Indonesia's Pertamina Geothermal in talks to buy KS Orka unit for up to $1 bln - sources

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Pertamina's geothermal subsidiary plant in Tomohon

Officials inspect a steam separator tower at Pertamina’s geothermal binary plant in Lahendong, Tomohon, North Sulawesi province, Indonesia, April 25, 2022. REUTERS/Fransiska Nangoy/File Photo Acquire Licensing Rights

  • Talks come as Pertamina aims to double geothermal capacity
  • Deal could be one of largest by Pertamina Geothermal since IPO
  • Shares have jumped 33% since listing in February

SINGAPORE, Sept 8 (Reuters) - Pertamina Geothermal Energy (PGE) (PGEO.JK), a unit of Indonesian state energy firm Pertamina, is in advanced talks to buy a geothermal unit owned by KS Orka Renewables for up to $1 billion, two sources with knowledge of the matter said.

A deal could be inked before the end of this year if their negotiations to buy PT Sorik Marapi Geothermal Power conclude successfully, one of the sources added, cautioning that no agreement was certain.

Geothermal developer KS Orka had earlier this year appointed DBS to explore the sale of Sorik Marapi, the sources said, declining to be identified as the matter is private.

Pertamina Geothermal and KS Orka did not immediately respond to requests seeking comment on Friday.

DBS declined to comment.

The talks come as Pertamina aims to double its geothermal capacity by 2027-2028, which may cost an estimated $4 billion. Indonesia, Southeast Asia's largest economy, is keen to tap into its geothermal resources to cut energy imports and reduce carbon emissions.

If the deal materialises, it could mark one of the biggest by Pertamina Geothermal since its domestic initial public offering in February. The company's shares have jumped 33% since its listing.

Last month, it signed initial agreements with two Kenyan companies to explore geothermal power project partnerships that could be worth a combined $2.2 billion.

Sorik Marapi, situated in Mandailing Natal Regency in North Sumatra, is one of the largest geothermal projects under development in Indonesia with a capacity of up to 240 megawatts, according to KS Orka's website.

KS Orka acquired a majority share of the company in mid-2016, the website showed, without disclosing the value.

KS Orka was set up by China's compressor maker Kaishan Group (300257.SZ) in 2016 to focus on geothermal new energy development, according to Kaishan's website.

Besides Sorik Marapi, KS Orka's other projects include PT Sokoria Geothermal Indonesia in East Nusa Tenggara, KS Orka's website showed.

Reporting by Yantoultra Ngui in Singapore; Additional reporting by Fransiska Nangoy; Editing by Kane Wu and Jacqueline Wong

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Yantoultra Ngui is a Southeast Asia Deals Correspondent with Reuters in Singapore, covering M&A and capital market deals in a region that is fast emerging as a hot destination for startup investors, unicorns and IPOs. He previously was a reporter at Bloomberg and The Wall Street Journal. Notably, he was part of WSJ's team that covered the financial scandal at Malaysian state fund 1MDB. Yantoultra graduated with an MBA in Finance from Universiti Putra Malaysia in 2010.

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