Indonesia’s Pertamina seeks nod to divest assets to shield from risks

PHILE PHOTO: A view of state-owned oil giant Pertamina's refinery unit IV in Cilacap, Central Java, Indonesia January 13, 2016. REUTERS/Darren Whiteside/File Photo

Indonesia’s Pertamina is seeking government approval to divest assets to help shield the state energy company from rising crude oil prices and a rupiah that is at its lowest level in more than 2-1/2 years.

While higher oil prices have yielded Pertamina better returns from its oil and gas output, they have also increased the fuel bill for the net oil importer, especially amid the slumping rupiah.

Indonesia has promised not to raise some consumer fuel and electricity prices ahead of elections in 2019, but the populist policy has also dented Pertamina’s finances and cut its means of spending on much-needed infrastructure.

The government, which sets Pertamina’s fuel prices, wants to guard Pertamina’s finances from crude prices that are expected to climb 46 percent above the $48 per barrel assumed in this year’s budget, and a 7 percent weakening of the rupiah against the dollar this year.

Pertamina wants to divest to help maintain its long-term financial condition, and to avoid risking too much in any one particular asset class, Adiatma Sarjito, vice president of corporate communication, said in a statement late on Thursday.

“Like the saying ‘don’t put (all) your eggs in one basket,’ we (plan to) minimise risk based on business and legal studies.”

It was not immediately clear how much Pertamina targets to sell or over what time period, but the company would maintain control over the assets, Sarjito said.

Pertamina’s total assets climbed 8 percent to $51.2 billion in 2017 from a year earlier, while its profits slid 19 percent to $2.5 billion over the same period, its audited earnings report shows.

Deputy State Owned Enterprise Minister Fajar Harry Sampurno this week said his office had approved Pertamina’s proposal to “take steps” to shield itself from rising oil prices.

He referred to a letter from his ministry to Pertamina directors that in principle approved their plans to reduce the company’s interests in some upstream projects.

It also approved Pertamina plans to spin off its Cilacap and Balikpapan refinery businesses to its subsidiaries, and review company policies that “significantly” impact its finances.

Indonesia’s upstream oil and gas regulator (SKKMigas) said it supported the moves, and “hopes that through these strategic steps PT Pertamina can make more aggressive efforts in exploration for new oil and gas reserves, and be more efficient in carrying out its upstream work programs.”

Pertamina, however, has cut its 2018 capital spending budget by 28 percent to around $4 billion from $5.6 billion, Investor Daily newspaper reported on Thursday, quoting Pertamina Investment Planning and Risk Management Director Gigih Prakoso.

Indonesia at the same time plans to increase spending on energy subsidies by 69 trillion rupiah ($4.8 billion) to 163.5 trillion rupiah to keep some fuel prices and electricity tariffs unchanged throughout the year, Finance Minister Sri Mulyani Indrawati said on Thursday.

The rupiah hit 14,500 to the U.S. dollar on Friday, its lowest level since October 2015.

Brent crude cost more than 1 million rupiah a barrel in July, the highest since mid-2014 just before global oil prices slumped. In comparison, Brent priced in U.S. dollars is at its highest since 2016.

Reuters

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.