Photo by SOEs Ministry

JAKARTA (TheInsiderStories)—Indonesia’s state-owned gas company PT Perusahaan Gas Negara Tbk (IDX: PGAS) officially acquired 51 per cent stake of the PT Pertamina Gas (Pertagas) with a total valuation of US$1 billion.

PGAS and the its parent company PT Pertamina signed the conditional sales purchase agreement (CSPA) today (29/06). According to the source close to the deal, the valuation of the acquisition around US$1 billion. In accordance with CSPA, the next step is to complete the transaction within the next 90 days.

“The integration of the gas business is to boost the economy and national energy security through the management of connected gas infrastructure from western Indonesia (Arun) to Eastern Indonesia (Papua),” said Corporate Secretary of PGAS Rachmat Hutama in a press release on Friday (29/06).

Meanwhile, VP Corporate Communication of Pertamina Adiarma Sardjito said after the integration process is completed, PT Pertamina as oil and gas holding directs PGAS as gas sub-holding to manage an integrated gas business in Indonesia.

“Pertagas will be integrated as a subsidiary of PGAS, within the framework of Oil and Gas Holding as stipulated in PP 06 of 2018,” said Adiatma.

The majority of PGN’s shareholders earlier approved the acquisition in the shareholders meeting on May 2018. In the meeting, 80.74 per cent of shareholders approved the PGAS and Pertagas merger. However, 18.7 per cent of shareholders opposed the merger and another 0.5 voted to abstain.

The CSPA signing between Pertamina and PGAS is a follow up of the oil and state-owned oil and gas holding company that was established on April 11, 2018. The oil and gas holding was authorized through the signing of the transfer of Indonesian government stake in PGAS to Pertamina.

The plan to take over of PGAS by Pertamina has been floated since 2013, with goals aimed at creating a 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 the belief it will benefit the entire nation.

The creation of this holding company was under a direction of President Joko Widodo as outlined in the SOE ministry’s roadmap plan submitted to the House of Representatives in December 2015.

By integrating the operation of PGAS and Pertagas, both companies could optimize their assets and avoid redundancy as well as creating the 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 integration of gas sector from upstream, midstream and downstream will provide optimum benefits to Pertamina, PGAS and the public at large. From the financial perspective, the Oil & gas Holding is projected to increase investment capacity of both entities to Rp416 trillion or US$32 billion in the next 15 years as well as resulting in value creation Rp329 trillion or US$25.3 billion.