KEEN’s Entry into IGREEN Opens Door to Green Financing for Renewable Energy Projects

JAKARTAWEEKLY.COM – Shares of PT Kencana Energi Lestari Tbk (KEEN) have gained momentum in recent trading sessions. Over the past week, KEEN shares rose 3.24% to Rp955 per share. The recent rally has been supported by the planned Pakkat 2 hydropower project and the company’s inclusion in the Indonesia Stock Exchange’s (IDX) IGREEN index.

MNC Sekuritas analyst Christian Sitorus said KEEN still had room to expand based on its balance sheet. In a research report published on Aug. 28, 2026, Christian noted that the company’s debt-to-equity ratio (DER) stood at 0.8 times as of the first half of the year. KEEN has also secured a Fitch ESG Rating of 2, classified as “Good”, giving the company some room to finance projects in its pipeline without pushing its debt position too high.

Another catalyst is KEEN’s success in winning the independent power producer (IPP) tender for the 45-megawatt Pakkat 2 hydropower plant in North Sumatra. It is the largest project the company has won to date. Once operational, the project is expected to increase KEEN’s installed capacity from 69 MW to 114 MW, an increase of around 65.2 percent.

KEEN is expected to invest about US$116 million in the project, or roughly US$2.6 million per MW, with construction estimated to take four years. With a long-term power purchase agreement (PPA), Pakkat 2 is expected to provide a more stable source of revenue once commercial operations begin. The size of the investment, however, also brings a financing challenge. The company will need to secure substantial funding while ensuring the project stays on schedule.

KEEN has been selective in choosing new projects. Although the company was appointed as PLN’s mandatory partner for the 95-MW Sulawesi 2 hydropower project, it chose to postpone development because the project’s economics were considered unattractive. The company has also partnered with TEPCO to provide technical support for its power-generation projects. As an IPP whose sole electricity buyer is PLN, access to financing remains a key factor in determining how quickly its 830-MW pipeline can be developed. Funding could come from lenders, banks or PT Sarana Multi Infrastruktur (SMI).

Another opportunity lies in the use of land owned by KEEN’s parent company, covering around 150,000 hectares. About 70,000 hectares remain available for solar power development, including an area in East Kalimantan where an industrial estate is planned to use renewable energy. If realized, demand from green-powered industrial projects could become a long-term source of electricity demand for KEEN.

The company’s near-term performance, however, remains under pressure. KEEN recorded net profit of US$6.2 million in the first half of 2026, down 24.7 percent year-on-year, while revenue fell 11.5 percent to US$16.8 million. The decline was caused by lower concession interest income, the loss of rental income from related parties and weaker-than-expected performance from concession projects. Power production was also disrupted after operations at the Pakkat 1 hydropower plant were temporarily halted following a landslide.

Management expects Pakkat 1 to return to normal operations around March or April next year. Meanwhile, the Tobelo project remains on schedule and is targeted for completion by the middle of next year. Total electricity production in the second quarter stood at 151.6 GWh. YB Sekuritas E-Hub Sales Manager Hendy Santoso said KEEN was targeting revenue of US$58.6 million this year, up 70.7 percent from US$34.33 million, assuming the company’s installed capacity reaches 69 MW following the operation of the 10-MW Salu Noling plant.

Maintaining the same revenue-to-capacity ratio, the additional 45 MW from Pakkat 2 could roughly generate another US$25 million to US$35 million in annual revenue once fully operational. Hendy stressed, however, that this was only a rough estimate because hydropower capacity factors can differ from those of the Salu Noling mini-hydropower plant, while the final PPA tariff for Pakkat 2 has yet to be determined.

The project could make a meaningful contribution to earnings over the longer term. Hydropower projects in Indonesia historically carry high EBITDA margins, while KEEN has recorded margins in the range of 55 percent to 78 percent. Once a plant is completed, operating costs tend to be relatively low compared with revenue. The financing structure is another matter. If 70 percent to 80 percent of the project is funded by debt, Pakkat 2 could add around US$81 million to US$93 million in new borrowings and significantly increase interest expenses.

The impact would begin to emerge during the four-year construction period, even before Pakkat 2 generates revenue. A similar pattern was seen when KEEN was developing Salu Noling. During the construction phase, the company recorded a significant net loss despite recognizing construction revenue. Once Pakkat 2 reaches its commercial operation date, incremental EBITDA could be substantial, although net profit margins would initially be weighed down by depreciation and interest expenses before improving over time.

KEEN has set a full-year net profit target of US$16.8 million, an 84.81 percent increase from US$9.09 million previously. Based on its first-half performance, however, the company would need to increase revenue by roughly 2.5 times and net profit by 1.7 times in the second half to meet its annual targets. Hendy said the gap was wide, particularly as hydrological conditions had yet to fully recover.

A key support for second-half performance would be the full ramp-up of Salu Noling, which was targeted to reach commercial operation in the second quarter. Stable operations would add new electricity production without relying on the company’s older plants. The return of the rainy season toward the end of the year could also improve water flows and boost hydropower production in the fourth quarter.

“An improvement in the second half is more realistic, particularly toward year-end when higher rainfall should support water flows. But full-year results will likely come in well below management’s target. Growth could be in the single digits or the company could still record a decline,” Hendy said.

The weather remains an important variable for KEEN because of its reliance on hydropower. The risk could become more pronounced with the threat of an El Niño event expected from the second half of this year into early next year. A weaker performance, therefore, does not necessarily point to problems with the company’s business execution but also reflects external factors, particularly weather and hydrological conditions.

KEEN has an ambitious renewable energy pipeline. One of the projects is the 95-MW Salu Uro hydropower plant, for which the company is preparing to sign a PPA with PLN. The project remains at the pre-commitment stage, similar to where Pakkat 2 was in its early development. The company is also developing the Tobelo solar power project in Halmahera, which is under construction and targeted for completion in the first quarter of next year.

The solar project could become one of KEEN’s future growth pillars. Since 2023, the company has been building capabilities in the segment through the 1.36-MWp Tempilang solar power pilot project in Bangka Belitung. Beyond these projects, KEEN has outlined a long-term pipeline of more than 500 MW, including 62.5-MW and 100-MW wind power projects in South Sulawesi, a 60-MW solar PV project and hybrid power plants. Some of these plans have been disclosed since 2024 and may not be developed simultaneously.

Diversifying into solar and wind could help reduce KEEN’s exposure to weather-related risks. Its reliance on hydropower became apparent during the first half, when abnormal weather and hydrological conditions weighed on production. Solar and wind projects have different weather-risk profiles and could provide a natural hedge against prolonged dry seasons. The projects are also tied to PLN under the IPP model and PPA arrangements, keeping market risk relatively low compared with construction and financing risks.

The company’s renewable energy plans are also supported by the government’s policy direction and PLN’s 2025–2034 electricity supply plan, which targets renewable energy to account for 61 percent of additional capacity. Hendy said KEEN’s continued dividend payments during its expansion phase also indicated that its cash-flow discipline had not broken down despite high capital expenditure.

“Diversification is strategically important over the long term because it reduces weather concentration risk, while also fitting with national policy and PLN-backed offtake,” Hendy said. “But the impact will be felt mainly over the medium term, from 2027 to 2031, rather than within the next one or two years.”

In the near term, the combination of projects still awaiting PPAs and substantial funding requirements could put further pressure on leverage and earnings, similar to what happened during the development of Salu Noling. Investors will need to monitor the signing of the Salu Uro PPA, the funding structure for upcoming projects, whether financing will rely on debt or equity, and the possibility of bringing in strategic partners. The progress of Tobelo and Pakkat 2 will also be important to ensure the projects remain on schedule.

IGREEN opens green financing opportunities

KEEN’s inclusion in the IDX IGREEN index could provide another avenue for the company to secure financing for its renewable energy pipeline. The Green Equity Index uses five assessment areas: financial, taxonomy, governance, assessment and disclosure. The framework refers to the Indonesia Sustainable Finance Taxonomy (TKBI) and the Green Equity Principles of the World Federation of Exchanges, with an external review conducted by Sucofindo.

The third-party verification could reduce due diligence requirements for institutions with strict ESG mandates because investors would not have to rely solely on companies’ own disclosures. The IDX has said the designation is intended to improve companies’ visibility and access to financing while providing investors with a more credible reference for sustainable investment.

“This is highly relevant for KEEN because it needs substantial funding for projects such as Pakkat 2, Salu Uro and Tobelo. The status could make it easier to access instruments such as green bonds or green loans, potentially at a more competitive cost of capital,” Hendy said.

The impact of the designation on valuation, however, remains difficult to measure because the index only became effective at the end of August 2026. There is not yet enough market data to determine whether inclusion will lead to a sustained rerating. The IDX has also stressed that inclusion in IGREEN is not a guarantee of higher returns. The designation is primarily a transparency tool rather than an automatic trigger for higher valuations.

From a fundamental perspective, KEEN is still facing pressure after its first-half revenue declined 11.5 percent and net profit fell 24.7 percent. Investors are likely to continue focusing on earnings quality and revenue visibility. Renewable energy companies such as PGEO and BREN, for example, have geothermal businesses supported by take-or-pay arrangements that offer relatively predictable revenue compared with relying on a green label alone.

For KEEN, the Green Equity status is therefore better viewed as a medium- to long-term enabler for financing its renewable energy projects and as a way to attract institutions with ESG mandates. The potential benefit may be more visible through lower borrowing costs on green financing than through an immediate change in the stock’s valuation multiple.

“As an element of scarcity, KEEN is among the first three companies to receive this status, so there is some first-mover reputational value. But its sustainability still needs to be proven through the IDX’s annual evaluation because the status is voluntary and reviewed every year,” Hendy said.

Christian also sees the IGREEN inclusion as an opportunity to broaden KEEN’s exposure to ESG-focused investors. Companies included in the Green Equity Index must derive at least 50 percent of their revenue from green activities. The assessment refers to the Indonesia Sustainable Finance Taxonomy issued by the Financial Services Authority (OJK) and is subject to annual review.

KEEN qualifies because its existing projects and pipeline are focused on renewable energy, including hydropower, solar and biomass. Christian said the status could increase the company’s visibility among investors with ESG mandates. The index could also serve as a reference for mutual fund and exchange-traded fund managers focused on sustainable investments, potentially broadening KEEN’s investor base and opening access to more attractive green financing options.

Stock recommendation

Christian maintained his Buy recommendation on KEEN, with a target price of Rp1,300 per share, supported by the Pakkat 2 hydropower project, the commercial potential of Salu Noling and the company’s sizeable renewable energy pipeline. The target implies price-to-earnings and price-to-book value multiples of 20.5 times and 1.3 times, respectively.

Investors should nevertheless watch for risks, including delays in completing Pakkat 2, cost overruns and higher funding requirements. On the positive side, an earlier commercial operation date for Salu Noling, a faster recovery of Pakkat 1 and the addition of new hydropower projects could provide further catalysts.

The IGREEN inclusion could also help attract ESG-focused funds and strengthen KEEN’s appeal to institutional investors. But the impact is more likely to emerge gradually as the company secures green financing and converts its renewable energy pipeline into operating assets.

From a technical perspective, Hendy said KEEN’s medium-term trend had begun to turn upward. A stronger signal would emerge if the stock managed to close above its 200-day moving average, currently around Rp950-Rp960. The key support level is Rp835. A break below that level could trigger a new low and invalidate the medium-term uptrend.

If KEEN avoids breaking below its previous low of Rp710, the stock could still form a higher low and maintain the potential for a longer-term uptrend. For now, investors can watch the Rp950-Rp960 area as the key resistance zone. A sustained move above the 200-day moving average could open the way toward the next psychological resistance at Rp1,000 per share.