The 3 Week Diet System

Thursday, February 6, 2014

PGN flexes muscle amid merger plan with Pertamina subsidiary

Feb. 7

Jakarta-listed gas distributor PT Perusahaan Gas Negara (PGN) has shown its strength by setting aside billions of dollars for investment amid the government’s plan to merge the company with a subsidiary of state oil and gas giant PT Pertamina.

PGN president director Hendi Prio Santoso said on Thursday the company had set aside US$1.25 billion in investment this year. The spending comprises a $650 million payment for the acquisition of a 75 percent stake in East Java’s Ujung Pangkah block from US oil and gas producer Hess Corp., which was agreed in early January. The acquisition, conducted through subsidiary PT Saka Energi Indonesia, saw the company achieve a 100 percent stake in the block.

As much as $200 million will be for distribution and transmission development and another $400 will be used to support the development of a floating storage and regasification unit (FSRU) in Lampung and support subsidiaries.

“We will fund it by internal cash, bank funding and likely from the capital market,” Hendi said.

PGN, in which the government holds a majority stake, runs gas sales and transmission businesses particularly in East Java, Jakarta and several parts of West Java and Sumatra. The company also distributes and sells gas from gas suppliers to domestic and industrial users.

Despite its focus on the downstream business, PGN has become aggressive in expanding its upstream business by acquiring producing blocks. Prior to the acquisition of Ujung Pangkah, PGN, also via Saka Energi, purchased a 20 percent participating interest in the Ketapang PSC gas block in East Java from Sierra Oil Services Ltd. 

The company has other acquisitions in the pipeline. PGN investor relations Nusky Suyono said the company eyed two blocks and expected to announce the takeover soon.

“The sizes of the acquisitions are not as big as that of Hess. Spending for the acquisitions has not been included in our $1.25 billion investment,” Nusky said.

PGN faces a difficult situation after State-Owned Enterprises Minister Dahlan Iskan said he supported a proposal from state owned Pertamina to acquire the gas distribution company. According to Dahlan, the acquisition had not been approved but he said the government had appointed state-owned investment firms Bahana Securities and PT Danareksa to assess the acquisition plan. Dahlan said further details — such as how much money was needed for the acquisition and how the two firms’ shares would be diluted — would only be announced after the assessment had been completed.

Under the plan, Pertamina will merge PGN with its subsidiary PT Pertamina Gas (Pertagas), which is also engaged in gas distribution.

Hendi said he had not received notification from shareholders. PGN is 57 percent owned by the government and the remainder by the public.

“We expect the regulator to support us so we can make use of the budget allocated,” Hendi said.

PGN director Wahid Sutopo said the takeover would not disturb PGN’s development project. 

He added the company had targeted to see a 5 to 10 percent growth in sales volume this year. The company has yet to release its financial and operational performance in 2013.

Shares in PGN, which are traded on the Indonesia Stock Exchange (IDX) under the code PGAS, were closed at Rp 4,830 apiece on Thursday, inching up by 0.21 percent compared to a day earlier.


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