Aggressively Carrying Out Energy Transition, Pertamina Geothermal Energy Successfully Book Income from Carbon Credit
Jakarta, March 21, 2023 - PT Pertamina Geothermal Energy Tbk. (PGEO), as an SOE subsidiary issuer with the largest installed geothermal capacity in the world, has a new revenue post from carbon trading.
Director of Finance of PT Pertamina Geothermal Energy Tbk., Nelwin Aldriansyah, stated that the issuer coded as PGEO shares are committed to actively participating in the energy transition.
"For the first time in 2022, Pertamina Geothermal Energy (PGE) recorded a new revenue post from the carbon credits sale. It proves that PGE's operations have received certification from several carbon credit institutions. Thus PGE has the right to monetize the carbon credits sales from PGE operations," Nelwin stated in his official statement on Friday (17/3/2023).
The Indonesian Coal Mining Association (APBI) notes that carbon trading in Indonesia can exceed US$300 billion or around IDR 4,625 trillion per year (assuming the JISDOR BI exchange rate is IDR 15,418 per US$), based on replanting deforested forests and renewable energy (EBT) use.
The Ministry of Energy and Mineral Resources (ESDM) has officially launched carbon trading. From 2023-2024, carbon trading will be mandatorily enforced in the power generation sub-sector.
Carbon trading is done in a coal power plant (PLTU) connected to the PT PLN (Persero) power grid with a larger capacity equal to 100 MW. Carbon trading is implemented through two mechanisms: emission trading and emission offsets.
PGEO continues to implement several strategies and monetization efforts to keep financial performance solid such as maintaining revenue, stable EBITDA margins and profit margins, as well as maintained debt ratios.
In the third quarter of 2022, Pertamina Geothermal Energy posted USD 111 million net profit, growing 67.8% compared to the US$66 million achievement previously in the same year.
"Net profit margin in the first nine months of 2022 reached 38.8%, compared to the same period in the previous year, which was only 24%," Nelwin said.
Meanwhile, the company's revenue until September 2022 was US$287 million, growing 3.9% compared to USD 277 million in the same period the previous year. In addition, the company also managed to record USD 244 million EBITDA until September 2022, increasing 10.1% to USD 221 million from the same period in the previous year.
"PGE's EBITDA margin in the third quarter of 2022 reached 84.7%, a significantly high increase compared to the last three years, which was around 80%," Nelwin explained.
Meanwhile, PGEO's total debt (short-term and long-term debt) continued to decline, from US$1.18 billion in 2019 to US$931 in the third quarter of 2022.
Meanwhile, the total debt ratio to EBITDA was recorded at 4.6 times in 2019 and decreased to 3 times as of September 2022, while net debt to EBITDA decreased to 2.2 times as of September 2022 from 4 times in 2019.
Encouraging SOEs
Deputy Minister of SOE, I Pahala Mansury, has repeatedly stated that he is encouraging SOE to start trading carbon, an activity purchasing and selling carbon credits (carbon credits), in which buyers produce carbon emissions that exceed the set limits.
Carbon credits represents the company's right to emit carbon emissions or other greenhouse gases in its industrial processes. One unit of carbon credit is equivalent to reducing a ton of carbon dioxide (CO2) emission.
Indonesia targets to reduce greenhouse gas emissions by 29% personally and 41% with international support by 2030. The strategic sectors prioritize forestry, energy, and transportation sectors, which already cover 97% of Indonesia's total NDC emission reduction target.
The Nationally Determined Contribution (NDC) is a commitment of each country to the Paris Agreement to reduce carbon emissions in their respective countries.
In the 2021 NDC document, through the long-term strategy - low carbon and climate resilience (LTS - LTCCR), Indonesia has committed to achieving Net Zero Emissions (NZE) in 2060.
Pahala added that there are many ranking standards in carbon assessment. However, most have implemented the carbon value standard applied by Verra. The carbon offsets traded value is around US$20-40. SOEs can conduct trials at half the price as a reference.
Regarding the carbon economic value, the value would be between US$2-3. Carbon Economic Value (NEK) is the value assigned to each carbon emission unit. NEK is important because it can encourage green investment in Indonesia. In addition, NEK could overcome the climate change financing gap that has been occurring so far.
Pahala asked SOEs to seriously start encouraging the energy transition in various ways, such as synergy and collaboration.
"We see that collaboration can be done between SOEs to build cooperation in producing energy and reducing emissions. Our SOEs could cooperate with other countries. SOE can jointly carry out the energy transition," Pahala explained.**