JAKARTA Jan 16 Indonesia plans for state energy
company Pertamina to acquire state gas utility
Perusahaan Gas Negara (PGN), a minister said on
Thursday, as Southeast Asia's largest economy moves to reduce
With declining crude output, the former OPEC member is
pushing to reduce spending on fuel subsidies and increase gas
use to meet its ballooning energy demands, but the effort has
been hampered by a lack of investment in infrastructure and
overlapping distribution systems.
The acquisition would give Pertamina greater control over
the distribution of natural gas and reduce costs, the government
says. PGN controls around 80 percent of Indonesia's gas
Competition between the two state-owned enterprises has held
up the government's goal of providing cheap fuel to households,
Dahlan Iskan, minister for state-owned enterprises, told
"Distribution of gas to households must become our focus.
Gas should be for the people, not just for factories and
exports," Iskan said in a statement.
PGN was one of the biggest losers on the Jakarta Stock
Exchange on Thursday as investors veered away on talk of the
After the acquisition, PGN will continue as a Pertamina
subsidiary, Iskan said, adding that other details were still
One scenario could be for PGN to acquire Pertamina's
existing gas subsidiary, Pertagas, before it is swallowed up by
Pertamina, Iskan said. Another could be for Pertamina to acquire
The government holds 57 percent of PGN, and investors
including U.S. fund managers such as Capital Group, Vanguard and
Matthews International own the remainder, according to its
Several analysts said the acquisition would probably be to
the detriment of PGN's private investors.
"The plan to inject Pertamina's Pertagas, with Pertamina
potentially controlling the merged entity, is very negative for
(PGN's) minority shareholders, given the exorbitant value it
places on Pertagas (price-earnings ratio of more than 25 times
and price-to-book value of more than six times)," CLSA said in a
report on Wednesday.
"If executed, we estimate it could lead to an average 12
percent downside to (PGN) stock or in the worst case up to 29
percent downside," CLSA said.
The acquisition also is likely to curtail PGN's ambitions to
expand upstream by acquiring oil and gas production assets, Citi
analysts said in a report.
Its plan to acquire Hess Corp assets has already
been blocked, Citi said. "The acquisition would have been
Indonesia consumes about 40 billion cubic metres of gas a
year, and demand is growing by at least 10 percent annually.
Two securities firms, Danareksa and Bahana
Securities, are weighing the various options for the planned
merger. The results of their study and a final decision on the
deal are expected soon.
PGN shares closed 2.5 percent lower on Thursday, while the
Jakarta stock exchange fell 0.7 percent.