Geothermal players oppose plans for PLN buying into PGE

Booth of Pertamina Geothermal at IIGCE 2015, Jakarta/ Indonesia (source: ThinkGeoEnergy)

The planned acquisition by PLN of up to 50% in Pertamina Geothermal Energy, sees some strong criticism from geothermal companies in Indonesia.

The planned acquisition of a 50% stake in Pertamina Geothermal Energy (PGE) by PLN is seeking some opposition.

In a statement, geothermal companies in the Indonesian Geothermal Association (INAGA) say that they are against PT PLN’s plan to acquire Pertamina Geothermal Energy (PGE), a subsidiary of PT Pertamina. INAGA argues that PLN’s reason to acquire PGN, which is for operational efficiency, is just an excuse.

INAGA chair Abadi Purnomo said geothermal exploration and development costs will not drop because of an acquisition. The reason is because geothermal business chains depend on investment climate, which determined by oil and gas factors.

“The acquisition plan is nothing but a plan to spend money. That fund is better off used for expanding electricity distribution or building new power plants,” he told local paper Tempo earlier this week.

Abadi said that the acquisition, initiated by the SOE Ministry, was not decided based on in-depth analyses. Geothermal, he said, is a risky business with a 50-percent chance of drilling failure due to dry hole. Even if the drilling goes well, the state will not compensate for the cost recovery of the exploration.

“Anywhere in the world, geothermal energy projects are done by oil and gas companies because they have similar stages of development. Just look at Chevron, Star Energy, Philippine National Oil Company,” Abadi said.

The SOE Ministry’s deputy for energy, logistics, and tourism Edwin Hidayat said PLN’s plan is the government’s way of creating a parent company for all geothermal business owned by the state. “Especially since we have a target to produce up to 2,700 MW of renewable energy by 2025.”

PLN plans to inject PGE with capitals until they have 50 percent ownership. Although half of the stake will be owned by PLN, PGE will remain a subsidiary of Pertamina. The acquisition is targeted for completion this year.

PLN actually already have a subsidiary engaged in the geothermal business, PLN Geothermal. But the subsidiary has made no significant actions. Meanwhile, Pertamina’s PGE manages eight geothermal power plants.

Pertamina president director Dwi Soetjipto said there is no certainty about PLN’s plan to acquire PGE. The decision depends on the process of due diligence and feasibility studies.