Courtesy of The Financial Times, an article on Indonesia’s plans to list a unit of its flagship oil group Pertamina this year:

Indonesia plans to list a unit of its government-run oil group Pertamina this year, stepping up a partial privatisation push as part of reforms to its $606bn state-owned enterprise sector.

The initial public offering of Pertamina Geothermal Energy, which uses seismic heat to generate electricity in the volcano-studded archipelago, could value the company at up to $2bn depending on market conditions, people familiar with the matter said.

State-owned enterprises minister Erick Thohir said the offering would spearhead other capital raisings and strategic partnerships planned for government-controlled companies, including Pertamina’s exploration and production arm Pertamina Hulu Energi.

“This is the first time one of the sub-holdings [subsidiaries] of Pertamina will go public,” said Thohir in an interview with the Financial Times at his ministerial residence in Jakarta, adding that the IPO was slated for November or December.

Indonesia’s state-owned enterprises have assets equivalent to about half of the country’s $1.2tn gross domestic product in sectors ranging from telecoms and oil to cement and hotels. They generated total revenue of about $155bn and net profit of $8bn last year.

To increase their efficiency, Thohir, a businessman and former owner of Italian football team Inter Milan, has consolidated 108 companies to 41 and placed them in 12 business clusters.

The goal is to develop more companies with global scale. Indonesia last year had only one Fortune 500 company — Pertamina. “I want to push more and more state-owned enterprises to become in the world top-100 or 500 companies,” Thohir said.

The ministry has said it is planning 14 IPOs under the reforms, starting with last year’s $1.3bn listing of telecom tower company PT Dayamitra Telekomunikasi on the Indonesia Stock Exchange.

Thohir said that after Pertamina Geothermal, Pertamina Hulu could list next year while Pertamina International Shipping, a petrol and gas logistics company, could also hold an IPO or bring in strategic partners.

The government is also looking for foreign partners to invest in International Healthcare Co, a merger of state-run hospitals from various companies that has become the country’s largest hospital operator.

IHC is looking for partners for a “health tourism” centre in Bali. The US-based Mayo Clinic is an adviser on the project.

Analysts said Indonesia’s state-owned enterprises were attractive partners for foreign investors in geopolitically sensitive industries such as mining.

South Korea’s LG Energy Solution and China’s CATL have recently signed agreements with state-owned enterprises Indonesia Battery Corp and Aneka Tambang for nickel supplies.

“Global companies feel secure when they speak to state-owned enterprises and they say ‘we’ll guarantee your supply of these natural resources’,” said Kyunghoon Kim, associate research fellow at Korea Institute for International Economic Policy and a longtime Indonesia watcher.

Muralidharan Ramakrishnan, a senior director at Fitch Ratings, said listing some entities separately could make them more attractive and improve funding access, especially for greener energy companies such as Pertamina Geothermal.

But he pointed out that the reforms, which were flagged in 2017, may take time to implement.

“So the big question is how and when,” Ramakrishnan said. 

Appointing a prominent businessperson such as Thohir, whose brother runs one of Indonesia’s biggest coal companies, as minister also raised questions about transparency and the need to ensure there was no favouritism, Kim said.

Other analysts said consolidation and IPOs alone could not assure proper reform. “They have managed to consolidate quite a few entities but it needs more time to assess whether they are more efficient or profitable,” said Siwage Dharma Negara, of the Indonesia Studies Programme at Singapore’s Iseas-Yusof Ishak Institute.