Saratoga bets on Indonesian energy

This thesis was reinforced last week when a consortium led by Saratoga Capital announced that it would purchase a 51% stake in the energy division of Indonesia's largest publicly listed oil producer PT Medco Energi Internasional, for $112 million. In all, $87 million was paid on Friday of last week, and the remaining $25 million will be invested in January.

The company's President Director Lukman Mahfoedz said the funding will help PT Medco Power meet Indonesia's rising energy demand. The unit owns gas-fired power plants based in Batam and South Sumatra, which claim a total capacity of 250 megawatts. It aims to have total capacity of 1,000 MW by 2015, and the company is said to have earmarked $500-$600 million over the next five years to increase electricity output.

"Medco Power is carrying investment measures to boost its operations to catch up with about 10% growth in electricity needs in Indonesia," he said.

Approximately 65% of Indonesia's electricity demand is reportedly not being met, while the Bandung Institute of Technology (ITB) estimates that power consumption will quadruple in 14 years.

This pocket of opportunity has attracted private equity. Saratoga alone has a deep history of investing into the sector: Sandiaga Uno, the firm's head, previously told AVCJ that Saratoga's most iconic transaction was the purchase of a 51% stake in Adaro Energy, which is now the second-largest coal player in the country. Adaro listed on the Jakarta Stock Exchange in July 2008, raising $1.3 billion. It remains Indonesia's largest-ever IPO.

Batavia Investment Management, Northstar Pacific Partners, Ancora Capital Management and J&Partners are among the other Indonesia-focused funds to have invested in the country's mining and utilities sector. They tend to acquire significant minority stakes. Ancora's $647 million investment for a 45% stake in PT Bumi Resources in 2008 is among the most expensive transactions in the space, while J&Partners' $200 million purchase of Avocet Mining last year is a rare case of a full buyout.

Meanwhile foreign players including Switzerland's Pala Investment, Aureos Capital, Olympus Capital and Apollo Capital Management began investing in the sector in 2007, often in partnership with local players. One example of this came in December 2010, when TPG Capital and Government of Singapore Investment Corp bought a stake in PT Delta Dunia Makmur, a coal mining contractor. The deal was originated by local firm Northstar Pacific.

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• Topics
• Southeast Asia
• Infrastructure
• Buyouts
• Saratoga Capital Group
• Indonesia
• Infrastructure
• energy