PGEO Claims To Boost Profits Through Green Bonds Issuance Is Not Logical

JAKARTA - The claim of PT Pertamina Geothermal Energy Tbk (PGEO) boosting profits through the issuance of green-minded debt securities aka green bonds for refinancing is considered illogical in Good Corporate Governance (GCG)-based financial governance.

Executive Director of Indef Tauhid Ahmad said that in fact, refinancing is only an activity that delays the obligation to pay debts when they are due to debt again because debtors are unable to pay their obligations with their assets.

"If the allocation for capex is smaller or not at all in the issuance of the debt securities, it means that the claim to diverge the profit is not appropriate. The company only wants to delay its obligations because it may not be able to pay debts from internal cash," he told reporters, quoted Friday, May 5.

According to Tauhid, one of the strong factors driving the refinancing option is because PGEO was unable to optimize the previous loan capital in carrying out operational activities.

"Previous loan capital should have been able to generate, so that the debts can be paid off," he said.

Tauhid assessed that the increase in the ratio of debt to equity (DER) of the company in the issuance of bonds risks causing problems in the future. Especially if Pertamina's grandson is unable to maintain the projected income.

"There is a risk that must be borne if it turns out that their revenue estimates just miss a little. If the project revenue, EBITDA and others are not strong, then DER will be higher, then their financial condition will get worse later," he explained.

Finally, Tauhid hopes that PGEO can ensure its financial performance and optimal operations so that it can convince shareholders.

"If the company's condition is heavy, who wants to buy shares or debt securities, maybe it doesn't sell," he concluded.

As is known, PGEO plans to issue a green bond outside Indonesia amounting to 400 million US dollars or around Rp. 6 trillion with a coupon of 5.15% per year due in 2028.

PGEO will use the funds from the debt to pay off the remaining debt with Mandated Lead Arrangers, Initial Syndicated Creditors and PT Bank Mandiri (Persero) Tbk (BMRI) as Facility Agent which will mature on June 23, 2023.

"On the date of this disclosure of information, the remaining amount of obligations that are still outstanding based on the Facilities Agreement is 400 million US dollars," said the management through the information disclosure of the Indonesia Stock Exchange (IDX) released Saturday, April 22, 2023.

Through its prospectus, the company also stated that the value of the global debt securities to be issued is estimated to represent 20 to 50 percent of the company's equity after the IPO is therefore required to comply with POJK No. 17/2020.