Funds prepared to defend PGN shares

The Jakarta Post, Jakarta

State-owned gas utility PT Perusahaan Gas Negara (PGN) said the government and the company's underwriters had prepared funds to help prevent its share price from falling below the initial public offering (IPO) price of Rp 1,500 per share.

PGN president WMP Simandjuntak said the money, amounting to Rp 300 billion (US$35.50 million), would be placed in a special account. He did not provide further details.

"It is to stabilize the price. Should the share price fall, they (underwriters) would buy more shares," Simandjuntak told reporters after a hearing with the House of Representatives Commission VIII on mining and energy.

PGN last week sold 30 percent of its shares via the IPO at a price of Rp 1,500 each, raising around Rp 1.9 trillion in proceeds, of which Rp 1.1 trillion went to the company and the remainder to the state coffers. The underwriters of the IPO were Credit Suisse First Boston (CFSB), PT Danareksa Sekuritas and ABN-Amro.

PGN's shares in the initial public offering was 8.56 times oversubscribed.

On Monday, PGN listed its shares on the Jakarta Stock Exchange. During the market debut, PGN shares managed to rise to Rp 1,750 before closing at Rp 1,550. But on Wednesday, the share price closed unchanged at Rp 1,500 amid an overall declining market trend in the region as investors took profit from recent gains.

PGN has said that the IPO proceeds will be used to finance its gas pipeline projects. But the company also plans to issue bonds next year to raise additional funds for the projects.

In the first quarter of next year, PGN will issue around US$100 million worth of bonds.

Simandjuntak said on Wednesday the company would likely set a coupon rate of 7.5 percent for the 10-year eurobond.