Foreign firms show interest in PGN
JAKARTA (JP): At least 30 foreign gas companies have shown interest in buying part of state gas company Perusahaan Gas Negara's (PGN) shares, PGN president A. Qoyum Tjandranegara has said.
Qoyum said Monday that the foreign companies included El Paso Energy International and Enron, both of the United States, Osaka Gas of Japan and Gas Le Franc of France.
However, he said the companies had not made a firm commitment due to uncertainty over PGN's rights in the sale of gas in the domestic market.
They wanted the government to issue a special ruling to clarify the mechanism in the sale of gas in the country, Qoyum said.
PGN plans to divest 25 percent of its shares to one or two interested companies through direct placement to raise funds for its future expansion.
Qoyum said investors were confused about Indonesian laws which on one hand provided state-owned Pertamina with the sole right to explore, produce and transmit gas in the country, but also allowed PGN to carry out transmission and distribution activities.
Pertamina was awarded the sole right to explore, produce, and transmit oil and gas in the country under Law No. 8/1971 and Law No. 44/1990. Under the Indonesian legal system, the laws supersede a 1994 government regulation which allows PGN to sell gas to corporate and household buyers.
"Investors want a clear rule of the game. They don't want to put their money into a company if they are not assured of the prospects of the company," company finance director WMP Simandjuntak said. He said investors wanted monopolistic practices in gas to be eliminated.
Qoyum said the Ministry of Mines and Energy had drafted a presidential decree on gas transmission and distribution which would guarantee PGN's right to transmit and distribute gas in the country.
A presidential decree ranks higher than a government regulation, but lower than a law under the Indonesian legal system.
"The presidential decree is a kind of bridge leading to a change in the existing oil and gas laws," Qoyum said. He said a presidential decree would be strong enough to convince investors about PGN's gas distribution right.
Qoyum expected the government would put the presidential decree on gas transmission and distribution into effect this year.
"Once the decree goes into effect, we will make our stake available for bidding to interested investors," he said.
Qoyum said PGN's divestment plan was part of requirements set by its creditors -- the Asian Development Bank, JEXIM and the European Investment Bank -- when they provided a US$590 million loan to the company in 1995 to finance the development of a gas pipeline linking Gersik, Duri and Batam in the southern part of Sumatra.
The 944-kilometer pipeline is under construction.
"We were requested by creditors to invite foreign investors to fund our expansion," Qoyum said.
PGN has yet to release its 1997 financial statement but earlier estimated its profits increased 32 percent to Rp 103 billion ($10.3 million) last year, while assets increased 68 percent to Rp 1.1 trillion. (jsk)