Wednesday, 29 January 2014

PERTAMINA’S CORPORATE ACTION WORSENS THE PERFORMANCE OS STATE OWNED GAS COMPANY



If it is true that the main purpose of Pertamina in acquring the state-owned gas company (PGN) is solely to implement open access, the corporate action will not provide a significant advantaged for Pertamina. The takeover attempt is feared would increase the burden of Pertamina who already reaped huge profits in many lines of business.

Pertamina’s attempt to acquire PGN is actually the culmination of hosilities between the stateowned companies that lasted this long. The trigger is gas governance liberalization policy. Through Regulation of the Minister of Energy and Mineral Resources No. 19/2009, the Government opens trade opportunities and natural gas transportation business for all business operators in a free competition through open access scheme.

Initially, there is a difference of opinion between Pertamina and PGN in addressing open access policy. One the one hand, PT Pertegas is very excited to implement open access without reserve. On the other and, PGN was determined not to implement open access totally at this point. The reason is that there are still technical and economic issues related to the availability of transmission and sistribution pipeline infrastructures to be resolved.

Thus, said reseracher of Center for Energy Studies Gadjah Mada University, Fahmy Radhi, who spoke in a Focus Group Discussion “Gas Governance as the Embodiment of Energy Sovereignty in Indonesia” at Gadjah Mada University (UGM) in Yogyakarta, on Monday (January 20).

Moreover, Pertamina has been continuously hit by various problems, thus further distancing Pertamina’s hope to become a World Class Oil Company. Still fresh in the memory of the public about Pertamina’s request to the government to raise prices of 12-kg LPG by 68% without consulting the government. Finally, the policy was revoked by the government in just five days.

Pertamina’s plan to increase the number of oil refineries which have been proposed since many years ago has never materialized until now. As a result, Indonesia is a net importer of fuel which is increasingly weighing on Indonesia’s trade balance. Defeat-by-defeat in the struggle to seize oil and gas fields with foreign oil companies have left a stigma that Pertamina was considered unqualified in managing oil and gas fields in its own country.

“In these conditions, Pertamina’s decision to acquire PGN is a blunder. Not only will it further aggravate the corporate load of Pertamina, but can also worsen post-acquisition performance of PGN, even could potentially lower PGN stock prices,” Fahmy said.

Not efficient

Thus, it seems that the year 2014 is a gamble for (PGN). Because, not to mention the implementation of the open access concept related to the use of PGN’s gas pipeline infrastructures jointly with other companies. Now, the Ministry of State-Owned Enterprises plans to directly acquire PGN to become a subsidiary of PT Pertamina.

The original plan, which was to acquire subsidiary company of PGN, namely PGAS, was considered less effective. Now, Dahlan Iskan provides an option to directly acquire PGN and automatically acquire PGN’s subsidiaries.

“There are two options regarding the implementation of acquisition by two stages or one stage. If in the first two stages, PGN acquire Pertagas, Pertamina’s subsidiary. On the second stages, Pertamina directly acquires PGN,” said Dahlan.

However, both options will still make PGAS a subsidiary of Pertamina. The first option is that Pertamina directly acquires PGAS, and the second option is PGAS acquires Pertagas and will later be acquired by Pertamina. The Ministry of State-Owned Enterprises will choose the best and most appropriate option. Will the option be made or done simultaneously (in one stage only)?

The acquisition plans is now being examined carefully by Danareksa and Bahana Securities. The study includes whether Pertamina’s acquisition of PGN coincides with PGN’s acquisition of Pertagas, or Pertagas is acquired first, and then Pertamina acquires PGN. The Ministry of State-Owned Enterprises is still reviewing Pertamina’s opportunities in acquiring a stake in PGN.

The plan was in line with government’s target to establish a large-scale oil and gas company. In short, PGN becomes a subsidiary of Pertamina, and Pertagas who was formerly a subsidiary company becomes the a sub-subsidiary company.

In response to this, analyst of PT Asjaya Indosurya Securities, William Suryawijaya, said that it would not be efficient it the acquisition of PGAS by Pertamina is in two stages. The reason is that however both options are, PGAS will eventually be acquired and will become a subsidiary of Pertamina. “Any option can be taken. However, it is more efficient if the acquisition is done in one stage,” William said.

According to William, for this time, what is needed is how Pertamina could negotiate with PGAS so that the acquisition process will be done on one stage in order to be more efficient. In fact, what is required is Pertamina’s lobbying capability so that PGAS can be acquired in one stage (Pertamina directly acquires PGAS). (E) 

Business News - January 22, 2014

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