PT Barito Renewables Energy Tbk (BREN) is a subsidiary of PT Barito Pacific Tbk (BRPT) (pre-IPO stake: 66.67%), focusing on geothermal energy. BREN will hold an IPO soon, potentially raising IDR 3.1–3.7 trillion in the process. BREN emerges as Indonesia’s largest geothermal player in terms of capacity (total: 885 MW) amidst rising interest in the renewable energy sector and the government's efforts to achieve 23% renewable energy mix by 2025. With a bookbuilding price range of IDR 670–780, BREN shares are offered at 14.3-16.1x FY23F EV/EBITDA.

Potentially raising IDR 3.1-3.7 trillion. With a book-building price range of IDR 670–IDR 780 per share, BREN might raise IDR 3.1-3.7 trillion in its IPO, with a market cap estimate of IDR 90–105 trillion. BREN will release 4.5 billion shares (3.35% of its total shares) to the public in its IPO. According to the company’s prospectus, 71% of its IPO proceeds will be used to pay its debt to Bangkok Bank Public Company Limited, 30% to settle its payment obligation to Star Energy Oil and Gas Ltd. (SEOG), and 10% as working capital.

Strong operational performance. In 1Q23, BREN managed to produce 1,294 GWh of electricity and 481 GWh of steam from its three Geothermal Working Areas (GWA), each with an installed capacity exceeding 200 MW, bringing its total installed capacity to 885 MW. With that kind of capacity, BREN is not only Indonesia’s largest geothermal operator but also one of the world’s largest geothermal players. In addition to its impressive capacity, BREN has proven its operational excellence, with all its power generation units operating at > 90% capacity in 1H23 .

Solid financials and future expansion plans. Supported by its massive operational capacity, BREN maintains a strong and stable financial performance, and the company currently holds several long-term sales contracts spanning 40 years. Regarding its financial numbers, BREN reported USD 147.1 million of revenue in 1Q23 (+10% yoy), USD 569.78 million in 2022 (+6.03% yoy), and USD 537.36 million (+3.2% yoy) in 2021, with EBITDA margins of 90.9%, 89.9%, and 89.0%, respectively. Going forward, BREN will focus on optimizing its existing geothermal capacity while adding new ones, including adding 15 MW to its Salak GWA using binary technology at the end of 2023 and 23 MW to its Wayang Windu Unit 3 in 2026. In addition to expanding the capacity of its existing GWAs, BREN is also working on a plan to open 3 new GWAs.

Moderate Valuation. With a bookbuilding price range of IDR 670-780/share, BREN’s valuation range comes in at 14.3x-16.1x FY23F EV/EBITDA, assuming an annualized EBITDA of USD 535 million (4% more premium than global and regional average, and 14% more premium than its closest peers, PGEO).