonging to Pertamina's subsidiary is close to 200 million US dollars.

Long before that, the termination of PLTP Karaha's business activities in 1998 due to the monetary crisis resulted in demands from Karaha Bodas Company (KBC), the power plant project contractor. The decision prompted KBC to sue Pertamina and the government to pay compensation.

After the cessation of operations, KBC sued Pertamina's arbitration. After undergoing various trial proceedings, the Cayman Islands Court found Pertamina guilty of violating the cooperation contract and punishing compensation of 315 million US dollars.

Not after bearing the bitter loss in the past, PGEO again issued a jumbo debt letter of around 400 million or around Rp. 6 trillion. Not for operational activities, the company will use all of these bond emissions to pay back the debt (refinancing) which will mature in June 2023.

The value of the global debt securities to be issued is estimated to represent 20-50 percent of the company's equity after the IPO. Referring to the financial statements as of December 31, 2022, PGEO's total equity reached 1.25 billion US dollars. Thus, 20-50 percent of this amount ranges from 251 million US dollars to 627 million US dollars.