Indonesia to merge three geothermal companies

Out-Law News | 05 Mar 2021 | 2:25 am | 1 min. read

Indonesia’s State-Owned Enterprises (SOEs) Ministry is planning to merge three state-owned geothermal companies to form a giant geothermal holding company for domestic green energy use.

Indonesia’s state-owned electricity company PT Perusahaan Listrik Negara (PLN) confirmed the move, with megaproject director M Ikhsan Asaad saying that Indonesia has a geothermal potential of 30 gigawatts (GW).

The three companies are PT Geo Dipa Energi, PT Pertamina Geothermal Energy (PGE) and PT PLN Gas and Geothermal (PLN GG). They have a combined installed geothermal capacity of 1.0225GW, nearly half of Indonesia’s 2.1307GW installed capacity.

It is reported that the joint holding company will be the largest globally in installed geothermal capacity.

Geo Dipa Energi is a special purpose company under Indonesia's Finance Ministry. PGE is a subsidiary of oil and gas holding company Pertamina. PLN GG is a subsidiary of PLN.

John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “Indonesia has significant geothermal resource, estimated to be around 40% of the entire global geothermal resource. Through consolidating these companies PLN and Pertamina are able to gain market position as well as economies of scale so as to better undertake further geothermal opportunities. It should also give it better access to the capital markets to enable future growth.”

“The scale of the geothermal resource should also be attractive to the private sector. However, antiquated laws and regulatory challenges have historically challenged its exploitation. The good news is that these challenges have been understood for some time, and the 2014 Geothermal Law made some progress towards establishing a viable framework for geothermal exploitation, although challenges such as the tariff remain. With a national renewable energy target of 23% by 2025, geothermal should nevertheless play a key role in Indonesia’s renewable target,” he said.   

Representatives of Geo Dipa and PLN GG have confirmed the planned merger. according to a report.