PGEO - Dominating Indonesia’s Baseload Transition

KBVS Update
Tuesday, 23 September 2025

PGEO - Dominating Indonesia’s Baseload Transition
(Initiate BUY; TP: IDR1,600/share, +21% upside)

■ Doubling capacity by 2031, output to reach 12.2 TWh. PGEO holding a 74% market share and targeting capacity expansion from 727 MW (2025F) to 1,747 MW by 2033F under its 3 phase rollout. Within 37.7% of its 1GW pipeline already contracted under long term SSC/PPA schemes with PLN, PGEO is poised to more than double output from 5.2 TWh (2025F) to 12.2 TWh (2035F), supported by ~80% capacity factors. Structurally high EBITDA margins (>50%) are driven by inflation-indexed tarrifs, long asset life, and efficient execution, securing PGEO's role as the dominant geothermal IPP in Indonesia.

■ Policy tailwinds & access to 34% RUPTL = long-term upside. Despite Indonesia’s 29.5 GW geothermal potential, only 4.9% is tapped today. PGEO commands 34% of the government’s RUPTL geothermal roadmap (5.2 GW target by 2034), positioning it at the heart of national baseload planning. Presidential Regulation No. 112/2022 introduced regional tariff caps that boost project IRRs and PPA viability. Steady earnings growth from USD420 mn (2025F) to USD754 mn (2030F) is forecasted, with FCF turning positive post-2032. Additional upside stems from upcoming SSC/PPA finalizations, regulatory incentives for renewables, and the inflation-hedged nature of its SSC contracts.

■ Discounted valuation despite scale advantage - BUY with IDR 1,600 TP. We initiate BUY with a DCF-derived TP of IDR 1,600/share, implying 2026F EV/EBITDA of 9.3x - still 15% below geothermal peers (10.8x) despite PGEO’s scale, policy alignment, and national footprint. ROE is seen rising to 7.2% in 2026F, above the global renewable average and closing the gap with domestic names (9.0%). PGEO’s long-term cash flow visibility, 1.7 GW pipeline, and exclusive offtake with PLN de-risk the business model. Key risks include: implementation delays, evolving regulation focus, and higher upfront capex tied to LCOE recalibration.

Regards, 
Laurencia Hiemas - KBVS Research