Indonesia to launch much awaited IPOs for PalmCo, PHE in coming months

Jakarta — Indonesia is planning to launch much-anticipated initial public offerings (IPOs) for its state palm oil planter and upstream oil and gas company in coming months, a deputy cabinet minister said on Friday.

IPO activity in the resource-rich country has been one of the world’s hottest this year with geothermal power firms and nickel and copper miners making major listings.

PalmCo, which controls the state palm oil estates, is planning to register for an IPO in September or October, while Pertamina Hulu Energi (PHE), the upstream unit of Pertamina is expected to launch a share sale in August or September, said Pahala Mansury, deputy minister overseeing the firms.

Pahala declined to disclose the size of the planned share sales but sources said PalmCo could raise about $500 million while PHE may raise at least $1.3 billion.

PalmCo will use the IPO proceeds to increase productivity and expand refining capacity to produce cooking oil and other derivatives, Pahala said in an interview with Reuters.

“Our expectation is to increase its processing capacity, which is now only 1 million tonnes, to 3.7 million tonnes in three to four years, using proceeds from the IPO,” he said.

PalmCo, formed through the consolidation of several state palm planters, controls the world’s biggest palm plantation area at around 650,000 hectare (1.61 million acres), Pahala said, with an average yield of 22 tonnes of palm fruit per hectare.

Indonesia, the world’s largest palm oil producer, was forced to impose a three-week export ban last year due to surging domestic cooking oil prices, shocking global markets.

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Larger refining capacity at PalmCo would help the country avoid such disruptions, Pahala added.

PalmCo is also expected to contribute to palm-based fuel production, including jet fuel. Indonesia has the biggest mandatory mix of palm oil in diesel fuel, at 35%, and plans to increase that to 40% in a few years, to reduce reliance on imported fuel.

Proceeds of PHE’s IPO will be used to finance Pertamina’s upstream production, especially natural gas, which is considered a transitional source towards cleaner energy.

PHE operates 27 oil and gas blocks and has participating interest in 13 other blocks in Indonesia, as well as a number of overseas operations, but reserves of many of its domestic blocks are depleting.

“With declining Pertamina gas production, we need the replacement. That’s why we hoped larger entitlement of gas production (from Masela), to be sold domestically,” Pahala said.

Pertamina and Malaysia’s Petronas are in discussions with Shell to acquire its 35% stakle in Indonesia’s Masela gas project.

($1 = 14,955.0000 rupiah)

Fransiska Nangov, Stefanno Sulaiman

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