A renewables IPO boom in Indonesia

Shares in the Indonesian geothermal power plant operator BREN surged after the company’s Indonesian Stock Exchange debut yesterday (Monday).

The company says it’ll use the $200M it raised to repay debt, buy geothermal plants in Java, and expand into other renewable technologies.

Indonesia’s initial public offering (IPO) space has been hot this year. It raised $2.8B in the first half of 2023, behind only China, the US, and UAE. That places Indonesia ahead of much larger economies like India and Japan.

So, what’s going on? 

Two things: investors are attracted to Indonesia’s strong economic and demographic fundamentals; and that’s dovetailing with a broader green energy transition.

• ⛏️ Five of the year’s six Indonesian IPOs that’ve crossed the $100M mark are connected either to renewable energy or key inputs
• 🌋 President Widodo introduced incentives last year to develop Indonesia’s vast geothermal potential (the world’s largest)
• ✍️ He’s moved to position Indonesia as a key link in the world’s EV supply chain, including through a partnership with Australia, and
• 🔋 Jakarta has banned the export of its nickel ore (the world’s largest reserves), forcing processors and manufacturers to invest locally.

Intrigue’s take: Intriguingly, this local IPO boom is happening against a cooling backdrop: the global IPO market has seen a 32% decrease year-on-year as it still comes down from its record 2021, responding to higher interest rates and an uncertain economic outlook.

So there’s an interesting market signal at play here: as investors look for returns, emerging market exposure, energy transition exposure, and manageable risk, some Indonesian stocks seem to be ticking the boxes.

Also worth noting:

• Coal accounted for over 60% of Indonesia’s energy mix in 2022. Indonesia has a 2060 net-zero target.
• The BREN share offering was oversubscribed by 135 times.
• BREN is owned by Indonesian billionaire Prajogo Pangestu.