Report of the Board of Directors
Dear Shareholders and Stakeholders,
Praise and gratitude we always offer the presence of God Almighty for the grace and favors that always overshadow us all. Alhamdulillah, we are currently still given healthy favors even though covid-19 has gone down.
Throughout 2022, the world is still hit by Covid-19 even though it has gone downhill. The condition of all lines of life, including the affected business sector, is now gradually recovering. Several countries in the world that used to implement strict social restriction policies that had triggered a significant economic contraction, such as in the United States, European Union, Japan, Britain and China, have begun to slow down.
Supply and demand in the global economy have now begun to squirm after previously correcting sharply as a result of massive activity restrictions when covid-19 hit. From the supply side, the manufacturing sector has increased production capacity so that the global supply chain has begun to move. Even some large companies that previously laid off some of their employees to reduce operational costs have now begun to open up. Meanwhile, on the demand side, consumption of goods and services, which had decreased, has now begun to rise again, retail sales activities and shopping centers that were once quiet have begun to open and are crowded with potential buyers.
The tourism sector, which had declined due to the implementation of regional quarantines in several countries (lockdowns), has now begun to be active again. The improvement of this site is expected to trigger the overall economy and reduce poverty. Likewise, in the renewable energy business sector, conditions have begun to look good and the potential continues to grow.
The Company has also mitigated, determined strategies and taken comprehensive strategic steps to minimize risks that could potentially affect the sustainability of the Company's business.
Business Performance 2022
In 2022 the company still has quite severe challenges. Although, the Covid-19 pandemic which affects economic and industrial conditions globally and nationally which has an impact on the energy industry has begun to grow slowly. Faced with this situation, Terregra has implemented a variety of strategic and consistent measures to support the sustainability of the core business and strengthen the financial structure. This is in line with the company's commitment to always grow and provide positive value to shareholders and stakeholders.
In running the business in 2022, the Board of Directors does not neglect the implementation of health protocols and is always consistent in carrying out work activities even though Covid-19 has begun to slow down. This is in line with the company's efforts in maintaining the continuity of operations, sales and development of the Company in the midst of new normal conditions. To maintain and improve business performance, Terregra's Board of Directors has made efforts to strengthen financial resilience as a basis for ensuring long-term profitability. Terregra's Board of Directors has also carried out appropriate and optimal cost efficiencies and taken advantage of existing market opportunities to maintain the company's financial strength, including innovating and applying the principles of good corporate governance compliance so that revenue generation can increase.
The achievement of Terregra's performance in 2022 will be the foundation for improving 2023 performance through business innovation efforts in optimizing its resources by prioritizing efficient cost management, to create added value not only for shareholders but also for stakeholders. Terregra is committed to creating positive added value for shareholders and stakeholders through the development of projects and resources, establishing business partnerships in business development, cost efficiency to increase competitiveness and strengthening core business performance to increase company revenue in line with the realization of the company's vision.
Terregra plans to optimize its potential through integrated technology-based business development efforts such as exploration, production operations, marketing, research and development. To realize it all, Terregra is open to establishing partnerships with various parties who have a good reputation based on profitable profitability in developing projects and developing sales business models. The Company has also implemented strategic policies to collaborate with national and international business partners who have access to technology, markets and funding.
It is undeniable that in 2022 the challenges are still tough even though the global Covid-19 pandemic has subsided. However, this condition is a challenge for the business world, including the mining industry and national renewable energy. External challenges, including the volatile global economic situation, are reflected in the volatility of the Rupiah exchange rate against foreign currencies which also affects the recording of the Company's foreign exchange rate difference/loss profit /loss, considering that Terregra has risk exposure to the weakening of the Rupiah exchange rate against the USD.
These external conditions have been comprehensively mapped and mitigated by Management to determine strategic measures to support the Company's business and operations.
Entering 2023, where challenges are still quite large, we respond optimistically and continue to apply the principles of prudence and good corporate governance in running this business. In 2023 Terregra will focus on hydroelectric projects, both mini hydro and large hydro (PLTA) in the country.
In 2022 the company has completed the due diligence process for 3 (three) PLTM projects with a Consultant appointed by the Potential Investor, namely Carbon Resilience Pte Ltd.
The Due Diligence Process on the Legality aspect was carried out by Baker McKenzie and its affiliate in Indonesia HHP, followed by the Engineering Due Diligence with the appointment of Jacobs Engineering New York to conduct technical due diligence at 3 PLTM project locations and conduct a review of the draft EPC Contract. This process was completed in November 2022.
In facing the challenges of a dynamic and volatile economy in 2022, Terregra is committed to continuing to strengthen its strategy and improve performance so that it is able to achieve stable financial growth and be able to produce more and more guaranteed projects so that a bright future can be achieved. Through measurable research and development, the company optimizes the use of capital to always try and work hard to realize the creation of sustainable energy for the Indonesian state which is certainly beneficial and safe for the surrounding environment.
Terregra will issue bonds in the form of green bonds. The green bond is intended to support the acceleration of financing of TGRA's energy projects. Later, the issuance of this green bond will complement TGRA's funding after previously planning to conduct a rights issue. Hopefully, Terregra will become the first new and renewable energy (EBT) company to issue a green bond.
TGRA Management's estimate is related to the need for nominal green bond funds to be issued for the first phase of IDR 500 billion. In the next green bond issuance, it can be IDR 1 trillion, which will be issued after the implementation of the rights issue. This is done so that the debt to equity ratio (DER) remains healthy. in 2022, Terregra has started preparing for the issuance of this green bond and has begun working on and preparing draft bonds to be issued.
TGRA has also discussed with the capital market authorities. The capital market authority makes it easy for NRE companies to issue green bonds. In accordance with the provisions of the Financial Services Authority (OJK), at least 70% of the proceeds from the issuance of green bonds will later be used for the development of NRE, namely hydro power plants. While the rest will be used for company operations.
Gradually, funds from investors have entered in the form of bridging funds for the settlement of land that has not been completed and the need for guarantees to the State Electricity Company (PLN). Currently, TGRA is carrying out the construction of three mini hydro power plants (PLTMH), the first is Sisira, Batang Toru-3, and Batang Toru-4. The total investment for these three projects is IDR 1.3 trillion. In detail, equity financing from carbon resilience is 50% (Rp 199 billion) for the three companies that house the PLTMH. Then, debt financing in the form of investor loans worth IDR 1.1 trillion with an interest rate of 1.7% floating rate above the 18-year LIBOR period As for the progress for PLTMH Sisira and PLTMH Batang Toru-3 for land acquisition has reached 100%, and is currently in the process of certification to the State Land Agency (BPN).
Construction will be started by the owner with the support of a development loan from Carbon Resilience Pte Ltd Singapore. Construction by contractors for Sisira and Batang Toru-3 was immediately carried out while finalizing the new Engineering-ProcurementConstruction (EPC) contract, where investors provided conditions that the EPC agreement must comply with FIDIC standards (international standards for strategic construction projects). As for the Batang Toru-4 PLTM, it is still in the process of land acquisition, of which there are still about 30% left.
The achievement of 2022 performance is inseparable from the support and cooperation of many parties, especially shareholders, who continue to support the realization of Terregra's vision and mission in the renewable energy industry in Indonesia.
In closing the 2022 report, let us express our deepest gratitude and deepest appreciation to all Terregra employees for their dedication, loyalty and hard work in supporting the company's business targets and realization to grow well as it is today. We would also like to thank all stakeholders, business partners, OJK, IDX, founders, the Board of Commissioners, and all shareholders for their support and cooperation so far.
Jakarta, 28 April 2023