Perusahaan Gas Negara (PGAS) has announced that total distribution sales volumes to Perusahaan Listrik Negara (PLN), the state-owned power company (not listed), reached 200-210 MMcfd (million cubic feet per day). This is for the power plant in Muara Tawar, north Jakarta. The company is also preparing the connection for the additional 100MMcfd uninterruptible supply to PLN.
PLN in West Java has gas sales contracts with PGAS to the tune of 360MMcfd, and the remaining 60MMcfd is for Tanjung Prior’ power plant (also in North Jakarta) and Cilegon. PGAS had earlier indicated that total distribution reached around 700MMcfd.
We are confident that our FY09 distribution volumes target of 729MMcfd could easily be achieved. There is upside risk for this volumes target. PGAS has been guiding for 700-800MMcfd for 2009.
We still view the stock as a defensive play and expect strong cash flow from increasing distribution volumes. Our analysis shows that the downside risks have been priced in. Maintain OUTPERFORM.
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