by: William Jhanesta
According to Petromindo Research, there were at least 19 mergers and acquisitions (M&A) announced during the period from July to September 2023, with the mining sector contributing the most deals, totalling 12 deals. In the oil and gas (O&G) sector, there were at least 5 deals, including the long-awaited announcement by Pertamina and Petronas, which acquired Shell's entire 35% interest in the Masela production sharing contract (PSC). Meanwhile, in the power and renewables sector, only 2 deals were tracked during the third quarter period.
M&A activities in the third quarter of this year spread across the entire project lifecycle, including operational, under development and construction, and under exploration assets. Out of all the assets sold, approximately 68% were in the operational phase, 21% were assets under development, and the remaining 11% were still in the exploration phase. In total, it is estimated that more than USD 2.51 billion worth of transactions took place. Please note that several announced deals did not reveal their agreed value.
Oil & Gas
The value of M&A transactions in the O&G sector for Q3 2023 was estimated at over USD 690 million. This value does not take into account the acquisition of the 3 Indonesia Deepwater Development (IDD) projects by Eni. Besides the acquisition of the Masela block interest by Pertamina and Petronas, during this period, it was also announced that Energi Mega Persada (EMP) acquired two producing assets owned by Pertamina in Sumatra. Unfortunately, the exact transfer value of these asset acquisitions was not disclosed.
In addition to acquisition of upstream assets, there were also two interesting M&A transactions in the LNG infrastructure sector. First is the acquisition of PT Sulawesi Regas Satu, an LNG regasification firm, by EMP. According to the company’s statement, Sulawesi Regas currently has a contract to lease out an FSRU (Floating Storage and Regasification Unit) and associated facilities to PT PLN Energi Gas, previously known as PT PLN Gas & Geothermal.
IDX-listed copper miner and smelter PT Amman Mineral Internasional Tbk (IDX: AMMN) had acquired 100% shares of PT Medco Sumbawa Gas (MSG) from related company PT Medco Power Indonesia. MSG is a company developing LNG terminal, storage, and regasification facilities to support the development of a 450 MW combined-cycle power plant in Sumbawa.
Power & Renewables
The Power & Renewables sector remained relatively passive during this period. Total transactions in Q3 2023 are estimated at over USD 50 million, with two deals reported. One of these deals involved the acquisition of a 40.476% stake in PT Supreme Energy Sriwijaya by a subsidiary of PT United Tractors Tbk (IDX: UNTR), PT Energia Prima Nusantara, valued at USD 42.33 million. This acquisition is related to the assets of the Rantau Dedap geothermal power plant with a capacity of 2x49 MW in South Sumatra.
In addition to geothermal, another M&A activity involved the acquisition of captive power plants owned by coal miner PT Arutmin Indonesia by the state-owned electricity company PT PLN (Persero). With this acquisition of captive power from the Muara Satui mine, PLN said that it now holds a total of 16,970,000 VA of captive power from Arutmin. This follows the previous acquisitions of captive power from three other mine sites in South Kalimantan operated by the coal firm in recent years, including the Asam-Asam site in February 2014, Kotabaru in March 2021, and Kintap in November 2021. However, no further details were provided.
Coal & Mining
The third quarter was a busy period for the Indonesian coal and mining sector. Based on data compiled by Petromindo, there were at least 12 deals with a total value of more than USD 1.81 billion. M&A transactions in the coal and mining sector during this quarter were predominantly related to the nickel industry, including acquisitions of nickel mines and smelters. Petromindo suggests that the aggressive acquisition of nickel mines was aimed at securing nickel ore supplies for existing nickel smelters amid concerns over diminishing national nickel reserves. Additionally, the increasing trend in energy transition, particularly concerning the development of the EV battery ecosystem, played a significant role in driving these transactions.
In addition, coal took the second spot in this sector with an estimated deal value of USD 646.3 million. This is noteworthy because amidst the ongoing discussions surrounding energy transition, the level of M&A activity in the coal sector remains quite robust. Notably, Petrindo, a coal mining company controlled by tycoon Prajogo Pangestu, has been actively involved in coal mine acquisitions. This situation indicates that the coal industry in Indonesia has not yet reached its peak and is likely to continue growing in the next few years.
Rumors and unrealized M&A
Petromindo has also mapped out several M&A plans, both formally disclosed and informally discussed, which have not yet materialized. The failure to reach agreements is attributed to various factors, including price discrepancies, changes in acquisition schemes, and geopolitical conditions. Some major and significant awaited transactions include the Tungkal and Salawati PSCs by Criterium, the Krueng Mane block, and the Sorik Marapi geothermal power plant.
Criterium Energy Ltd, an independent upstream energy development and production company focused in Southeast Asia, recently announced the restructuring of the acquisition of all outstanding shares of Mont D’Or Petroleum Limited. With the recently announced Tungkal PSC extension period to 2042, Petromindo expects Criterium to quickly execute drilling campaigns for the untapped resources within the block.
By the end of 2022, UK independent oil and gas firm Harbour Energy was reportedly in the process of acquiring the Krueng Mane block, offshore Aceh, from Eni. A top official of the upstream oil and gas authority SKK Migas said that Harbour plans to integrate the Krueng Mane block with its Andaman II block to create a single working area and ensure cost efficiency. The Krueng Mane block includes the Jambo Aye gas discovery with a potential gas flow of up to 120 million standard cubic feet per day (MMSCFD), but it has so far been unable to be developed due to high costs.
Earlier this year, KS Orka Renewables appointed DBS Bank to explore the sale of its entire 95% ownership in the Sorik Marapi geothermal project. Sources have indicated that several parties are interested including PT Pertamina Geothermal Energy Tbk, Star Energy Geothermal, and PT Medco Power Indonesia. Negotiations are still ongoing, leaving Pertamina and Medco, with discussions aimed at reducing the transaction value from the initial USD 1.2 billion, according to the sources.
These planned M&A deals represent potential future developments in Indonesia's business landscape. As market conditions, regulatory environments, and global dynamics continue to evolve, the success and timing of these transactions may also change. Stakeholders in these proposed deals will closely monitor these factors and adapt their strategies accordingly to maximize their chances of successful completion.
Final Comments
M&A opportunities in the Indonesian energy and mining sectors are expected to continue evolving in the coming years. Assets with the potential to support decarbonization efforts in this era of energy transition are likely to have larger transaction opportunities. Fossil energy projects with added carbon capture and storage (CCS) facilities in the upstream oil and gas industry, the development of clean energy-based power plants, and critical mineral mining will attract greater attention from large international companies and well-established local energy firms. As Indonesia navigates its energy transition, the M&A landscape is poised for significant growth and transformation.
