PGEO Bonds Are Not Amended By Banks

Illustration. (Photo: Doc. Antara)

JAKARTA - Banking is considered not interested in financing the geothermal development business run by PT Pertamina Geothermal Energy Tbk (PGEO).

For this reason, PGEO plans to issue debt securities or green-minded bonds outside Indonesia to refinancing short-term debts provided by banking syndicates.

Capital Market Observer and Finvesol Consulting CEO Fendy Susianto said, from the banking perspectives, the company's geothermal energy sector has a high investment risk. On the other hand, PGEO's business is considered not attractive to financiers.

"In terms of business-to-business (B2B), especially from the banking side, this geothermal business has a high risk, the return offered is also less attractive. So it is natural that it is difficult to get funding," he told reporters, quoted Thursday, April 27.

PGEO management itself wrote in the company's prospectus that, historically, funds to carry out operational activities were obtained through shareholder loans.

"That is Pertamina as well as development project grant funds from the Japan International Cooperation Agency (JICA) and the World Bank," said PGEO President Director Ahmad Yuniarto in his prospectus.

In short, said Fendy, PGEO has not been able to attract banking interest.

"Even if there is a bank that gives loans, it will not last long in providing loans because the business risk is too high," said Fendy.

Furthermore, Fendy also questioned why PT Bank Mandiri (Persero) Tbk did not provide loan facilities in the PGEO refinancing process. Even though both of them have affiliated support and were once agents of PGEO's syndicated loan facility in 2021.

If PGEO's business is good, why not refinancing from Mandiri or other banks at home and abroad that can provide foreign loan facilities? This means that banks are no longer in an aggressive position to fund the company because the risk exposure increases.

Recently, PGEO announced plans to issue foreign debt securities amounting to 400 million US dollars or around Rp. 6 trillion with 5.15 percent coupon per year due in 2028. These funds will be used to pay back debts (refinancing) in the same amount as the bond emission value.

It's just that the loan interest previously achieved is lower than the bond coupon this time. So it is very likely that the interest costs incurred by the company will be higher.

"That way PGEO must face an interstate payment differential adjustment (adjustment to differences in costs)," concluded Fendy.