Daily Newsletter

11 September 2023

Daily Newsletter

11 September 2023

PGE in talks to buy KS Orka geothermal unit for up to $1bn

Sources familiar with Pertamina say a deal could be struck by the end of this year, although no agreement is certain yet.

Annabel Cossins-Smith September 08 2023

Pertamina Geothermal Energy (PGE), a subsidiary of Indonesian state-owned energy company Pertamina, is in advanced talks to fully acquire renewables developer KS Orka Renewables’ geothermal unit for up to $1bn, according to sources familiar with the matter.

According to sources speaking with Reuters, a deal could be struck by the end of this year, although no agreement is certain yet. Talks come after Pertamina announced in April last year plans to double its geothermal capacity by 2028, a move that could cost up to $4bn.

According to data from the Ministry of Energy, Indonesia has geothermal resources with the potential to generate more than 28GW of power. Currently, it has only tapped into approximately 2.5GW of this.

If the deal goes through, it could be the largest for PGE since its domestic initial public offering posted in February, which saw the company’s shares leap 33% over the course of this year. United Arab Emirates-based energy company Masdar invested in PGE in February with hopes to increase its footprint in the Asia-Pacific region. Indonesia currently stands as the world’s second-largest geothermal market, with the US holding top spot.

Masdar CEO Mohamed Jameel Al Ramahi said at the time: “We are especially excited to add geothermal energy to our clean energy portfolio, a clean energy source that can deliver dispatchable power 24 hours a day, which further underscores our position as a global leader in delivering clean energy solutions that help drive the global energy transition.”

Last month PGE signed initial agreements with two Kenyan energy companies to explore partnerships relating to geothermal power projects. The Indonesian company signed a memorandum of understanding (MoU) with Geothermal Development company for a partnership worth up to $1.5bn. It also signed a separate MoU with Africa Geothermal International No. 1 for a deal potentially worth $700m.

Thermal power will continue to dominate annual electricity generation in India

India derives most of its electricity from thermal power. Within thermal sources, India is majorly dependent on coal-based plants for power generation. The government has no immediate plans to phase-out coal power plants as coal is one of the cheapest sources of power generation in the country. The country also imports significant amounts of coal from Indonesia, Australia, and South Africa where the carbon quantity of coal is high. Coal is expected to remain the most dominant source of power generation in India until 2035.

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