Pertamina Geothermal Energy issuer summary: long-term offtake and 2028 offshore bond refinancing for a Pertamina-linked geothermal IPP

Date prepared: 2026-05-18
Issuer display: PT Pertamina Geothermal Energy Tbk / PGEOIJ
Key source dates: 2025 Annual Report, audited consolidated financial statements for 2025, unaudited interim consolidated financial statements for the period ended March 2026, Fitch Ratings rating action in April 2026

1. Business Snapshot and Recent Developments

PT Pertamina Geothermal Energy Tbk (PGE) is an Indonesian geothermal power generation and geothermal steam sales company, and a listed issuer within PT Pertamina (Persero)’s Power & New Renewable Energy subholding. As of end-2025, its direct parent was PT Pertamina Power Indonesia, which is also referred to as Pertamina NRE in PGE’s annual report. In this report, the direct parent is referred to as PPI / Pertamina NRE where necessary. As of end-2025, the main shareholders were PPI / Pertamina NRE with 68.32%, Masdar Indonesia Solar Holdings RSC Limited with 14.85%, PT Pertamina Pedeve Indonesia with 5.93%, and public shareholders with 10.90%. PGE is not directly owned by the Indonesian government, but it has links to the government and policy through PPI / Pertamina NRE and Pertamina. This point is important as the starting point for credit analysis. Government-relatedness is strong, but PGE’s offshore bonds are not explicitly guaranteed obligations of the Indonesian government.

The business can be divided into three broad categories. The first is own-operated power generation, where PGE operates geothermal power plants itself and sells electricity to PLN. The second is steam sales, where PGE sells geothermal steam to PLN or PLN Indonesia Power. The third is production allowance / KOB revenue received from Joint Operation Contracts (JOCs) such as Salak, Darajat, Sarulla, and Wayang Windu. JOC capacity illustrates the scale of the geothermal portfolio managed by PGE, but the cash flow that directly enters PGE consists of allowances based on JOC contractors’ revenue or contractual arrangements. It does not have the same economic meaning as own-operated generation capacity.

As of end-2025, PGE stated that it managed total geothermal capacity of 1,943MW. Of this, own-operated capacity was 727MW and JOC capacity was 1,216MW. The core own-operated assets are Kamojang, Ulubelu, Lahendong, Lumut Balai, and Karaha, and steam-equivalent power generation in 2025 reached a record-high level of 5,095.49GWh. Lumut Balai Unit 2 (55MW) received its operational eligibility certificate on June 29, 2025, and entered commercial operation on June 30, 2025. Supported by this unit’s contribution, Lumut Balai’s output increased from 482.06GWh in 2024 to 714.10GWh in 2025, supporting overall revenue growth at PGE.

There are three recent credit developments. First, 2025 saw revenue and EBITDA growth, but net profit declined. Revenue increased from USD407.1mn in 2024 to USD432.7mn in 2025, and company-disclosed EBITDA rose modestly from USD324.1mn to USD330.4mn. By contrast, net profit declined from USD160.3mn to USD137.7mn. The main drivers were higher costs related to the operation of Lumut Balai Unit 2, maintenance and personnel costs, lower finance income, and a swing from foreign exchange gains in 2024 to foreign exchange losses in 2025. From a credit perspective, higher revenue and operating cash flow are positive, but margins have stepped down, and the post-expansion cost structure needs to be monitored.

Second, 1Q2026 showed recovery in earnings. Revenue for the three-month period increased 14.8% year-on-year to USD116.6mn, operating profit increased 12.0% to USD62.0mn, and net profit increased 40.0% to USD43.9mn. Net profit was also supported by a foreign exchange gain of USD3.3mn in 1Q2026, compared with a foreign exchange loss of USD8.9mn in 1Q2025. However, operating cash flow declined from USD77.5mn to USD53.3mn, so the short-term improvement in profit should not be taken as evidence that cash generation has become materially stronger. Cash flow seasonality, tax payments, and working capital need to be monitored on an ongoing basis.

Third, the main rating pressure has shifted from PGE on a standalone basis to linkage with the parent and sovereign. On April 14, 2026, Fitch affirmed PGE’s Long-Term IDR at BBB- and assigned a Negative Outlook. In the Fitch material reproduced by Petromindo, PGE’s Standalone Credit Profile is bb, and PGE’s IDR is notched up under the Parent and Subsidiary Linkage Criteria based on its link with its direct parent, PPI / Pertamina NRE. The key rating sensitivities are a downgrade of Pertamina, a reduction in PPI’s incentive to support PGE, and a reduction in Pertamina’s incentive to support PPI. Even if PGE’s own business and financial profile do not change sharply, rating trends for the Indonesian sovereign, Pertamina, and PPI could affect PGE bonds.

PGE is supported by the baseload nature of its geothermal assets, long-term contracts with PLN, low net debt, and its strategic position within the Pertamina group. At the same time, it is constrained by business scale, asset concentration, development delays, the 2028 offshore bond maturity, and sovereign and parent linkage.

2. Industry Position and Franchise Strength

Indonesia is a market with abundant geothermal resources, and geothermal power is relevant both to the country’s renewable energy policy and to stable electricity supply. Unlike solar and wind power, geothermal generation has limited weather-driven output volatility and can operate as baseload power if underground resources and generation equipment remain sound. PGE’s business value lies in combining this baseload profile with long-term contracts with PLN. If generation volumes are stable and electricity and steam sales contracts are long-term, revenue is more predictable than for a typical merchant renewable business.

PGE’s franchise also has policy significance within the Pertamina group. PPI / Pertamina NRE is the subholding that oversees Pertamina’s gas-based power and new and renewable energy businesses, and had consolidated installed capacity of 3,271.4MW as of end-2025. Of this, geothermal capacity of 772.2MW was through PGE’s power generation, making PGE a core operating subsidiary in PPI / Pertamina NRE’s renewable energy business. Pertamina group’s credit strength has historically been centred on oil and gas upstream, refining, and fuel sales, but from the perspective of decarbonisation and energy transition, PGE’s geothermal business has a strategic position. Including both own-operated capacity and JOC capacity, PGE can be viewed as one of Indonesia’s largest geothermal platforms, but this report has not confirmed a single official source for domestic market share. Therefore, capacity including JOCs should not be treated directly as PGE’s standalone earnings capacity.

However, strategic importance is separate from payment guarantee. PGE’s shareholders include Masdar and public shareholders, and the company is listed on the IDX. Its direct parent PPI / Pertamina NRE and ultimate parent Pertamina appear to have strong incentives to support PGE, but the reviewed materials do not confirm that PGE’s debt carries an explicit guarantee from Pertamina or the government. Fitch also assesses PPI’s legal incentive to support PGE as Low and its strategic / operational incentive as High, and does not treat the support link as a legal guarantee.

The largest factor supporting revenue quality is long-term contracts with PLN. PGE has PJBL / ESC arrangements for electricity sales and PJBU / SSC arrangements for steam sales. Note 31 of the 2025 financial statements shows contract terms of 30 years or 360 months for areas including Kamojang, Lahendong, Ulubelu, Karaha, Lumut Balai, Hululais, and Sungai Penuh. It is also disclosed that, from November 2, 2023, some of PGE’s steam contracts were transferred to PLN Indonesia Power following PLN’s partial spin-off. This means the counterparty changed within the PLN group, and credit analysis should recognise counterparty concentration to PLN / PLN Indonesia Power.

PGE’s pricing mechanisms differ by contract, but the annual report states that electricity and steam sales from own-operated assets have contractual pricing formulas and adjustment mechanisms. Electricity sales are described as having adjustments based on the US producer price index, consumer price index, and other measures, while steam sales are described as having certain escalators. Note 2 of the 2025 financial statements states that PJBU / SSC contracts for Kamojang, Lahendong, Ulubelu, and others, and PJBL / ESC contracts for Kamojang, Lahendong, Ulubelu, Karaha, Lumut Balai, and others, contain Take-or-Pay (TOP) clauses, while certain steam contracts also contain Delivery-or-Pay (DOP) clauses. TOP is a mechanism under which the buyer pays for a minimum capacity as long as PGE meets the contractual minimum supply or generation. DOP, by contrast, indicates that PGE may be required to compensate the buyer if it cannot meet minimum supply obligations. This structure reduces dispatch / demand risk, but leaves geothermal resource, well, and equipment risk with PGE.

At the same time, PGE’s franchise has concentration risk. Production is anchored by Kamojang, Ulubelu, Lahendong, and Lumut Balai, and sales concentration to PLN / PLN Indonesia Power is also high. In geothermal operations, steam supply from a single field, well decline, make-up wells, reinjection wells, equipment failures, and unplanned outages can have a direct effect on credit metrics. PGE operates across multiple areas, but the number of power plants and geographic spread are limited, so its ability to substitute output in the event of a major well or equipment issue is not as deep as that of a larger multinational utility.

In terms of peer comparison, PGE is a government-related and Pertamina-linked geothermal platform, and differs from project-bond or restricted-group credits such as Star Energy Geothermal under Barito Renewables. For PGE, the analysis combines parent linkage, PLN contracts, and standalone financial strength rather than a government guarantee.

3. Operations, Contracts and Segment Assessment

PGE’s operating performance increased clearly in 2025. Total production increased from 4,734.57GWh in 2023 to 4,827.22GWh in 2024 and 5,095.49GWh in 2025. The 2025 increase was mainly driven by Lumut Balai Unit 2, which produced 241.81GWh by itself. Among existing assets, Kamojang generated 1,806.41GWh, Ulubelu 1,616.53GWh, and Lahendong 848.83GWh, with these three areas accounting for about 84% of total production.

Higher production is credit positive, but generation volume alone is not sufficient. To assess revenue quality, it is necessary to verify which sales contracts generate revenue, at what prices, and to what extent that revenue covers PGE’s fixed costs, maintenance, capex, and debt repayment. In 2025 sales, own-operated sales were USD415.4mn. By area, Kamojang contributed USD149.5mn, Ulubelu USD116.3mn, Lahendong USD79.9mn, Lumut Balai USD59.6mn, and Karaha USD10.1mn. Production allowance was USD17.3mn, or about 4.0% of total revenue of USD432.7mn. Therefore, JOCs increase the scale and policy importance of the business portfolio, but on the recent income statement, own-operated assets are the core.

The main long-term contracts are as follows. This is not a full covenant table, but a summary intended to show the visibility of PGE’s cash flow and counterparty concentration.

Concentration to PLN / PLN Indonesia Power is both a credit support and a monitoring item. At end-2025, trade receivables were USD122.8mn from related parties and USD3.5mn from third parties, while the foreign-currency financial asset note at end-March 2026 showed related-party trade receivables increasing to USD146.0mn. The annual report’s collection period was 53.01 days in 2025, 58.25 days in 2024, and 61.91 days in 2023, so collections do not appear to have deteriorated as of 2025. However, this report has not examined in detail payment delays by PLN / PLN Indonesia Power, contract-level TOP / DOP ratios, dispatch instructions, or receivables ageing. Long-term contracts do not eliminate payment risk.

Development projects are also important, in addition to existing asset operations. The fixed asset note in the 2025 financial statements lists construction in progress and development projects including Lumut Balai Units 3 and 4, Hululais Units 1 and 2, Bukit Daun, Sungai Penuh, Lahendong Units 7 and 8, and Gunung Tiga. Hululais Units 1 and 2 were 87.85% complete as of end-2025, with commercial operation stated as 2028. Bukit Daun, Sungai Penuh, and Lahendong Units 7 and 8 are in the exploration and development review phase, with expected commercial operation shown as 2030, 2029, and 2027, respectively.

This development pipeline supports PGE’s medium-term growth, but from a credit perspective it also increases capex, delay, and tariff agreement risk. The annual report states that the timing for the use of IPO proceeds needs to be adjusted because Bukit Daun, Lahendong Units 7 and 8, and cogeneration have not reached electricity price agreements with buyers, and that Hululais is subject to schedule adjustments related to PLN’s EPCC coordination. This means PGE’s capex is not only equipment renewal, but also carries development risk involving contracts, pricing, and counterparty coordination.

Sibayak is another point to note. Sibayak Units I and II were supposed to be operated by PT Dizamatra Powerindo, but the equipment was described as non-compliant and not operational. PGE has a contractual structure under which it can sell steam only to Dizamatra, so reactivation requires legal and technical review. At present, the impact on PGE’s overall revenue scale is limited, but it should be recognised as an example of contractual constraints preventing asset utilisation.

The strength of the geothermal business lies in its low sensitivity to fuel prices and the revenue visibility provided by long-term contracts. Conversely, if wells, steam, equipment, or permits become bottlenecks, revenue is impaired. Future credit strength will depend on whether PGE can maintain high utilisation at existing sites and advance developments such as Hululais, Lahendong 7&8, Sungai Penuh, and Bukit Daun without excessive leverage increase.

4. Financial Profile and Analysis

PGE maintained low net debt and a large cash balance from end-2025 to end-March 2026. At the same time, profitability declined from 2023 to 2025, and the key issue is how much financial headroom remains from the high-margin existing geothermal assets after development costs, maintenance, depreciation, dividends, offshore bond interest, and future refinancing.

Revenue in 2025 was USD432.7mn, up 6.3% from 2024. The company cited optimisation of load factor, earlier maintenance days, higher JOC production allowance, and the operation of Lumut Balai Unit 2 as revenue growth drivers. EBITDA was USD330.4mn, a modest increase from USD324.1mn in 2024. Operating cash flow was USD313.5mn, a large increase from USD258.3mn in 2024. Simple free cash flow after deducting cash outflow for additions to fixed assets of USD84.4mn from operating cash flow was USD229.1mn, indicating strong cash generation from existing assets.

However, margins declined. Gross margin fell from 59.1% in 2024 to 53.9% in 2025, operating margin from 51.6% to 47.5%, and net margin from 39.4% to 31.8%. The increase in costs in 2025 is consistent with depreciation / operating costs associated with Lumut Balai Unit 2 operation, maintenance, and employee-related expenses. Geothermal power has low fuel costs, but equipment, wells, and maintenance have a high fixed-cost component, and margins can move with new unit operation and major maintenance. The operating margin improved to 53.2% in 1Q2026, but three months is too short to conclude that there has been a structural improvement.

The fixed asset acquisition expenditure in the table above is based on “acquisition of fixed assets” in the cash flow statement. By contrast, the segment information in the annual report shows fixed asset additions on an accrual basis of USD101.8mn in 2025. For simple FCF and liquidity bridge analysis, the cash flow statement figure of USD84.4mn is used because it captures actual cash outflow. In future capex discussions, it is necessary to note that the timing of accrual-based investment amounts and cash outflows can differ.

On debt, interest-bearing debt at end-2025 consisted of bonds of USD399.1mn, long-term loans of USD350.4mn, and lease liabilities of USD3.4mn, for a total of about USD752.9mn. After deducting cash of USD718.5mn, net debt was only about USD34.4mn. At end-March 2026, bonds were USD399.2mn, long-term loans USD346.6mn, and lease liabilities USD3.2mn, for total interest-bearing debt of about USD749.0mn, while cash had increased to USD745.2mn. Net debt therefore declined to about USD3.8mn.

The important point in this table is that PGE’s credit strength is supported not by “low gross debt”, but by the large cash balance and long-term loan structure. Gross debt is about USD750mn, or about 1.7x revenue. In absolute terms, this is not light. However, cash is almost the same amount, and much of the long-term borrowing is G-to-G funding via Pertamina from JICA, IBRD, and CTF, with maturities extending to 2035 or 2051. Short-term debt is small, with current long-term loans of USD18.2mn and current lease liabilities of USD1.6mn as of end-March 2026. The largest capital-market maturity is the USD400mn offshore bond due April 2028, and the key issue is whether this is addressed through cash, operating cash flow, bank and capital-market access, parent support, or a combination of these.

Dividends in 2025 were USD136.4mn, equivalent to 43.5% of operating cash flow and 59.5% of simple FCF. PGE returns capital to shareholders as a listed company, but from an issuer-credit perspective, it is necessary to monitor whether the dividend level may reduce financial flexibility when future capex increases. In 2025, operating cash flow was strong, allowing the company to increase cash after dividends, fixed asset additions, loan repayments, and interest payments. However, if development investment increases in 2026-2029 and funding needs overlap for projects such as Hululais and Lahendong 7&8, PGE may not be able to maintain low net debt while sustaining the same dividend level.

Foreign exchange risk remains. The bonds are in US dollars, JICA-related borrowings are in yen, and domestic costs and some liabilities are incurred in rupiah. PGE recorded a foreign exchange loss of USD7.6mn in 2025 and a foreign exchange gain of USD3.3mn in 1Q2026, making FX a non-negligible swing factor in earnings.

Overall, PGE’s financial profile currently supports credit strength. Revenue, EBITDA, and operating cash flow are stable, net debt is extremely low, and short-term liquidity is strong. However, given margin decline, the capex pipeline, dividends, and the 2028 offshore bond maturity, the current low net-debt position should not be assumed to persist automatically. In the next phase, the direction of credit strength will depend on how far PGE can fund development capex and refinancing through internal funds, long-term low-cost funding, and parent / market access while preserving the strong cash conversion of existing assets.

5. Capital Structure, Liquidity and Funding

PGE’s capital structure consists of bonds, long-term borrowings via Pertamina, a large cash balance, and equity as a listed company. The Global Green Bond due April 27, 2028 is the key debt through which PGE directly faces capital-market investors. On April 27, 2023, the company issued USD400mn of 5.15% Senior Unsecured Fixed Rate Notes, listed on SGX-ST. According to the financial statements, the issuance format was Rule 144A / Regulation S, and the proceeds were used to repay bank borrowings. This report has confirmed mainly the basic terms that can be verified from the financial statements and SGX prospectus page: issue amount, coupon, maturity, listing, issuance format, use of proceeds, and senior unsecured status. The covenant package in the Offering Circular has not yet been reviewed in detail.

Because this offshore bond is senior unsecured, repayment capacity rests on PGE’s issuer credit strength, parent linkage, PLN contracts, liquidity, and future capital-market access. The reviewed materials do not confirm an explicit guarantee from Pertamina or the Indonesian government. At present, detailed provisions such as negative pledge, change of control, cross-default, restricted payments, additional debt limitations, and other covenants have not been confirmed. This report is an issuer credit report, and a full investment assessment of the individual bond terms remains a next-step item. Especially in view of the 2028 redemption, the covenants, call schedule, investor protections, parent support language, and green bond reporting obligations need to be reviewed.

Long-term borrowings via Pertamina stabilise PGE’s funding profile. Note 31 of the financial statements explains that G-to-G funding from JICA, IBRD, CTF, and others is on-lent from the government to Pertamina, and from Pertamina to PGE. JICA funding is used for the Lumut Balai Geothermal Power Plant Project, while IBRD / CTF funding is used for the Geothermal Clean Energy Investment Project at Ulubelu Units 3 and 4 and Lahendong Units 5 and 6. The repayment periods are long, with JICA scheduled to be repaid until 2051, IBRD until 2035, and CTF until 2051. Low-cost and long-term project funding supports PGE’s weighted-average funding cost and maturity dispersion.

Liquidity was strong as of end-March 2026. Cash and cash equivalents were USD745.2mn, far exceeding current long-term loans of USD18.2mn and current lease liabilities of USD1.6mn. The current ratio was 411.1% and the cash ratio 335.3% at end-2025. Operating cash flow was USD313.5mn in 2025, leaving room to accumulate substantial internal funds in the less than two years before the 2028 offshore bond maturity. Therefore, near-term payment capacity concerns are low.

However, strong liquidity should not be equated with a complete solution to the 2028 offshore bond. Cash of USD745.2mn at end-March 2026 exceeds the USD400mn offshore bond, but this cash is also used for working capital, development investment, dividends, loan repayments, and equipment maintenance. It is not yet confirmed whether PGE will redeem the 2028 offshore bond fully in cash, refinance it, or combine parent support and bank borrowings. If market conditions deteriorate, using cash would reduce refinancing risk, but would also reduce development headroom and the liquidity buffer. Refinancing would preserve cash, but would expose PGE to sovereign and Pertamina outlook, US dollar interest rates, and Indonesian credit spreads.

Based only on known figures, PGE’s capacity to address the 2028 offshore bond is currently strong. However, the table below is not a forecast, but a sensitivity that overlays 2025 actual results on end-March 2026 cash. The 2026-2029 project-by-project capex budget, unused bank lines, and post-2026 dividend policy have not been confirmed, and large development spending would be added to this.

This simple calculation indicates that PGE is not in a position where offshore bond redemption would immediately create a liquidity shortfall. At the same time, actual cash flow in 2026-2028 will include multi-year investment, dividends, maintenance, taxes, and working capital, so the offshore bond redemption policy and development funding plan need to be verified separately.

The large capex noted by Fitch will shape the financial direction in 2026-2029. PGE’s existing financial profile is strong, but geothermal development is long-term and capital-intensive, and involves uncertainties related to exploration, well drilling, steamfield development, generation equipment, grid interconnection, and COD. The company’s fixed asset additions on an accrual basis were USD101.8mn in 2025, while cash flow statement fixed asset acquisition expenditure was USD84.4mn, but investment could increase as Hululais, Lahendong 7&8, Sungai Penuh, Bukit Daun, Kotamobagu, Seulawah, and other projects progress. At present, public materials do not sufficiently confirm firm funding for each project, unused committed lines, or the total capex budget.

Capital policy is also a monitoring item. PGE is a listed company and paid dividends of USD136.4mn in 2025. PGE is a strategic subsidiary for the Pertamina group, but if the parent expects dividend income, the priority between growth investment and offshore bond redemption becomes an issue. For credit investors, the preferred outcome would be conservative management of dividends, capex, refinancing, and parent support around the 2028 offshore bond redemption period.

6. Government, Parent Linkage and Structural Considerations for Bondholders

Pertamina group linkage is essential in assessing PGE’s credit strength. However, three layers need to be distinguished. The first is PGE’s standalone business and financial profile, corresponding to Fitch’s Standalone Credit Profile of bb. The second is the relationship with the direct parent PPI / Pertamina NRE, where PGE’s strategic importance, support incentives, and operational integration are assessed. The third is the relationship between Pertamina and the Indonesian government, where the sovereign rating and state-owned energy policy shape the overall group credit profile.

On a standalone basis, PGE has a solid credit profile supported by long-term contracts and low net debt, but it is not large. Fitch assigns PGE a standalone credit profile of bb, citing modest operating capacity, asset concentration, earnings visibility, and a relatively strong financial profile. This reflects Fitch’s view that even though PGE’s financial profile is strong, its business scale, asset diversification, and regulatory environment remain more constrained than those of an international investment-grade utility.

The link with the direct parent lifts PGE’s rating. In the Fitch material reproduced by Petromindo, PGE’s rating is aligned with its direct parent PPI / Pertamina NRE. Fitch assesses PPI’s legal incentive to support PGE as Low and its strategic / operational incentive as High. PGE is core to Pertamina NRE’s renewable energy strategy and is linked to Pertamina group’s decarbonisation and ESG goals, so the parent has strong incentives to provide support.

At the same time, PPI / Pertamina NRE itself is assessed through its linkage with Pertamina. Fitch assesses Pertamina’s legal, strategic, and operational incentives to support PPI as Medium, citing PPI’s important role in the parent’s energy transition plan. This multi-stage linkage is both a benefit and a risk for PGE. The benefit is that PGE can receive a rating level above its standalone credit profile. The risk is that even if PGE’s own operations and financials remain stable, deterioration in Pertamina’s or the sovereign’s rating and support outlook could pressure PGE’s rating.

For bondholders, the structure can be organised as follows.

PGE is an issuer with a high likelihood of parent support, but it is not a simple sovereign proxy. Fitch’s rating sensitivities focus more on Pertamina’s IDR, PPI’s incentive to support PGE, and Pertamina’s incentive to support PPI than on deterioration in PGE’s own leverage. This means the strength of the linkage is the main rating driver. At the same time, when investors assess actual payment capacity, PGE’s cash, operating cash flow, 2028 redemption plan, PLN payments, and development capex are more direct. Rating analysis and funding analysis need to be separated.

7. Rating Agency View

On April 14, 2026, Fitch affirmed PGE’s Long-Term IDR at BBB- with a Negative Outlook. In the material reproduced by Petromindo, PGE’s IDR is aligned with its direct parent PPI / Pertamina NRE and assessed under the Parent and Subsidiary Linkage Criteria. PGE’s Standalone Credit Profile is bb. In other words, in Fitch’s view, PGE on a standalone basis is not at the lowest rung of investment grade; it reaches BBB- through two stages of parent linkage: PGE-PPI and PPI-Pertamina.

The important point in Fitch’s standalone assessment of PGE is that both strengths and constraints are presented. The strengths are earnings visibility from long-term contracts and a strong financial profile. The constraints are modest operating capacity, asset concentration, Indonesia’s regulatory and tariff environment being less strong in international comparison, and large capex expected in 2026-2029. PGE has extremely low net debt on a standalone basis, but if the scale of geothermal development and capital spending increases, standalone metrics could weaken.

The rating sensitivities are clear. Fitch identifies negative rating action on Pertamina’s IDR, weakening of PPI’s incentive to support PGE, and weakening of Pertamina’s incentive to support PPI as drivers of negative rating action / downgrade for PGE. A revision of the Outlook to Stable would require Pertamina’s Outlook to be revised to Stable and the support incentives among Pertamina, PPI, and PGE to be maintained. This indicates that PGE’s rating upside / downside is likely to remain strongly linked to the sovereign and Pertamina group outlook for the time being.

This view indicates that PGE bonds are both a standalone geothermal operating company credit and a credit exposure to Pertamina group linkage. PGE’s cash, CFO, and long-term contracts do not by themselves explain the full BBB- rating, and parent- and sovereign-driven downside pressure needs to be monitored first.

At the same time, the rating agency view should not be converted directly into an investment decision. Fitch’s BBB- / Negative is a useful anchor, but a decision to hold or buy PGE’s 2028 offshore bond also requires separate analysis of liquidity to maturity, the refinancing market, dividend policy, capex timing, and the spread demanded by investors. This report has not verified market price or spread data, and therefore does not make a relative value assessment.

8. Credit Positioning

Among Indonesian renewable energy issuers, PGE combines government / Pertamina group linkage with the transparency of a listed company. Compared with project-bond or restricted-group geothermal credits such as Star Energy Geothermal, PGE is characterised more by an issuer-level consolidated balance sheet, Pertamina-related loans, and parent linkage. Compared with geothermal issuers with a high proportion of government guarantees such as Geo Dipa, PGE relies on implicit and strategic support rather than guarantees. Compared with Pertamina itself, PGE has a much smaller business scale, but it has lower direct sensitivity to fuel subsidies, refining margins, and oil prices.

PGE’s relative strengths are its long-term contracts with PLN, own-operated geothermal assets, low net debt, and abundant cash. Its relative weaknesses are the small operating capacity and asset concentration that Fitch cites as the basis for the SCP of bb. Dependence on Kamojang, Ulubelu, Lahendong, and Lumut Balai, concentration to PLN / PLN Indonesia Power, the 2028 offshore bond maturity, and rising development capex are constraints that larger multi-region utilities do not face to the same extent.

In addition, PGE’s Pertamina group linkage is a rating-support incentive, not a promise of capital injection. Support can take multiple forms, including funding support, bank relationships, intra-group funding, and policy coordination, so it is necessary to continue monitoring how PGE’s consolidated cash flow absorbs the offshore bond, borrowings, capex, and dividends.

9. Key Credit Strengths and Constraints

PGE’s main credit strengths are as follows.

The main constraints are as follows.

For credit investors, PGE should not be treated simply as “a small geothermal issuer with strong financials”. It is a geothermal issuer with strong financials whose rating and spread are affected by growth investment and parent linkage. If only existing assets were considered, credit metrics would be conservative. However, PGE’s strategic value lies in its development pipeline, and executing that pipeline requires capital. Therefore, the core investment question is how far PGE can grow while preserving its current cash balance and low net debt.

10. Downside Scenarios and Monitoring Triggers

The most realistic downside scenario is rating pressure through the sovereign and Pertamina. Fitch’s rating sensitivities for PGE emphasise a downgrade of Pertamina’s IDR, a reduction in PPI’s incentive to support PGE, and a reduction in Pertamina’s incentive to support PPI. If the Indonesian sovereign or Pertamina outlook deteriorates further, PGE’s rating and market valuation could come under pressure even if its business does not deteriorate substantially.

The second downside scenario is a combination of capex and development delays. If Hululais, Lahendong 7&8, Sungai Penuh, Bukit Daun, and other projects experience COD delays, cost overruns, insufficient steam confirmation, or delayed pricing agreements, investment spending would come first while EBITDA growth would be delayed. If investment becomes debt-funded and dividends are also maintained at a high level, net debt would rise and refinancing flexibility for the 2028 offshore bond would narrow.

The third downside scenario is operational deterioration at existing assets. If any of Kamojang, Ulubelu, Lahendong, or Lumut Balai experiences well issues, steam supply problems, equipment failure, or an extended outage, margins and cash flow would weaken in a geothermal business with a high fixed-cost component. Kamojang and Ulubelu in particular contribute materially to revenue, so even a single-site outage could affect the overall profile. Sibayak, where the asset cannot be used because of contractual and equipment constraints, is small, but it illustrates the rigidity of geothermal contracts.

The fourth downside scenario is payment and contract risk with PLN / PLN Indonesia Power. PLN is a state-owned power company with high policy importance, but PGE’s sales are heavily concentrated. Deterioration in tariff adjustments, contract renewals, transfers, payment delays, project interconnection, or power purchase price agreements would affect PGE’s revenue visibility. At present, this report has not confirmed any material payment issue, but delays in pricing agreements for development projects have already been disclosed in public materials.

The fifth downside scenario is deterioration in the refinancing market for the 2028 offshore bond. PGE has room to address the maturity with cash, but it also has capex and dividends. If US dollar rates, Indonesian sovereign spreads, Pertamina outlook, and ESG / emerging market credit technicals deteriorate, refinancing costs could rise. If there is no clear redemption or refinancing policy during 2027, the market may become more focused on the maturity wall.

Monitoring items are as follows.

11. Credit View and Monitoring Focus

PGE’s current standalone credit strength should be viewed as speculative grade rather than investment grade, as indicated by Fitch’s Standalone Credit Profile of bb. The external rating of BBB- / Negative reflects not only PGE’s standalone liquidity, but mainly the parent links between PGE and PPI / Pertamina NRE and between PPI and Pertamina. It does not mean there is an explicit guarantee from the government or Pertamina. The probability that PGE’s standalone payment capacity deteriorates rapidly over the next 12 months is low, but ratings and spreads could change relatively quickly depending on the combination of parent / sovereign outlook, 2028 offshore bond refinancing, and development capex.

PGE’s strongest point is that, as of end-March 2026, it had cash of USD745.2mn, almost matching gross debt of about USD749.0mn. Operating cash flow was USD313.5mn in 2025, showing adequate cash generation from existing assets. Long-term contracts with PLN and the baseload nature of geothermal power also limit downside to revenue. From a short-term liquidity perspective, the cushion against the 2028 offshore bond is large.

However, this strength is not something that will necessarily be maintained without active management. PGE is a company pursuing growth investment, and projects such as Hululais, Lahendong 7&8, Sungai Penuh, and Bukit Daun require cash outflow before COD. Dividends are also large. In 2025, the company increased cash despite paying dividends of USD136.4mn, but when development capex increases, the priority among dividends, capex, refinancing, and parent funding will determine credit strength. If PGE is managed conservatively, cash flow from existing assets and low net debt can maintain investment-grade-like stability. Conversely, if growth investment and shareholder returns are both increased, standalone metrics may again reveal the constraints implied by Fitch’s SCP of bb.

The current base view is to treat PGE as a Pertamina-linked geothermal credit with reassuring short-term liquidity, but one that should be monitored before waiting for the rating outlook or the 2028 maturity. Purely from the perspective of credit fundamentals, near-term payment risk is limited, but decisions to hold, initiate, or add to positions require verification of market price and spread, the 2028 bond terms, and the refinancing policy. Without market data, the relative value assessment remains unconfirmed.

The most important point for the next update is the combination of cash flow and capex in 1H and full-year 2026. In addition to revenue and net profit, it is necessary to monitor operating cash flow, fixed asset additions, dividends, cash balance, current borrowings, and any bond buyback or new issuance. In parallel, rating actions for Indonesia, Pertamina, and PPI from Fitch / Moody’s / S&P should be followed. On PGE-specific operations, the focus should be stable operation of Lumut Balai Unit 2, the 2028 COD outlook for Hululais, pricing agreements for Lahendong 7&8 and Bukit Daun / Sungai Penuh, and the contract and collection status with PLN / PLN Indonesia Power.

12. Short Summary & Conclusion

Pertamina Geothermal Energy is a Pertamina-linked geothermal issuer with long-term contracts to PLN, the baseload characteristics of geothermal power, and liquidity that was close to net cash as of end-March 2026. Standalone business scale and asset concentration, the 2028 USD400mn offshore bond maturity, and 2026-2029 development capex are constraints, but parent linkage and cash generation from existing assets support credit strength. Credit monitoring needs to focus not only on PGE’s own financials, but also on the Pertamina / Indonesia sovereign outlook, the refinancing policy for the 2028 bond, and the priority between development investment and dividends.

Sources

• PT Pertamina Geothermal Energy Tbk, Annual Report 2025.
• PT Pertamina Geothermal Energy Tbk, Consolidated Financial Statements as of and for the year ended December 31, 2025.
• PT Pertamina Geothermal Energy Tbk, Interim Consolidated Financial Statements as of and for the three-month period ended March 31, 2026.
• PT Pertamina Geothermal Energy Tbk official report page, https://www.pge.pertamina.com/en/report/2026
• Fitch Ratings, "Fitch Affirms Pertamina Geothermal Energy at 'BBB-'; Outlook Negative", action dated April 14, 2026, reproduced by Petromindo on April 15, 2026, https://www.petromindo.com/news/article/fitch-affirms-pertamina-geothermal-energy-at-bbb-outlook-negative
• SGX prospectus page for PT Pertamina Geothermal Energy Tbk USD400mn 5.15% 2028 notes, https://links.sgx.com/FileOpen/PT%20Pertamina%20Geothermal%20Energy%20Tbk_2005268858-v1%20Final%20Offering%20Circular%20dd%204.20.2023.ashx?App=Prospectus&FileID=59134

Unverified / Pending

• For the 2028 Global Green Bond, only the issue amount, coupon, maturity, listing, Rule 144A / Reg S format, senior unsecured status, and use of proceeds for loan repayment have been confirmed. The Offering Circular text, individual covenants, change of control, negative pledge, cross-default, restricted payments, and call / tender provisions have not been reviewed.
• Current bond price, yield, OAS, Z-spread, and spread comparison with similar-maturity bonds have not been confirmed.
• The total amount of 2026-2029 capex, project-by-project funding plan, unused committed lines, and bank borrowing facilities have not been sufficiently confirmed from public materials alone.
• WKP / plant-level EBITDA, well-level decline curves, resource reserve reports, and detailed availability data have not been obtained.
• PGE’s precise market share in the overall domestic geothermal market, contract-level payment history from PLN / PLN Indonesia Power, receivables ageing, and contract-level TOP / DOP ratios have not been confirmed.