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JAKARTA (TheInsiderStories)— Indonesia’s Minister for State-Owned Enterprises on Wednesday (04/11) signed an approval letter over the transfer of a 56.96 percent stake in state gas distributor PT Perusahaan Gas Negara to state energy company PT Pertamina.

The plan to takeover of PGN [PGAS] by Pertamina has been floated since 2013, with goals aimed at creating an state-owned energy holding company that handles the management of gas infrastructure in Indonesia.

The takeover has stirred public debate and confusion among executives in both companies. However, the government proceeded with the plan on belief it will benefit the entire nation.

As part of the deal, PGN will acquire Pertamina’s gas producer arm Pertagas. PGN has $6.29 billion worth of assets as of end of last year and Pertagas has $1.81 billion. PGN is put into a sub-holding company under Pertamina managing gas business from midstream to distribution.

Fajar Harry Sampurno, a Deputy Minister of State Owned Enterprises told reporters on Wednesday (04/11) that the creation of this holding company was from a direction from President Joko Widodo as outlined in the SOE ministry’s roadmap plan submitted to the House of Representatives in December 2015.

A study from the SOE Ministry shows that benefit of creating an energy holding company include:

  • helping create an efficient value chain in the gas industry from upstream, midstream and downstream
  • improving supply of gas, savings of expenditure, capital expenditure and operating procedures,
  • increasing liquidity
  • increasing the investment capacity and financial structure

The study said the integration of gas companies from the upstream to downstream is important as it is expected to make gas distribution more efficient and ultimately help reduce gas prices.

The study also said by integrating the operation of PGAS and Pertagas, both companies could optimize their assets and avoid redundancy as well as creating larger entity. The integration of both companies is also expected to help boost development of gas infrastructure in the country and ultimately giving wider access to the public to get gas supply.

The creation of sub holding gas will also help making it easier for the government to determine affordable gas price for end-users by determining gas processing and distribution margins. Meanwhile for PGN, the control of gas infrastructure development under its management will allow the company to develop gas infrastructure more efficient and flexible.

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Before joining The Insider Stories as an editor, Muna was a journalist for macroeconomics and energy at Bisnis Indonesia. She received a Master of Science in International Development from The University of Manchester and bachelor degree in Social Development and Welfare from Universitas Gadjah Mada.

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