Fitch Affirms Pertamina Geothermal Energy at 'BBB-'; Outlook Negative

(Fitch Ratings - Hong Kong/Singapore - 14 Apr 2026)--Fitch Ratings has affirmed PT Pertamina Geothermal Energy Tbk's (PGE) Long-Term Issuer Default Rating (IDR) at 'BBB-'. The Outlook is Negative.

The rating is aligned with PGE's immediate parent, PT Pertamina Power Indonesia (PPI), under our Parent and Subsidiary Linkage (PSL) Rating Criteria. We assess 'Low' legal and 'High' strategic and operational incentives for PPI to support PGE. PPI is a sub-holding of PT Pertamina (Persero) (BBB/Negative), Indonesia's integrated oil and gas company, and oversees the group's power and new and renewable energy (NRE) operations.

PPI's credit profile is linked to Pertamina's using a top-down approach. We assess Pertamina as having 'Medium' legal, strategic and operational incentives to support PPI, given PPI's key role in the parent's energy-transition plans.

PGE's Standalone Credit Profile (SCP) of 'bb' reflects its modest operating capacity, asset concentration, earnings visibility and relatively strong financial profile.

Key Rating Drivers

'Medium' Strategic Incentives: We believe Pertamina has 'Medium' strategic incentive to support PPI, and therefore PGE, given PPI's role as the main vehicle to raise the NRE capacity of Pertamina's energy mix to around 20% by 2030 (2025: about 5%). This aligns with Indonesia's target to increase NRE to 19%-23% by 2030 from 16% in 2025. We view PPI as having high growth potential, although its financial contribution to Pertamina will remain minimal over the medium term due to its small size relative to the parent's core business.

PPI plans to increase gas-to-power and NRE installed capacity to over 10GW by 2029, from 3.1GW in 2024, including capacity held through joint ventures (JVs) and associates. This target includes around USD2.0 billion in capex and about 700 MW of additional capacity at PGE. PPI also intends to continue pursuing M&A in domestic and international markets. In June 2025, PPI acquired a 20% stake in a Philippines-based renewable energy producer, marking its entry into overseas markets and supporting its energy transition strategy.

'Medium' Legal and Operational Incentives: PPI is a material subsidiary under the cross-default provision of Pertamina's senior unsecured notes. We believe PPI's capex plans will result in significant external debt in the next four years. Pertamina owns 100% of PPI, appoints its management and board, and exerts strong control. PPI has operational synergies between its geothermal energy and Pertamina's upstream oil and gas businesses.

PGE's Key Position: We believe PGE's high strategic importance underpins PPI's capacity expansion and that it will remain PPI's largest subsidiary by financial contribution over the next three to four years. We expect PGE to account for less than 15% of PPI's total installed renewable capacity by 2029, including JVs and associates, but to continue contributing most of PPI's EBITDA. The stable nature of geothermal operations and Indonesia's high geothermal potential augments PGE's role in Pertamina's and the country's energy transition.

Our assessment of 'High' operational incentives for PPI to support PGE is underpinned by PPI's strong control over PGE. This includes appointing PGE's board and management and approving capex and the annual budget. The absence of debt guaranteed by PPI and a cross-default provision in PPI's debt results in 'Low' assessment for legal incentives for PPI to support PGE.

Capacity Expansion; Modest Leverage: PGE aims to nearly double installed capacity to around 1.4GW by end- 2029, with development capex of about USD2 billion in 2026-2029 (2025: USD84 million), funded capex via debt and free cash flow. Our base case assumes lower capex of about USD1.4 billion and slower capacity additions to reflect execution risks and delays, with installed capacity exceeding 1GW by end-2029. As a result, we expect PGE's leverage to be comfortable for its SCP with EBITDA net leverage staying below 2.0x (2025: 0.1x).

Acquisitions Treated as Event Risk: PGE may acquire capacity in the near term to achieve its installed capacity targets, as several of its organic expansion projects were delayed due to procedural matters. Fitch expects PGE to exceed 1GW of installed capacity by 2029 from organic expansion and will treat acquisitions as event risk. PGE is seeking both offshore and onshore expansion, and most of its discussions are in the early stages.

Asset Concentration to Improve: PGE's asset concentration should ease after expansion, with the contribution from Kamojang and Ulubelu, its two key operating geothermal working areas (WKPs) out of five, declining to just over 50% of total production by 2029, from just under 70% in 2025. Concentration risk is mitigated by multiple operating units at most WKPs, supporting an availability factor above 95% over the past five years. PGE has 1.2GW of operating capacity under the joint operation contract, although the contribution to cash flow is immaterial.

Strong Counterparty; Cash Flow Visibility: PGE has low counterparty risk, as it sells all its steam and electricity volume to sovereign-owned utility PT Perusahaan Listrik Negara (Persero) (PLN, BBB/Negative) under long-term sales contracts, typically 30 years. The contracts have an average remaining life of more than 20 years, providing price certainty because tariffs are fixed with automatic annual adjustments for inflation, and most include take-or-pay clauses that off some volume protection. PLN's timely payments record gives PGE stable cash flow.

Immaterial Middle East Conflict Impact: PGE's operating costs are largely unaffected by the Middle East conflict, and it may even benefit from higher sales volumes. PGE has minimal direct exposure to oil and gas price fluctuations as a pure-play geothermal operator. The company's strong cost position in the electricity generation mix could support some volume upside as other generation sources face higher fuel costs. However, based on current conditions, we expect these additional volumes to remain a small share of total production output in 2026.

Peer Analysis

Fitch uses the stronger parent path under the PSL criteria to rate PGE, and PGE's rating is indirectly linked to that of its ultimate parent, Pertamina. Pertamina has 'Medium' legal, operational and strategic incentives to support PGE's immediate parent, PPI, while PPI has 'High' operational and strategic incentives to support PGE, although legal incentives are 'Low'.

The rating approach is similar to that for PT Perusahaan Gas Negara Tbk (PGN, BBB-/Stable), which is also rated under a top-down approach from Pertamina under our PSL criteria. PGN's PSL linkage reflects a 'Medium' incentive for Pertamina to provide support. PGN, as the sub-holding company for Pertamina's gas business, dominates the Indonesian gas market, with over 90% of gas distribution and 100% of transmission volume. Pertamina appoints most of PGN's directors and senior managers. PGN is also a material subsidiary under the cross-default provision of Pertamina's senior unsecured notes.

Fitch’s Key Rating-Case Assumptions

- Operating capacity to reach more than 750MW by end-2027 and close to 900MW by end-2028, excluding inorganic expansions;

- Selling price per unit based on existing price per contract, with escalation for inflation if applicable, based on the contract for each working area;

- EBITDA margin between 75% and 78% in 2026-2029 ;

- Cash organic capex of just under USD1.5 billion during 2026-2029;

- Dividend payout ratio at 85% of net profit.

Corporate Rating Tool Inputs and Scores

Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the SCP:

- Business and financial profile factors (assessment, relative importance): management (bbb, lower), sector characteristics (bbb+, moderate), market and competitive positioning (b+, higher), diversification and asset quality (bb-, higher), company operational characteristics (bbb+, moderate), profitability (bb+, moderate), financial structure (bbb+, lower) and financial flexibility (bbb, moderate).

- The quantitative financial subfactors are based on standard CRT financial period parameters: 20% weight for the latest historical year 2025, and 40% for the forecast years 2026 and 2027.

- The governance assessment of 'good' results in no adjustment.

- The operating Environment assessment of 'bbb-' results in no adjustment.

- The SCP is 'bb'.

To derive the IDR:

- Application of Fitch's PSL criteria results in an equalised approach.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

- Any negative rating action on Pertamina's IDR;

- Weakening of PPI's incentives to support PGE;

- Weakening of Pertamina's incentives to support PPI.

Factors that Could, Individually or Collectively, Lead to Stable Outlook:

- A revision of the Outlook on Pertamina's rating to Stable, provided incentives to provide support remain intact between Pertamina, PPI and PGE.

For Pertamina's rating, the following sensitivities were outlined by Fitch in a rating action commentary on 10 March 2026:

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

- Negative rating action on the sovereign

- Significant weakening of the likelihood of state support

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

- The Outlook will be revised to Stable if the Outlook on the sovereign's IDR is revised to Stable, provided there is no significant weakening in the likelihood of government support

Liquidity and Debt Structure

PGE's liquidity benefits from very low annual debt maturities of below USD20 million until 2028, when its only US dollar note matures. Long dated, amortising term loans accounted for 47% of its total debt at end-2025. PGE had total debt outstanding of USD750 million and a strong cash balance of USD718 million as of end-2025.

We expect PGE to generate stable annual cash flow from operations of over USD250 million in 2026-2029, although it will rely on external funding for its planned capex. Financial flexibility is adequate, buoyed by solid access to a notional pooling facility at Pertamina's group level, shareholder loans and external financing, aided by parental support.

Issuer Profile

PGE is an Indonesian geothermal company, established in 2006. PGE has total operating capacity of 727MW under its own working area and 1,216MW under joint operating contracts at end-2025. It manages 15 geothermal working areas across Java, Sumatra and Sulawesi.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

PGE's ratings are indirectly linked to its ultimate parent, Pertamina. Any change in Pertamina's ratings will result in a similar revision in PGE's ratings.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

Climate Vulnerability Signals

The results of our Climate.VS screener did not indicate an elevated risk for PGE.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. (ends)