PGN Sustainability Report 2012

Sus

taina

bility Report

energy for sustainability

delivering

what matters most

sustainability

for stakeholders

PT Perusahaan Gas Negara (Persero) Tbk Sustainability Report energy for sustainability

Welcome to PGN’s 2012 Sustainability Report. This is the fourth annual sustainability report since the Company’s first sustainability report was published in 2009.Through this report which refers to reporting standard of GRI, we present information related to the Company’s economic, environmental and social performances throughout 2012 for the benefit of all our stakeholders.


Outli

ne o

f

Sust

ainab

le Perf

ormance

‘11 ‘12OBTAINED ECONOMY VALUE(USD)

2,24

7,94

4,57

62,

683,

170,

085

‘11 ‘12DISTRIBUTED ECONOMY VALUE(USD)

2,06

6,71

4,20

12,

143,

177,

455

‘11 ‘12REWARD FOR WORKERS(USD)

59,5

38,3

6959

,785

,653

‘11 ‘12PAYMENT TO SUPPLIERS(USD)

878,

854,

180

957,

261,

487

*)exchange rates 2012 = 9670, exchange rates 2011 = 9068


Sust

ainab

le Perf

ormance

‘11 ‘12PAYMENT TO FINANCIERS(USD)

477,

767,

884

349,

306,

788

‘11 ‘12DIVIDEND FOR STATE(USD)

176,

718,

567

236,

206,

468

‘11 ‘12VARIOUS TAXES FOR STATE(USD)

246,

339,

310

220,

537,

636

‘11 ‘12CRS FUND AND ENVIRONMENT FOSTERING(USD)

18,2

41,5

87

9,96

6,96

6

‘11 ‘12TOTAL AMOUNT OF PARTNERSHIP FUND CHANNELING(USD)

20,7

63,0

0729

,961

,557

Outline of Sustainability Performance Economic Performance2

Years 2011

The

effe

ctive

ness

ratio of ch

anneling the number of assisted partners

Customer S

atisf c

at

ion

Inde

x (C

SI)

Customer Importance Index (CII)

96.5

7 %

96.10 % 45,181

32,321

NO

NE

Economic Performance

The infraction of marketing cases

85.3

3 %

83.33 %

86.67 %88.50 % Years 2012

fund

par

tner

ship


Environment conservation with community

• Garbage cleaning and reforestation in PGN’s operational areas

• Planting palms and grass at former dump site in off-take area in Sukadanau Rawamaju, Bekasi

• Waste management to produce manures, conducted in 5 cities: Batam, Palembang, Lampung,

Bogor, and Surabaya

• Sea water management to produce safe drinking water in Panggang Island, Kepulauan Seribu

Environment Performance

Outline of Sustainability Performance Environment Performance3

CO2(Ton)

770.381,194.30

(Gigajoule)

GAS

656,173

673,454

(Liter)

320,733497,225 934,638

570,858

(Gigajoule)

19,714

18,367

Years 2012 Years 2011


Number of Female Workers

369359

Number of Male Workers

1,1951,157

Total Number of Workers

1,5641,516

Outline of Sustainability Performance Social Performance4

Social Performance

Wor

kers

rota

tion

Workers received

annual KPIWorkers inCorporated

in Workers Federation

Workers w

alked out

Cases of infrin

gemen

ts

Cases of infringements of workers regulations

3.45

%

3.23%

100%

100%

NO

NE

Wor

kers

retir

ed fu

nd

SUFF

ICIE

NTL

Y

NONE

NONE

Years 2012 Years 2011

of human rights


Occupational accidents; Fatality0

Minor Occupational accidents

30

Awards in occupational safety

34

Social Performance

Occupational accidents; LTIF0

Outline of Sustainability Performance Social Performance5

Hours

Workers training

221,776

178,160

Tahun 2012 Tahun 2011


Education Sector

• Publishing ‘Legends of the Archipelago’ comic series in 33 titles that represent 33 provinces

• Sending out young teachers to 25 elementary schools in remote areas

• Competency education for 100 teachers from 55 preschool education institutions

• Establishing several units of community library

• Developing and renovating schools and education facilities

• Granting scholarship for 1050 college students in 14 state universities in Indonesia

• Granting education funds for 2400 elementary, junior high school and senior high school students

Health Sector (EC8)

• PGN’s ‘Healthcare Car’ covers health services for 36,212 people

• Developing ‘House of Health’ in Sidoarjo

• Providing ‘PGN Healthy Homecoming Command Post’

• Procuring health facilities, such as community ambulances

• Developing and renovating community health centers

Public Infrastructure Programs (EC8)

• Providing 2 units of generator set in Pengadaan Pemping island

• Establishing ‘Limar’ self-sustaining electricity program in Way Kanan and Pacitan

• Giving aid of 3 Arm Roll Truck for Bandar Lampung city

• Developing community hall in Marga Tiga district, East Lampung

• Renovating hanging bridges and roads in Pagar Dewa village, South Sumatera

• Developing and renovating village administration office, village hall, school, gateway, mosque and

community health center in Sriminosari village, East Lampung

Religious Facilities Programs

• Giving aids for development and renovation of religious facilities and other supporting facilities

• Donating charity funds for oIDRhans

Natural Disaster Aids

• Emergency aid for flood victims in Banten areas (Tangerang and Cilegon) and Greater Jakarta areas

• Aid for flood and whirlwind victims in Garut, West Java

• 500 aid packages of basic foodstuffs for victims of landslide in Bali

• Aid for overcoming drought disaster in East Java

• 9 tons of rice for victims of fire in Karet Tengsin and Bendungan Hilir, Greater Jakarta

• Command posts and soup kitchens for victims of earthquake in Sukabumi, West Java

Support Programs for Society

Outline of Sustainability Performance Support Programs for Society6


Gas SourcePelanggan Rumah Tangga

Pelanggan Komersial

Pelanggan IndustriPower Plants

LNG Transportation Vessel

Compressor Station

1

2

3

4 5

6

7Sumber Gas

Household Customers

Commercial Customers

Industrial CustomersPembangkit Listrik

Kapal Pengangkut LNG

Stasiun Kompresor

1

2

3

4 5

6

7

Gas for the Nation


Gas SourcePelanggan Rumah Tangga

Pelanggan Komersial

Pelanggan IndustriPower Plants

LNG Transportation Vessel

Compressor Station

1

2

3

4 5

6

7Sumber Gas

Household Customers

Commercial Customers

Industrial CustomersPembangkit Listrik

Kapal Pengangkut LNG

Stasiun Kompresor

1

2

3

4 5

6

7


5 PGN’s Response to Climate Change

6 Improving the Climate Together with PGN

Prioritizing the Interests of Stakeholders 7

Good Corporate Governance8

Freedom to Participate in Unions 72 Workplace Environment 72

Employee Turnover 73 Elimination of Forced Labor 74

Fair Remuneration 74 Entitlement Package of Non-Organic Workers 76

Respect for Human Rights 77 Human Rights Training and Awareness Raising 77

Preventing Corruption 78 Contributions to Political Parties 80

Labor Force Profil 80 Equal Opportunity in Workplace 81

Career Management 83 Training and Competency Development 85

Pension and Insurance Programs 85

Information regarding Products 89Product Quality and Compliance with Regulations and Standards 90

Customer Service 91Customer Gatherings 91

Measuring Customer Satisfaction 92

Policies and Organization of OSH 97 Internalization and Road Map of OSH Culture 100

Programs to Improve OSH Implementation in 2012 102 SBU’s Activities and Projects 106

Statistics of OSH Performance in 2012 108 Health Counselling Programs 112

Appreciations on OSH Implementation in 2012 113

Realization of Activities 118Environment Preservation 118

Education Sector 119Health Sector 120

Public Infrastructure Programs 121Natural Disaster Relieve 121

Distribution of Economy Values 127Contribution to the State 128

Contribution to Regional Economy Growth 129Relationships with Partners 129

Partnership Programs 129The Company’s Products and Services 135

Visi, Misi dan Nilai Perusahaan 141 Sosialisasi dan Upaya Pencapaian Visi dan Misi Perusahaan 143

PGN in a Flashback 145The Company’s Milestones 147

The Company’s Shares 149Economy Scale 149

PGN’s Operational Structure 150PGN’s Groups 151

Subsidiaries and Affiliations 152Scheme of Business Structure 153

PGN’s Operational Map 155A Succession of Important Events 157

Achieved Appreciations and Certifications in 2012 159

19 Reporting Period19 Selection of the Contents of This Report

20 Boundary Report and Data Measurement Methodology 20 Changes in the Report from the Previous Year

21 GRI Application Level and Index21 Assurance

21 Contact Details

25 The Impact of Climate Change on PGN25 Business Opportunities Resulting from Climate Change

26 Carbon and Other Gas Emissions from PGN’s Business Activities 26 Carbon Footprint

27 Energy Consumption28 Controlling Carbon Dioxide Gas Emissions

32 Environmental Transformation33 Energy Audit34 PGN’s Roadmap for Environmental Transformation 2013 to 2017

34 Implementation of AMDAL or UKL-UPL (Environmental Impact Analysis)35 Changes in Environment Management Policies35 Sustainable Environmental Management and Monitoring 36 Biodiversity36 Rehabilitation and Revegetation37 Use of Materials39 Waste Management40 The Conservation of Water Resources41 Preserving the Environment through Our Environment Management Program41 Compliance with Environmental Regulations 41 Water Consumption

46 The Management of Stakeholder Interests49 Stakeholder Engagement51 Membership in Industrial Associations and Other Organizations

54 Management Resistance57 Management Structure57 General Shareholders’ Meeting

59 Structure of Board of Commissioners and Directors59 Board of Commissioners

59 Directors59 The Mechanism of Selection and Appointment of Commissioners and Directors

60 Remuneration for Commissioners and Directors61 Fundamental Policies of Management

61 Internal Monitoring and Controlling61 Prevention Against Corruption

62 Policies on Information and Transparency Disclosure 62 Preventing Conflict of Interests

62 Integrity Pact62 Avoiding Politics Involvement

63 Procurement of Products and Services63 The Mechanism of Expressing Opinions to Directors

63 Implementation of International Standards65 Precautionary Approach

67 Internalization of Company’s Culture and Code of Ethics

71 Relationships with Employees72 Compliance with Labor Regulation and Laws

1 Outline of Sustainable Performance

2 Remark from the Board of Commissioners

3 Remark from the Directors

4 About This Report

9 Improving the Well-Being of Employees

Contents


Community Member’s Life12

Improving Economy13

PGN’s Profile 14

Freedom to Participate in Unions 72 Workplace Environment 72

Employee Turnover 73 Elimination of Forced Labor 74

Fair Remuneration 74 Entitlement Package of Non-Organic Workers 76

Respect for Human Rights 77 Human Rights Training and Awareness Raising 77

Preventing Corruption 78 Contributions to Political Parties 80

Labor Force Profil 80 Equal Opportunity in Workplace 81

Career Management 83 Training and Competency Development 85

Pension and Insurance Programs 85

Information regarding Products 89Product Quality and Compliance with Regulations and Standards 90

Customer Service 91Customer Gatherings 91

Measuring Customer Satisfaction 92

Policies and Organization of OSH 97 Internalization and Road Map of OSH Culture 100

Programs to Improve OSH Implementation in 2012 102 SBU’s Activities and Projects 106

Statistics of OSH Performance in 2012 108 Health Counselling Programs 112

Appreciations on OSH Implementation in 2012 113

Realization of Activities 118Environment Preservation 118

Education Sector 119Health Sector 120

Public Infrastructure Programs 121Natural Disaster Relieve 121

Distribution of Economy Values 127Contribution to the State 128

Contribution to Regional Economy Growth 129Relationships with Partners 129

Partnership Programs 129The Company’s Products and Services 135

Visi, Misi dan Nilai Perusahaan 141 Sosialisasi dan Upaya Pencapaian Visi dan Misi Perusahaan 143

PGN in a Flashback 145The Company’s Milestones 147

The Company’s Shares 149Economy Scale 149

PGN’s Operational Structure 150PGN’s Groups 151

Subsidiaries and Affiliations 152Scheme of Business Structure 153

PGN’s Operational Map 155A Succession of Important Events 157

Achieved Appreciations and Certifications in 2012 159

19 Reporting Period19 Selection of the Contents of This Report

20 Boundary Report and Data Measurement Methodology 20 Changes in the Report from the Previous Year

21 GRI Application Level and Index21 Assurance

21 Contact Details

25 The Impact of Climate Change on PGN25 Business Opportunities Resulting from Climate Change

26 Carbon and Other Gas Emissions from PGN’s Business Activities 26 Carbon Footprint

27 Energy Consumption28 Controlling Carbon Dioxide Gas Emissions

32 Environmental Transformation33 Energy Audit34 PGN’s Roadmap for Environmental Transformation 2013 to 2017

34 Implementation of AMDAL or UKL-UPL (Environmental Impact Analysis)35 Changes in Environment Management Policies35 Sustainable Environmental Management and Monitoring 36 Biodiversity36 Rehabilitation and Revegetation37 Use of Materials39 Waste Management40 The Conservation of Water Resources41 Preserving the Environment through Our Environment Management Program41 Compliance with Environmental Regulations 41 Water Consumption

46 The Management of Stakeholder Interests49 Stakeholder Engagement51 Membership in Industrial Associations and Other Organizations

54 Management Resistance57 Management Structure57 General Shareholders’ Meeting

59 Structure of Board of Commissioners and Directors59 Board of Commissioners

59 Directors59 The Mechanism of Selection and Appointment of Commissioners and Directors

60 Remuneration for Commissioners and Directors61 Fundamental Policies of Management

61 Internal Monitoring and Controlling61 Prevention Against Corruption

62 Policies on Information and Transparency Disclosure 62 Preventing Conflict of Interests

62 Integrity Pact62 Avoiding Politics Involvement

63 Procurement of Products and Services63 The Mechanism of Expressing Opinions to Directors

63 Implementation of International Standards65 Precautionary Approach

67 Internalization of Company’s Culture and Code of Ethics

71 Relationships with Employees72 Compliance with Labor Regulation and Laws

Increasing Customer Satisfaction10

Prioritizing Health and Occupational Safety (OSH)

11

Assurance Statement by Mazars

Application Level Check by NCSR

15

16

GRI G3.1 Content Index17


Remark from the Board of Commissioners (1.1)

“PGN has its own carbon footprint measurement system, as

a first step towards formulating the effective policies to mitigate greenhouse gas emission resulted from its operational activities”

Dear respected stakeholders,

As we all know, climate change has become a global issue which we must overcome together. Climate change will cause dreadful impacts, not only to the society, but also to business regardless the kind of industry in which it operates, including PGN’s business.

The government has expressed a commitment to cut greenhouse gas emission by 26% in 2020 by carrying out domestic efforts, and an additional 15% by gaining international supports and other potentials through market mechanism. Responding to the government’s commitment, Board of Commissioners appreciates the efforts of PGN’s Management in the initiatives to reduce greenhouse gas emission, which is the cause of climate change. PGN has its own carbon footprint measurement system, as a first step towards formulating the effective policies to mitigate greenhouse gas emission resulted from its operational activities. The voluntary initiative shows the concern of PGN’s Management in the efforts of preserving the earth.

PGN has been gradually carrying out various steps to reduce greenhouse gas emission resulted from its operational activities. PGN has also realized a range of reforestation programs as important steps to decrease greenhouse gas emission and to maintain natural sustainability. All of the efforts are real examples of PGN’s implementations of its commitment in preserving the nature.

Aside from that, Board of Commissioners hails business development programs aimed to increase PGN’s capability in fulfilling the escalating demand on natural gas. This initiative is in accordance with the government’s programs in order to reduce greenhouse gas emission. An increasing usage of natural gas leads to a decrease of greenhouse gas emission. Board of Commissioners has given mandate to the Directors to work hard in catering the demand on natural gas, which has been estimated to increase in the future.

We also appreciate the Directors’ efforts in improving the prosperity of society who live around PGN’s operational areas through the implementation of Partnership and Environment Preservation (PKBL) programs in the year 2012, with the increasing number of programs compared to the previous years. Board of Commisiioners supports all efforts initiated by the Directors in establishing clusters of small enterprises, which have enabled more effective and efficient fostering and controlling activities on the distribution of Partnership Program funds. These programs are expected to accelerate economy growth in the society. Similarly, the initiative to set up fostered villages through the distribution of Environment Preservation program funds is in accordance with the government’s attempts to improve the health of society. The funds have been used to mend education facilities, infrastructures, and to help increase the health of society.

Sustainability Report Remark from the Board of Commissioners11


Board of Commissioners sees that the implementation of those programs is PGN’s real act in responding to sustainability issues in the economy, environment and social dimensions. Being a company with responsibilities and ethics, Board of Commissioners confides the Directors to continue carrying out strategic measures in sustainability context, including programs related to improvement of professionalism and maintaining the safety and health of the workers and their families.

With the more increasing economy growth, Board of Commissioners has a vision that in the future PGN will face tougher challenges, considering the raising expectation of stakeholders, specifically from the industrial, commercial and household customers, regarding PGN’s capability in providing sufficient gas supply with a good quality and affordable price. However, Board of Commissioners believes, with hard working, professionalism and tough team work, PGN will be capable of suIDRassing all the challenges.

Lastly, Board of Commissioners expresses gratitude and gives the highest appreciation to the Directors and all the staff who have worked hard to achieve sustainable performance in the economy, environment and social aspects.

Jakarta, March 2013

Bayu Krisnamurthi

President of Commissioner

Sustainability Report Remark from the Board of Commissioners12


“PGN consistently supports the government’s reforestation program of A Billion Trees Program. In 2012, we have planted 570,858 trees”

Remark from the Directors (1.1,1.2)

Sustainability Report Remark from the Directors13

Distinguished Stakeholders,

We ended 2012 by achieving satisfactory sustainability performance. It has been our contribution for supporting the global efforts towards achieving the Sustainability Development goals. Sustainability is the ability to survive within three interrelated pillars, namely the economic, environmental, and social pillars. In order to enhance the stakeholders’ economic conditions, we have been making continuous endeavors towards improving our environmental and social performance.

In line with the Sustainability Development goals, PGN’s goal is to fulfill the present generation’s needs for natural gas energy without disrupting the ability of the future generations to fulfill their needs. Therefore, We are implementing sustainability programs on an on-going basis which are aimed at improving the economy of the community, maintaining the preservation of the environment, maintaining workers’ comfort and improving concern for the social conditions of the community.

Overcoming Climate Change

In addressing Climate Change in the context of sustainability, the global community is facing the issue of climate change which requires the attention of all economic actors, including PGN. For that puIDRose, we have also assumed a significant role and have joined the global community in addressing climate change by implementing a set of strategic measures for dealing with the aforementioned issue.

In 2012, we have successfully applied the carbon footprint system, which we refer to as “Karbon Kalkulator PGN” (PGN’s Carbon Calculator). Through this system, we are able to track the footprint and calculate the amount of carbon emission from PGN’s operational activities, as well as to determine the appropriate policies and measures in order to mitigate PGN’s carbon emission.

There are several carbon emission mitigation programs which have been and will continue to be implemented, including reducing electricity consumption, increasing the consumption of natural gas energy for power plants, limiting official trips, minimizing the use of paper through the implementation of the paperless concept, and encouraging the implementation of the 3 R (reduce, reuse, recyle) principles. In addition to the above, PGN consistently supports the reforestation movement formally declared by the Government through the One Billion Trees Program. In 2012, we planted as many as 570,858 trees.

Improvement of the Quality of Life of Marginal Community

As a State-Owned Enterprise, PGN continuously supports the Government’s programs aimed at achieving the Millenium Development Goals (MDG’s) through the implementation of the Partnership and Environment Development Program (Program Kemitraan dan Bina Lingkungan/PKBL)the funds of which are


Sustainability Report Remark from the Directors14

allocated annually from the Company’s profits. Compared to the previous year, PKBL funds for this year indicated an increase of 59%, namely from USD30,101,227 in 2011 to USD47,711,187 in 2012. In addition to that, we also allocate funds on an annual basis for the Corporate Social Responsibility (CSR) Program, which is included in the company’s budget as operational costs. In 2012, CSR funds reached USD491,957 or 78% compared to the previous year’s figure. Until the end of 2012, we have distributed soft loans, which are part of the Partnership Program, in the amount of USD29,961,557 to 45,181 Trained Partners. This program has had significant impacts on the efforts to alleviate poverty, decrease the rate of unemployment and improve the social conditions of the community. As part of its concern for the social condition of the community, PGN has been continuously implementing various philanthropic programs, which include education, health, infrastructure, and humanitarian aid.

Improving the Employees’ Comfort

As the Company’s important assets, we have been making continuous efforts to improve our employees’ professionalism and skills through education and training programs. In 2012, 1,564 employees participated in trainings, with an average of 932.41 training hours per person per year. The education and training costs in 2012 reached USD23,955,161,083. Employees’ performance assessment is conducted regularly and is used as a basis for the granting of rewards and career advancement. All employees are free to join workers’ union and equal opportunities are granted to both genders. They are treated without any discrimination on the basis of race, ethnic group, religion, and gender. During 2012, there were no strikes or boycott by employees.

Challenges and Opportunities PGN supports the Government’s efforts in the context of stepping up the use of natural gas as a substitute for oil fuel. Within the upcoming period of 5 years, the need for natural gas will continue to increase. This is a challenge and at the same time an opportunity for PGN to maintain the availability of adequate supply. PGN is currently in the process of constructing LNG Receiving Terminal (LNG RT) and Floating Storage Regasification Units (FSRU), as part of the aforementioned expansion plan.

Through this expansion, within the next 5 years, PGN will be playing an increasingly important role in the efforts for the mitigation of greenhouse gases, in support of the greenhouse gases mitigation program initiated by the Government. We realize that the successful achievement of sustainability performance is closely related to the directives from the Board of Commissioners and Shareholders, as well as the involvement of other stakeholders. Similarly, the spirit and hard work of all parties at PGN have greatly contributed to the improved achievement of PGN’s sustainability performance. Finally, on behalf of the Company’s Board of Directors, I would like to express our gratitude to all stakeholders for their support and participation in the achievement of the sustainability performance in 2012.

Jakarta, March 2013

Hendi Prio SantosoPresident Director


Sustainability Report Sustainability Report15


About This Report4



About This Report

About This Report About This Report18

2012 Welcome to PGN’s 2012 Sustainability Report, Which is the fourth annual report of

this kind.Through this report, we present information related to the Company’s economic, environmental and social achievements throughout 2012 for the benefit of all our stakeholders.


Amongst otherpurposes, this report is a fulfillment of our obligation to report on the implementation of

PGN’s Social and Environmental Responsibility (SER), as defined by section 66, paragraph 2C, Law Number

No. 40, 2007 concerning Limited Liability Companies. This report has been prepared in accordance with

international reporting standards, the Sustainability Reporting Guidelines version 3.1, published by the Global

Reporting Initiative (GRI), which is based in Amsterdam, the Netherlands. In order to enable readers of this

report to determine which GRI indicators have been applied in this report, we have included a reference to the

appropriate GRI indicator in brackets in red text in each relevant section. A complete list of these GRI indicators

is presented on page 164 of this report. (3.12)

Reporting Period (3.1, 3.2, 3.3)

This report is the sustainability report for the period from January 1, 2012 to December 31, 2012. The last

report prior to this one, which covered 2011, was published in May 2012.

Selection of the Contents of This Report (3.5)

The selection of the topics and the determination of the contents of this report are based on consideration of

material issues, particularly issues which may have a significant impact on stakeholders in the decision-making

process. This is intended to meet the expectations of investors regarding the contents of the report. A number

of GRI Indicators G3.1 are not addressed in this report because they are considered not to be of material

significance and not relevant to the conduct of PGN’s operations. In addition, some GRI Indicators G3.1 are

not addressed because the relevant data was not available. Management will endeavour to ensure that future

reports address these areas.

On the basis of input from investors and other stakeholders, in the selection of material for this Report, priority

has been given to issues related to sustainability, which relates, amongst other matters, to PGN’s endeavours

to deal with climate change, to foster community economic empowerment, to facilitate improvements to the

quality of life of the communities amongst which it operates, to facilitate improvements to community health

and educational facilities, and to provide material assistance to the victims of natural disasters. In addition,

we also include material related to the Company’s day-to-day internal operations, with these topics being

addressed as a manifestation of PGN’s commitment to the fulfillment of its commitment to transparency in

issues related to environmental, health, workplace safety, human resources management and sustainable

management.

The Implementation of the principle of Stakeholders inclusiveness has conducted through Stakeholder

Forum Interests. From these discussions obtained input and view about the importance of issues in report to

Stakeholders and to what extent these issues could affect PGN business.The Results of Discussion Forum can

be described in graph besides.

About This Report Reporting Period19


About This Report Boundary Report and Data Measurement Methodology

20

Boundary Report and Data Measurement Methodology (3.6, 3.7, 3.8, 3.9)

The data and information contained presented in this report relate solely to the performance in terms of

sustainability of PGN as a holding company, and does not cover the performance of its subsidiary companies in

these terms.

Financial data and information contained in this report, such as that related to received and distributed

economic value (see diagram and table EC1), includes material related to subsidiary companies prepared on the

basis of the equity method. Quantitative data presented in this report has been prepared on the principle of

comparability, covering a period of at least two consecutive years, enabling readers of the report to conduct an

analysis of year-to-year trends. Non-financial data and data related to sustainability have been measured on the

basis of international standards. Thus, terms such as gigajoule are used to measure energy usage, and so on.

Changes in the Report from the Previous Year (3.10, 3.11)

There were no changes in the standards used for the preparation of the report this year and no reclassifications

of sustainability date. As in the previous year, we utilize the GRI G3 .1 standard. In the period of this report, no

fundamental changes have been made to PGN’s business structure. Similarly, no fundamental changes have

occurred since the period of the last report in matters related to boundaries, scope or technical measurements.

Impo

rtan

t to

Sta

keho

lder

s

1

5

4

3

2

1

02 3 4 5 6 7 8 9 10

8

7

6

X

Y

Gas supply assured

Gas distribution safetyKemudahan Pembuatan Kontrak

Workers rights

The diversity and respectful of Human

Training and development

Wellness and safety work

Empowermentcommunity economic

Donation for life’s community

Environment impact analysis

Electricity consumption

Carbon Footprint Management and Carbon Emission Mitigation

Important for the Company


Head Office (2.4)PT Perusahaan Gas Negara (Persero) Tbk

Jl. K.H. Zainul Arifin No. 20 Jakarta 11140, Indonesia.

T +633 4838 F +633-3080

www.pgn.co.id

Contact CenterT 0800 1500 645

T +6221-633 3000E [email protected]. K.H. Zainul Arifin No. 20 Jakarta 11140, Indonesia.

www.pgn.co.id

Company SecretaryPT Perusahaan Gas Negara (Persero) Tbk

Jl. K.H. Zainul Arifin No. 20 Jakarta 11140, Indonesia.

T +622-633 3080, +6221-633 4838, +6221-633 4861F +6221-633 3080

E [email protected] www.pgn.co.id

About This Report GRI Application Level and Index21

GRI Application Level and Index (3.12)In terms of the GRI Application Level System, we can state that this report has fulfilled the criteria for a “Level

A+” report as defined by the application level systems promulgated by GRI. According to the GRI Application

Level System, sustainability reports can be classified according to 3 (three) levels, these being Levels C, B, and

A.This statement has been checked and confirmed by the National Centre of the Sustainability Reporting

(NCSR), as can be seen in the Statement GRI Application Level Checked section on page 163 of this report.

Assurance (3.13)In 2012, we appointed an external independent assurer to assure PGN’s 2012 Sustainability Report. We

present the report from the external independent assurer on page 161-162.

Contact Details (3.4)To submit inputs or questions regarding this report, please contact:


PGN’s Response to Climate Change5



PGN’s Response to Climate Change

PGN’s Response to Climate Change PGN’s Response to Climate Change24

There are six key components of climate change which caused

extreme weather conditions, such as atmosphere (air),

lithosphere (land), hydrosphere (water), cryosphere (ice

coverage), biosphere (animal life) and humanosphere

(human)

Photo by: Iwhan Agung Wibowo, SBU Transmission Sumatera-Jawa


PGN’s Response to Climate Change The Impact of Climate Change in PGN

Extreme weather conditions resulting from climate

change on a global scale today are increasingly

frequent occurred. In Indonesia, the main

characteristics of this extreme weather are indicated

from the longer dry seasons and intense rainy seasons

accompanied by strong winds. These conditions have

caused major floods in a number of regions across

Indonesia, including in Jakarta. Climatologists state

that there are six key components of climate change

which caused extreme weather conditions, such as

atmosphere (air), lithosphere (land), hydrosphere

(water), cryosphere (ice coverage), biosphere (animal

life) and humanosphere (humanity). Damage to one

or more of these six components will cause extreme

weather conditions.

These conditions have created concern around the

world, with a global movement to involve everyone

working together to ensure the sustainability of

the Earth and its inhabitants for the benefit of

future generations. Sustainability is achieved if

environmental conditions are maintained in the

appropriate manner. To achieve it, the involvement of

all entities is required, including PGN.

The Impact of Climate Change in PGN (EC2)

Climate change has had a significant influence

on PGN’s business, in some cases disrupting the

Company’s operations. For example, when Jakarta

was recently afflicted by floods, administrative

activities and routine maintenance of offtake stations

in areas around Jakarta ceased temporarily.

In the long term, extreme weather conditions

resulting from climate change have the potential

to directly affect our main facilities in a number of

ways, such as landslides in areas which caused gas

production facilities close or disruptions of operations

as a result of high waves which threated offshore oil

and gas production facilities.

The potential disruptions are even greater at present,

as we are currently constructing gas storage and

distribution facilities, the offshore Floating Storage

and Redistribution Unit (FSRU), which is located

between Lampung and Jakarta. Thus, climate change

has a number of significant potential financial

implications for PGN.

This condition, makes PGN shall have a strong

commitment to conduct operations in an

environmentally friendly. PGN must strive to minimize

the environmental impacts of our operations

through the implementation of environmentally

friendly policies while at the same time encouraging

business partners and the community to engage in

environmental protection programs.

Business Opportunities Resulting from Climate Change

On the other hand, there is a growing awareness

amongst the community regarding the importance

of reducing carbon emissions through the utilization

of more environmentally friendly fuels. This creates

a significant business opportunity for PGN. The

use of natural gas as fuel results in lower levels

of carbon emissions than any other fossil fuel.

Conversion programs through which natural gas

is used to replace other fossil fuels will naturally

result in increased demand for gas. This creates an

opportunity for PGN to increase its capacities, range

and extent of its distribution and

transmission facilities.

This increased demand also creates opportunities for

us to increase the supply of gas through participation

in both upstream and downstream industries related

to the natural gas industry.

25


PGN’s Response to Climate Change Carbon Footprint26

Carbon and Other Gas Emissions of PGN’s Business Activities

Our primary operational activities involve the

management of distribution and transmission

pipeline network which connects production sources

to our main clients, including industrial, commercial,

and household clients. We are aware that PGN’s

activities have a potential impact on the environment.

The Company’s operations make significant use of

electricity at the Company’s office and other facilities,

the use of fossil fuels for transportation, work-related

travel, and for a number of otherpurposes. All of

these activities have a potential environmental impact

through the omission of carbon dioxide into the

atmosphere. In addition, the use of chemicals that

may damage the ozone layer, such as freon used in

air-conditioning, also has the potential to contribute

to global warming.

Carbon Footprint

As stated in this report, PGN is currently in the

process of entrenching a more environmentally aware

Corporate culture throughout its operations. This

transformation involves a thorough calculation of the

Company’s carbon footprint as a basic preliminary

measure to mitigate against the environmental

impact resulting from PGN’s operations. The

calculation of PGN’s carbon footprint was conducted

in 2012 through the implementation of a carbon

accounting system, which is also referred as the

PGN Carbon Calculator system. In the initial stages,

the PGN Carbon Calculator system only covered

carbon emissions resulting from the use of electricity

supplied by PLN or derived from the Company’s own

generators, as well as carbon emissions resulting from

the use of operational vehicles.

In principle, the PGN Carbon Calculator system

is easy to implement. Operators of the Carbon

Calculator can enter data related to the consumption

of electricity in terms of kilowatt-hours, the

consumption of fuel used by operational vehicles,

and the volume of gas utilized in various locations

and in various timeframes. Through mathematical

calculations based on internationally accepted

formulas, the total volume of the Company’s carbon

emissions can be derived and presented in a table or

as a graph. Data required for these calculations can

be presented and managed through applications such

as Excel and can also be presented through

Web-based applications.

In addition to the use of the PGN Carbon Calculator,

we are also preparing a number of environmental

management programs and initiatives which will

implement as an ongoing manifestation of our

commitment to the conservation of the environment.

At each stage of the implementation of these

programs, we will conduct a measurement of carbon

emissions in order to determine means for improving

and adjusting systems so that PGN’s carbon footprint

remains tightly controlled.


PGN’s Response to Climate Change Energy Consumption

PGN’s operational activities require both the direct

and indirect use of energy. Energy is used directly

to operate the turbine compressors propel gas

through the distribution pipeline network so that

it reaches end users, including electricity generation

facilities, industrial users, commercial users,

and household consumers.

The total volume of energy consumption to operate

the Company’s turbine compressors in 2012 was

673,454 gigajoules, compared to 656,173 gigajoules

in 2011. The primary source of energy consumption

for this puIDRose was natural gas, which is an

environmentally friendly fuel. The Company’s energy

consumption has tended to increase with the

expansion of its transmission and distribution pipeline

network, as can be seen by the following table. (EN3)

Energy Consumption

27

Energy Consumption (G)

Gas Quantity (MMBTU)

Convertion2008

1.000.000

800.000

600.000

400.000

200.000

02009 2010 2011 2012

1.055

401.831

860.884

771.498

813.930

908.232

423.931

1.055 1.0551.055 1.055

621.965

656.173

638.345

673.454

(gigajoule)


PGN’s Response to Climate Change Controlling Carbon Dioxide Gas Emissions28

Indirectly, the Company consumes energy to operate

office facilities in the Company’s Head Office,

the offices of its SBU, and for lighting in areas

surrounding the Company’s operations. Electrical

energy is provided by PLN or is produced through

the Company’s own electrical generators, which are

fuelled by natural gas, as shown in the table above.

The total volume of electrical energy supplied by PLN

in 2012 was 5,101.94 MWh or 18,367 GJ, compared

to the figures for 2011, when the total stood at

5,476.13 MWh or 19,714 GJ. (EN4)

We have implemented a number of efficiency

measures to reduce the indirect use of energy,

including the following: (EN7)

1. The use of energy-efficient lighting;

2. The turning off lights in rooms that are not

being utilized;

3. The setting of air-conditioners to temperatures

enabling a reduction in energy use;

4. The organizing of office space to achieve a higher

level of proficiency.

We convinced all these efforts had given positive

impact in the form of reduced energy consumption

as shown by the reduced energy cost payment

obligations. However, in this report we have not

been able to deliver the amount of energy reduction

quantitatively, due to limitations of the system.

(EN5, EN6)

Controlling Carbon Dioxide Gas Emissions

The emission of carbon dioxide gas from PGN’s

operations mainly results from the use of generators

deployed at compressor stations and from the use of

PGN’s operational vehicles, which consume

fossil fuels. The total consumption of fossil fuels for

suchpurposes throughout 2011 was 497,225 litres,

compared to the figure of 320,733 litres in 2012.

This figure is derived from the recalculation of energy

audits of fuel used for generators and operational

vehicles rented from Corporate partners or vendors.

On the basis of calculations utilizing the Carbon

Calculator system that we have developed, the total

consumption of fossil fuels in 2011 is equivalent to

carbon dioxide emissions into the atmosphere of

1,194.30 tons, compared to the figure for 2012,

when this consumption was equivalent to carbon

dioxide emissions of 770.38 tons. (EN16)

To reduce these emissions of carbon dioxide, PGN

is in the process of preparing a carbon footprint

program based on the calculation of carbon

emissions from PGN’s operational activities. The

implementation of a program to reduce carbon

emissions is a manifestation of the Company’s

commitment for transforming systems of

environmental management, as explained previously.

Besides calculating the total volume of emissions of

carbon dioxide, we are simultaneously implementing

a number of measures to reduce carbon dioxide

emissions into the atmosphere. In 2012, these

measures included the following: (EN18)

• The testing of operational vehicles to ensure that

their emission levels do not exceed limits

established by the government;

• Tree planting and revegetation programs to

increase the rate of absoIDRtion of carbon

dioxide in the field;

• Limitations on the use of electronic equipment,

including computers and similar equipment, by

limiting office hours.


PGN’s Response to Climate Change The Replacement of Chiller Fuel for Cooling Office Space

29

In addition, the consumption of fossil fuels in

generators at compressor stations results in the

emission of a number of other pollutants, including

nitrogen oxide and sulphur oxide, with the level of

emissions being highly dependent on the condition

of the machinery used. Thus, PGN is committed to

periodic maintenance of these generators and other

machinery. We also conduct periodic measurements

of ambient air quality in a number of locations in

order to ensure that the air quality remains within

defined limits. An example of such measurements

can be seen in the “Environmental Monitoring”

diagram. (EN20)

PGN does not utilize vehicles to transport and

distribute natural gas except under specific

conditions, in which case the use of such vehicles is

tightly monitored. The primary use of vehicles is to

support operational activities both at headquarters,

in other regions where the Company operates, and

in supporting operational units. The use of such

operational vehicles may have an environmental

impact, particularly through the emission of exhaust

gas, which consists in part of carbon dioxide. A

diagram presenting further information related to

carbon dioxide emissions may be seen in another

section of this report. (EN29)

The Replacement of Chiller Fuel for Cooling Office Space (EN18)

One of chemical gas that has a damaging impact

on the ozone layer and which contributes to global

warming is freon. This substance is used as a chiller

or as a heat exchange media in cooling equipment,

such as air conditioning, refrigerators, cooling towers

and other similar devices. At various periods, such as

when this machinery is serviced, the chiller substance

must be released into the atmosphere, thereby

contributing to the pollution of the

Earth’s atmosphere.

We have initiated the use of natural gas from our

internal network to replace chiller substances that are

not environmentally friendly. This program is achieved

good results. Natural gas which is used as chiller can

be recycled for use as fuel.

PGN is currently planning to extend the use of

natural gas of the chiller on the basis of the following

considerations:

1. To achieve compliance with the government’s blue

sky program;

2. To demonstrate that natural gas can be utilized

for coolingpurposes as a chiller;

3. To expand on the demonstrated success of the use

of natural gas as a chiller in PGN SBU II Surabaya’s

building facilities.

With the use of natural gas as a chiller since 2011

throughout Gedung Graha PGAS, we no longer

utilize materials that result in the emissions of

ozone-depleting gases from this type of freon.


6 Improving The Climate Together with PGN



Improving The Climate Together with PGN Improving The Climate Together with PGN

Improving The Climate Together with PGN

32

Now PGN is in the process of conducting an environmental

transformation, which is puIDRose to ensure that PGN

acts as an environmentally friendly company promoting

green and clean energy for life.


Improving The Climate Together with PGN Environmental Transformation33

Environmental Transformation

In order to ensure that the environmental transformation which is being implemented by PGN becomes a part

of a new working culture, we need to make changes in the implementation of environmental management

and energy. The scope of the environmental transformation covers the following: energy audits, the

formulation of an environmental transformation roadmap and carbon footprint reduction. Activities related to

the last of these points were described in the previous section of this report.

Energy Audits

Energy audits covering the Company’s Head Office, SBU Distribution 2 and SBU TSJ were conducted to achieve

the following goals:

• Reductions in expenditure on energy;

• The implementation of a energy management system which is eventually intended to facilitate the

achievement of a green energy system;

• The identification of facilities which consume a disproportionate volume of energy;

• Increased awareness and attention to energy expenditures;

• The identification of low efficiency facilities;

• Increased awareness and concern of employees about conservation of energy and a related change in

workplace practices;

• The implementation of an Environmental Management System; and a reduction in the carbon footprint.


PGN’s Roadmap for Environmental Transformation 2013 to 2017

PGN’s Roadmap for Environmental Transformation 2013 to 2017 represents a further development and

clarification of the goals, targets and programs previously implemented by PGN. In the initial stages of the

environmental management program in 2012, we have prepared systems, facilities and infrastructure, human

resources and other resources to ensure that PGN achieved full compliance with all regulations related to

environmental management. In the following stages, we will formulate follow-up programs to ensure that

PGN does not merely achieved full compliance, but implements standards that comply with international best

practice, beyond the standards mandated within Indonesia (beyond compliance).

The Implementation of AMDAL (Environmental Impact Analysis)

PGN’s commitment to the implementation of environmental management can be seen from its

implementation of AMDAL, which is confirmed by an RKL-IDRL and UKL-UPL implementation report. In

addition, PGN’s compliance with government regulations can be determined from a number of documents

formulated throughout 2012, including the following:

1. AMDAL LNG FSRU Lampung

2. UKL-UPL Gas Compressor Station Terbanggi Besar Lampung

3. UKL-UPL Distribution Pipes Tandes Gresik, East Java

4. UKL-UPL Distribution Pipes Jalur Sampurna, East Java

5. UKL-UPL Distribution Pipes Muara Karang, Jakarta - Muara Bekasi, West Java.

Improving The Climate Together with PGN PGN’s Roadmap for Environmental Transformation 2013 to 2017

34


Changes in Environment Management Policies (EN26)

In 2012, we renewed our vision, policies and commitment in the area of Workplace Health and Safety and

Environmental Management (K3PL). PGN also strives to implement the principles of sustainability, not only

in the safety, health and environmental management, but also in the optimization of the use of energy as

an integral element of our vision. Policies regarding the use of energy and environmental management have

been fully integrated into our K3PL vision. The integrated policy has been named the Policy for a Management

System for Workplace Health and Safety and the Management of the Environment and Energy (SMK3PL-E).

This policy represents a further elaboration of our previous K3PL policy.

Here follows PGN’s Environmental Management Policy statement:

As part of our endeavors to improve the quality of the environment, we have implemented a number of

policies and work programs, including the following: (SO9, SO10)

• The formulation of an AMDAL (Environmental Impact Analysis) for each new project, with the involvement

of independent external analysts;

• The implementation of an Environmental Management Plan and an Environmental Monitoring Plan, with

routine reports delivered to the appropriate institutions each semester;

• Encouraging employees to reduce their use of electricity;

• Replacing machinery with new, more energy efficient technology;

• Encouraging employees to conduct paperless work practices.

Sustainable Environmental Management and Monitoring (EN16, EN17, EN19, EN20)

We are continuing to implement an Environmental Management and Monitoring program as a manifestation

of our commitment to preserve the environment. All aspects of this program are implemented within all

developmental projects which require significant funding, with each of these projects being required to

prepare an AMDAL analysis before development of the project commences. After the construction of

transmission and distribution pipeline network or other large scale projects as part of the Company’s business

activities, we conduct environmental monitoring programs to determine the impact of the operations of the

transmission and distribution pipeline networks or other projects on the surrounding environment.

In general, the environmental impact during the construction of transmission and distribution pipeline

networks is not significant. The quality standard parameters used based on Kepmen KLH, Bapedalda

regulations, and other related government regulations. Reporting submitted each semester to the relevant

agencies, including KLH, Bapedalda, Migas, etc.

Improving The Climate Together with PGN Changes in Environment Management Policies35


Improving The Climate Together with PGN Biodiversity36

Biodiversity (EN14, EN11)

For the development of its natural gas facilities and its transmission pipeline network, the Company

implements policies to avoid protected forests and other areas with a high biodiversity value. However,

despite these policies, under certain conditions if it is not possible for PGN to entirely avoid crossing such

protected forests or other areas with a high biodiversity value, PGN will prefer to choose the shortest route to

minimize any negative impacts on the biodiversity. In addition, in consideration for ease of supply utilities and

maintenance, the facility was built adjacent to the road infrastructure available.

Throughout the period of this report, PGN did not engage in the construction of transmission facilities passing

through or located in protected forests zones. PGN also strove to avoid all areas with a high biodiversity value.

Rehabilitation and Revegetation

We have conducted a process of rehabilitation of the area where in the past digging was conducted in the

construction of the transmission and distribution pipeline network. Earth displaced as part of this process

MEASUREMENT OF AIR QUALITY WORK ENVIRONMENT IN PAGAR DEWA

No Parameter Mount Quality Standards *) Result Method

NAB KTD

1 Dust mg/m3 10 - 0,068 SNI 19-7119.3-2005

2 Hydrocarbons (HC) **) mg/m3 - - 0,144 18-6/IK/ULK-HC

3 Carbon Monoxide (CO) **) mg/m3 29 - 4,136 18-7/IK/ULK-CO

4 Nitrogen Dioxide (NO2) **) BDS 3 5 0,0184 18-2/IK/ULK-NO

2

5 Sulfur Dioxide (SO2) **) mg/m3 - 0,25 0,030 18-1/IK/ULK-SO

2

*) The Regulation of Minister of Manpower and Transmigration No. PER.13/MEN/X/2011 Years of 2011 attachment IL NAB chemical factor in air quality work**) Parameter accreditation by KAN No. LP-195-IDN

PGN operational activities do not result in the production of liquid wastes, solid wastes, or the direct

emmission of fumes which is damaging to the environment. In accordance with the stipulations of the AMDAL

document, we monitor the following:

• Water quality

• Air quality and level of emissions

• Noise levels

• Soil quality

The results of this monitoring process show that throughout the Company’s operations, all aspects achieve full

compliance with established standards and regulations. The results of monitoring of the emissions in the areas

surrounding the Pagar Dewa compressor facilities are as follows:


Improving The Climate Together with PGN Use of Materials37

has been used to cover the piped network under the ground. Other displaced earth, which is not usually of

significant quantity, has been used to level the distribution pipeline network. It should be noted that we do

not engage in extraction processes.

We have also established a number of areas for reforestation if the area used for the transmission pipeline

network cannot be reforested. The rehabilitation of the environment is included as an integral part of the cost

of rehabilitating and revegetation areas surrounding the transmission. (EN30)

In the period covered by this report, we have planted trees in areas on or around land dug up to develop the

transmission and distribution pipeline network. The total number of trees planted amounts to 570,858, with

these trees being planted in a number of areas, including Serang, Bogor, Pasuruan, Bekasi, Jakarta, Lampung

Pagardewa, Palembang and Banyu Asin. The majority of the trees planted were Jabon, Sengon, and Mangrove

species, in addition to fruit trees.

We conduct periodical inspections and maintenance activities of the revegetated areas surrounding the

distribution and transmission pipeline network. (EN11, EN13)

Use of Materials

We also participated in environmental conservation and preservation of the environment through the efficient

use of natural resources and energy, and other program in order to care for environmental sustainability.

We also utilize pipes made from steel or PE plastic of optimal thickness. These pipes are covered with PE and

other protective agents to prevent rust and to ensure that they remain usable when buried underground

for long periods (up to 30 years). The goal of this is to minimize the impact on the environment in the

construction of our transmission and distribution pipeline network.

To build the pipe transmission and distribution pipeline network, we have also had to install an increasing

amount of new pipelines of the past few years. By the end of 2012, the aggregated total length of the

transmission and distribution pipeline network under our management amounts to 5,912 kilometers. This

represents an increase of 0,49% over the previous year. The cumulative length of the piped network over the

past two years can be seen in the following table. (EN1)


Improving The Climate Together with PGN Use of Materials38

THE ACCUMULATION TABLE OF LENGHT TRANSMISSION AND DISTRIBUTION PIPELINE (KM)

Variety of pipe 2012 2011

TRANSMISSION

Steel pipe 2047 2047

BE pipe - -

Others 2047 2047

DISTRIBUTION


PE pipe 1930 1915

Others 3865 3836

TOTAL LENGHT


PE piipe 1930 1915

GRAND TOTAL 5912 5883

Other materials used in our primary activities is filter which placed inside the pipes at the point of intake. The

function of these filters is to clean contaminants in the form of water vapors and other matter in order to

maintain the quality of the natural gas.

At periodic periods, these filters are replaced. Discarded filters are treated as solid waste in accordance with

the regulations and in order to prevent environmental pollution. (EN22, EN24)


Improving The Climate Together with PGN Waste Management39

We also use a significant volume of paper to support

our operational and administrative activities. We

implement a policy mandating the recycling and

efficient use of paper. In a month, total approximately

85% of the paper used to support PGN’s activities

is recycled. PGN cooperates with third parties

to manage the recycling of a portion of this

paper waste. (EN2)

We also implement technology-based solutions to

reduce the total volume of paper waste, such as

email and other web-based applications. Since these

technology-based measures have been implemented,

the overall use of paper by PGN has been reduced

significantly, from approximately 19,228 rim in 2011

to 17,292 rim in 2012. (EN1)

We have also implemented tight monitoring

procedures to govern the storage and use of fossil

fuels, lubricants, and other potentially dangerous

liquids, including dangerous and poisonous liquid

wastes. These procedures are implemented in order

to prevent spillages that may have a detrimental

impact on the environment. During the period of this

report, there were no reported incidences of spillages

of fossil fuels, lubricants and other dangerous liquids

throughout the Company’s area of operations. (EN23)

Our operations do not result in the production of

significant amounts of poisonous and dangerous

liquid waste includes B3. However, to manage

and recycle such B3 wastes as are produced, the

Company deploys the services of a competent

third-party service licensed by the Ministry of the

Environment. We are directly responsible for the

temporary storage of such waste within our own

facilities. All such wastes are accompanied by a

manifest and stored in sealed and specially marked

containers. The process of the transportation of these

wastes to the places where they are managed, being

the responsibility of third parties whose activities are

constantly monitored by the Company.

We have also issued policies that allows waste

materials which can be recycled, will managed

by competent third parties. The management of

such materials involves either its sale, donation, or

disposal. For the recycling of specific material such as

pipes and paper waste, the process is managed by

competent third parties. (EN27)

Waste Management


Improving The Climate Together with PGN The Conservation of Water Resources40

The primary use of water within our operations is for

the cooling of compressor pump installations and

sanitarypurposes within our offices. In general, water

used for suchpurposes is supplied by regional water

companies (PDAM). In addition, we maintain our

own pumped water facilities as a backup, in cases

where there are disruptions from the supply of water

from these companies.

The use of groundwater at our Head Office is always

within limits defined by current regulations. The total

volume of water supplied by PDAM during 2012

amounted 47,398 M3 . Whereas in 2011 as big as

48,088 M3 . (EN8)

PGN maintains significant areas of open space

surrounding its Head Office for the catchment

and absoIDRtion of water. In areas set aside for

thesepurposes PGN has created boreholes to

facilitate the absoIDRtion of rain and wastewater

into the ground. As a result, groundwater levels have

remained stable and there have been no complaints

from members of community in surrounding areas or

from other institutions regarding the management of

such water. (EN9)

In the Company’s offices in remote areas, the

need for water is often met through the use of

groundwater. In general, such water is only used for

the cooling of compressors and sanitarypurposes.

When such water is used for coolingpurposes,

we implement a closed loop system, so that water

is not wasted.

All water within the system is reused for

coolingpurposes. We have not yet conducted the

specific audit of the volume of water released into

bodies of water either at our Head Office or at

supporting offices. (EN21)

We have not yet applied optimal facilities for the

recycling of water resources, with water recycling

facilities at our Head Office utilizing a carbon filter

based filtration system. Water recycled from the

system is utilized for a number of limitedpurposes,

such as washing operational vehicles and for

watering gardens. Water used for the cooling of

compressors is returned to the closest water disposal

units, without further recycling. (EN10, EN21)

The Conservation of Water Resources


Our Environmental Management Program is an

integral part of our Environmental Management and

Partnership Program in 2012, PGN implemented

a number of activities intended to foster the

preservation of the environment, at a total

expenditure of IDR 9.49 billion, amongst others,

these activities included the following:

• The planting of mangrove trees, fruit trees, and

other plants in a number of regions throughout

Indonesia, including Belawan-Medan, DKI

Jakarta, Cirebon, and Surabaya. The total number

of mangrove trees planted under this program

was 41,374 and the total number of fruit trees

planted was 69,484. We conducted this activity

in cooperation with tertiary education institutes

in the respective areas, including IPB, USU and

ITS also the Mangrove House Consortium;

• The revegetation of areas surrounding our

operations and the planting of palm trees and

grass on land formerly used as a rubbish dump

in the offtake area surrounding Desa Sukadanau

Rawamaju-Bekasi;

• The implementation of an integrated rubbish

disposal system, through which waste is

transformed into compost in accordance

with regulations stipulated by the Ministry of

the Environment. This program begun in

2011 and has been implemented in 5 cities in

cooperation with regional and district

governments, in Batam, Palembang, Lampung,

Bogor, and Surabaya;

• These activities form a part of PGN’s contribution

to preserve the environment. These activities

can also be regarded as measures intended

to reduce global warming and climate change.

We hope that these programs will encourage a

higher level of awareness amongst members

of the community, including our own employees,

regarding the importance of maintaining clean

and healthy environment conditions.

Compliance with Environmental

Regulations

PGN constantly strives to demonstrate a high level of

commitment to the preservation of the environment.

This is achieved through a number of programs

and activities that are intended to meet against

environmental damage, as explained in the sections

above. In the period covered by this report, PGN

was not subject to fines or other legal sanctions as a

result of non-compliance with regulations governing

environmental management. (EN28)

Water Consumption

The use of water in office and other facilities

throughout PGN’s operations may have a detrimental

effect on the environment if not appropriately

managed. Water is a vital substance for human

and animal life. Thus, water resources must be used

responsibly in order to ensure that future generations

will have access to the water resources that

they require.

We are aware of the potential impact of PGN’s

business on the environment and committed to

formulating and implementing a number of programs

as an effort to mitigate against this impact and to

ensure the sustainability of the Earth we live on,

as described in these previous sections.

Preserving The Environment Through Our Environment Management Program (EN13, EN30)

Improving The Climate Together with PGN Preserving The Environment Through Our Environment management Program

41


Prioritizing the Interests of Stakeholders

7



Prioritizing the Interests of Stakeholders Prioritizing the Interests of Stakeholders

Prioritizing the Interests of Stakeholders

44

PGN regards the maintenance of harmonious relationships

with all stakeholders as a vital element in the achievement of

the sustainability of its business.


PGN regards the maintenance of harmonious relationships with all stakeholders as a vital element in

the achievement of the sustainability of its business. Our awareness of the importance of this element

compels PGN to consistently strive to improve the quality of communications as a means to determine the

aspirations of all of our stakeholders and to communicate matters related to programs and endeavors that

we have implemented or that we plan to implement as a means of ensuring the fulfillment of

these aspirations.

The mechanisms used to improve the intensity and quality of communications include all community

relations activities, as well as annual general shareholders meetings, bipartite and tripartite forums and our

Environmental Management and Partnership Program, through these meetings and forums, PGN strives to

describe its programs in a transparent, fair and clear manner in order to facilitate planning and to ensure

ongoing community development, including improvements to the material welfare of members of the

community and the preservation of the environment in accordance with their aspirations. At the same

time, stakeholders are enabled to provide input, comments, and evaluations to improve the quality of our

Corporate social responsibility programs.

PGN is committed to the belief that intensive communications with stakeholders and their appropriate

involvement are vital to ensuring the sustainability of the Company’s business. This commitment pushes us

to improve the quality of communications and relations with stakeholders and underlines our endeavors

to determine their aspirations, and to formulate working programs to ensure their achievement, and to

communicate fully regarding the development of these programs. The diagram below describes these

endeavors graphically.

Prioritizing the Interests of Stakeholders Prioritizing the Interests of Stakeholders45


1. Shareholders

Shareholders are Stakeholders who have a direct

interest in the operations of the Company through

their investment of capital in the Company. As a

result, shareholders will pay a high level of attention

to the operational and financial performance of the

Company, both of which have a direct influence on

share prices. Shareholders have a right to expect to

enjoy the results of their investment at any point

within a given period through increased share prices

and the payment of dividends.

In order to facilitate effective communications and

harmonious relationships with Shareholders, PGN

conducts routine General Shareholders Meetings

(GSM). These meetings are conducted at least once a

year as a medium to provide a comprehensive report

of the Company’s financial performance, including

a social accountability report. Through an analysis

of the main points of the agenda at this meeting,

Shareholders may direct the formulation and

development of the Company’s strategic direction,

including matters related to investment and the size

of dividends to be paid.

In addition to the GSM, PGN also facilitates

transparent and intensive communication with

shareholders through its website, through biannual

and quarterly performance reports, reports issued

through the mass media, the routine publication of

the Annual Report and Sustainability Report, and

through other media.

2. Employees

PGN’s human resources are its most significant

asset in the conduct of its business. All of PGN’s

achievements are the result of the dedication and

hard work of all employees at PGN. The aspirations

of employees include the following: a conducive

workplace, a clearly defined career path and

system of rewards, appropriate remuneration, and

guaranteed welfare.

In order to facilitate the fulfillment of these

aspirations within the boundaries established by the

Company’s financial capabilities, we conduct routine

meetings between the Company and SPPGN (the

PGN Trade Union) and representatives of the SPSI

(All Indonesia Employees Union), as the recognized

representatives of our employees. Through these

bipartite forums, all issues related to workplace

relations and issues may be addressed. The frequency

of such meetings is determined by the urgency of

issues that emerge and are conducted in order to

ensure the ongoing efficiency and effectiveness of

the forum.

The Management of Stakeholder Interests

Prioritizing the Interests of Stakeholders The Management of Stakeholder Interests

In broad outline, PGN has seven main stakeholder groups that influence the Company’s operations. PGN

strives to adopt specific approaches suitable for each of these stakeholder groups, in accordance with each of

their respective aspirations and hopes. This approach is intended to ensure effective communication and to

manage the involvement of each of the respective stakeholder groups.

PGN’s measures to communicate with each of the seven Stakeholder groups can be described as follows:

46


3. Business Partners

In order to ensure harmonious relationships with

business partners, PGN has established ethical

guidelines to guide cooperative endeavors with

business partners for the mutual benefit of all parties.

Issues affecting the relationship between PGN and its

business partners are addressed through discussions

and consultations based on these ethical guidelines,

with the results of the discussions and consultations

being formulated through a contract that must be

respected and implemented by all parties in order to

ensure good operational relations.

PGN strives to ensure the fulfillment of the aspirations

of its business partners through the implementation

of fair and transparent procurement processes, the

timely payment for services, and evaluations based on

factual and accurate data.

4. Government Agencies and Regulators

The government holds a significant stake in PGN. As

such, the government has a legitimate interest in the

Company’s financial performance and in the smooth

operations of the Company.

The Company’s operational performance in terms

of the distribution and transmission of gas in the

required volumes, pressure levels and quality to its

end users has a direct impact on the activities of

industrial, commercial and household users of gas,

thereby providing benefits to the government by

creating employment opportunities, tax revenues and

dividends, and macroeconomic benefits.

In the period of this report, PGN remains involved

in the distribution and transmission of gas. The

production of gas is managed by other privately and

state-owned enterprises on the basis of production

contracts that are monitored by the government.

In order to fulfill the aspirations of both the

government and PGN, particularly with regards to

the distribution of gas through the transmission and

distribution network, PGN conducts routine meetings

with representatives of the government through

bipartite and tripartite forums. These meetings are

intended to facilitate the development of plans

related to the expansion of PGN’s operations, the

allocation of gas, and gas sales prices.

PGN also engages in routine discussions to

understand the position of regulators with reference

to the management, exploration and exploitation

of natural gas resources in Indonesia in order to

facilitate the optimal operation of the Company.

5. The Community

In addition to facilitating economic growth amongst

the industrial and commercial sectors and amongst

the broader community, particularly amongst

communities in close proximity to areas of the

Company’s operations, PGN strives to achieve the

growth of its own operations in accordance with the

growth and development of these communities. In

order to achieve this, PGN has implemented its PKBL

program and a number of other social responsibility

and community development programs.

PGN implements its partnership program in

accordance with the specific potentials and

situation of each area in which it operates. The

implementation of partnership programs is based

on considerations related to the growth and

development of the communities in the areas

surrounding the Company’s operations.

The partnership program is subject to annual

planning and review. The scope and nature of

the program is adjusted in accordance with the

Company’s and the communities’ capabilities. In the

implementation of these programs, PGN works with

Prioritizing the Interests of Stakeholders Business Partners47


Prioritizing the Interests of Stakeholders Consumers48

respected community leaders, representatives of local

government agencies, other state owned enterprises,

academic institutions, and private organizations

with the capacities to develop Corporate and social

responsibility and environmental management

programs that facilitate the achievement of the

community’s aspirations.

PGN also strives to maintain harmonious relationships

with Civil Society Organizations (CSO) who play a

positive role in facilitating relationships between the

Company, government and community institutions,

with the direct involvement of these CSO’s at all

stages of the planning and implementation of the

Company’s Corporate responsibility programs. In

addition, PGN also works with academic institutions

and expert consultants who provide input to optimize

the implementation of these programs.

6. Consumers

The trust of consumers is a vital pillar that supports

the sustainability of the Company’s operations over

the long term. In order to maintain and develop

the trust of consumers, PGN strives to fulfill the

aspirations of these consumers, with these aspirations

relating to the following: the reliability of supplies,

the quality and pressure levels of supply gas, and

reasonable and consistent pricing policies.

In addition, PGN conducts a number of activities,

including the following: routine maintenance and

expansion of the pipe distribution and transmission

network, the expansion of upstream and downstream

business activities, measures to maintain the quality

of supplied gas, intensive communications with

consumers through special meetings, and the

implementation of an integrated complaints

handling unit.

PGN also conducts routine evaluations and surveys

to determine the level of customer satisfaction with

the quality of the product and service provided by

the Company, with these evaluations and surveys

involving independent third parties, in order to gather

feedback as a basis for improvements to the level of

service provided.

7. Media

PGN conducts a media gathering program to

maintain and develop trust and good relations with

representatives of the media and to facilitate the

communication of matters related to the Company’s

performance to all stakeholders.


Prioritizing the Interests of Stakeholders Stakeholders Engagement

Stakeholders Engagement (4.14 - 4.17)

49

Stakeholder group Method of involvement/communication

Frequency of Meetings Aspirations of stakeholder group

Shareholders and investors Company VisitConference CallSite VisitAnalyst MeetingNon-deal RoadshowInvestor SummitRUPSPublic Expose

Minimal 12 times/quarterMinimal 3 times/yearMinimal 1 times/yearMinimal 1 times/yearMinimal 4 times/year1 times/yearMinimal 1 times/yearMinimal 1 times/year

• Maintain and increase the value of investments through the improved performance of the Company.• Regular annual dividends.• The accountability and accuracy of financial reports.• The accountability and accuracy of operational reports.• Respect for the rights of shareholders as stipulated in various acts and regulations.

Employees Through SP-PGNManagement and Employee Forums

In accordance with need

• Equality.• Welfare.• Defined career path.• Non-discriminatory workplace practices • conducive work conditions.

Business partners (vendors, suppliers, agents, resellers, and installers)

Contracts for the supply ofservices and goodsEvaluations of the performance of supplies andbusiness partners.

In accordance with need, at least once per year

• Fair and transparent procurement processes • objective evaluation and selection processes • mutually beneficial growth

GovernmentAuthorities andRegulators

Bipartite meetings Meetings with Parliament Tripartite meetings

In accordance with need, at least once per year

• Optimal implementation of operations • Harmonious and constructive relationships with regulators.• Full compliance with laws and regulations


Prioritizing the Interests of Stakeholders Stakeholders Engagement50

A more comprehensive description regarding the measures implemented by the Company to ensure the fulfillment of the aspirations of stakeholders is contained in other sections of this Sustainability Report.By ensuring harmonious and mutually respectful relations with all stakeholder groups, PGN will fulfill its vision of becoming a leading company in its field.

Stakeholder group Method of involvement/communication

Frequency of Meetings Aspirations of stakeholder group

Community Implementation of Corpo-rate social responsibility and environmental management programs.Philanthropic activities that benefit members of the community

In accordance with need to ensure optimal operations

• Harmonious relations in the provision of benefits to members of communities in areas surrounding the Company’s operations.• Minimization of the negative effects of the Company’s operations on the environment • growth and improvement in the economy and economic activities of the community

Consumers Meetings with consumer representative groups customer service complaints handling service (call center)customer satisfaction surveys


• Reliable supply of gas• Reliable gas pressure and quality• Appropriate pricing • Service that meets and exceeds expectations

Media Press ReleaseMedia GatheringCorrespondence


• Reliable and accountable news reports


Mengutamakan Pemangku Kepentingan Membership in Industrial Associations and Other Organizations

PGN is an active participant in a number of associations and organizations. The goal of this participation is to

expand the Company’s business networks and to facilitate effective communication with stakeholder groups

and to facilitate the resolution of problems that may affect the Company’s operational activities.

Through its membership in such associations, PGN plays an active role in forums intended to foster economic

growth within Indonesia through the development of the natural gas industry. In addition, PGN benefits by

receiving input, advice, and constructive criticism as a basis for the improvement of the services it provides.

In 2012, PGN was a member of the following organizations:

1. Indonesia Gas Association (Pres)

2. Emitent Association of Indonesia (Member)

3. International Gas Union (Member)

4. Indonesian Stock Exchange (Member)

5. Kustodian Sentral Efek Indonesia (Member)

6. SPI Communication Forum (Organizer and Member)

7. IT BUMN Forum (Member)

8. BUMN Human Resources Forum (Member)

9. BUMN Public Relations Forum (Member)

10. BUMN Corporate Responsibility and Environmental Management Forum (Member)

PGN pays annual membership fees for its participation in all of these organizations, except the BUMN forums,

for which no membership fees are levied. PGN also played an active role as sponsor of the Gas Information

Exchange 2012 (GASEX 2012) conference, held at the Bali International Convention Centre, Nusa Dua, Bali.

PGN plays an active role in all BUMN forums, which are facilitated by the Ministry for State-Owned Enterprises,

with meetings held on a monthly or annual basis.

Membership in Industrial Associations and Other Organizations (4.13)

51


8 Sustainability Governance

Membership in Industrial Associations and Other Organizations (4.13)



Sustainability Governance Sustainability Governance

Sustainability Governance

54

For the year 2012assessments GCG is a “Very

Good” with a score of 90.72.


We believe that the implementation of Good

Corporate Governance (GCG) best practices is

fundamental in the achievement of PGN Vision

2020 as a world class energy company. With the

implementation of GCG best practices, Corruption,

Collusion and Nepotism (KKN) practices can be

prevented, and it can result in the enhancement of

the supervision function in company management,

thus keeping the company away from the risk

of losing the stakeholders’ confidence. The loss

of stakeholders’ confidence is bound to put the

company out of existence.

Therefore, we have been conducting periodic GCG

assessment, carried out by competent independent

consultants, followed by a process for the

improvement of all institutions and infrastructure

of the organization. For 2012, the result of the

assessment has been “Excellent” with a score of

90.72. The objective is to ensure that the company

is managed under a sound governance system by

implementing GCG best practices at all times, thus

enabling PGN to achieve first rate performance as

well as to maintain the stakeholders’ confidence,

increase the company’s value, and ensure long-term

business sustainability.

Sustainability Governance Sustainability Governance55


PGN, as a State-Owned Enterprise (SOE), views GCG

resilience not only as a realization of the Company’s

compliance with Decree of the Minister for State-

Owned Enterprises number Kep-117/M-MBU/2002

concerning the Implementation of GCG Practices in

State-Owned Enterprises, but rather, also as a means

for materializing PGN’s resilience in overcoming any

challenge and in taking advantage of every business

opportunity.

Sustainability Governance Sustainability Governance56


Sustainability Governance Structure of Governance

The structure of PGN’s Governance involves the

interaction among the key Organs of the Company,

which consist of the General Meeting of Shareholders

(GMS), the Board of Commissioners, the Board

of Directors, as well as the Supporting Organs,

consisting of the Committees under the Board of

Commissioners. The structure has been designed

to ensure independence of each of the company’s

organs in performing their respective functions. (4.1)

General Meeting of Shareholders (4.7)

GMS is a forum for shareholders in which strategic

decisions are made, aimed at the Company’s growth

and development. The GMS consists of the Annual

GMS and the Extraordinary GMS. Through the GMS,

shareholders can exercise their right, express their

opinion and vote in making important and strategic

decisions independently and proportionally between

the interest of the shareholders and the interest of

the company. (4.4)

Through the GMS, shareholders are able to formally

exercise their right and express opinion, make

suggestions and recommendations to the Board

of Directors.

The Board of Commissioners as well as the Board

of Directors are bound by and must implement every

resolution of the GMS. The interests of minority

shareholders are represented by the Independent

Commissioners. In addition to the GMS, shareholders

can make suggestions and provide an opinion to

the Board of Directors through meetings with the

majority shareholder, in this case, the Ministry for

State-Owned Enterprises.

The shareholders can also give their opinions and

suggestions through Meet the Investors Forum

(Forum Temu Investor), or during visits by investors

to PGN.

The GMS is also a means for assessing the

performance of the other two organs of the

company, namely the Board of Commissioners and

the Board of Directors, with regard to achieving

the operational targets set at the beginning of the

year. The performance of the Board of Directors

is measured based on the fulfillment of the Key

Performance Indicator (KPI), and it is subsequently

evaluated and accounted for in the GMS.

The stipulation of KPI is reviewed annually and

adjusted to reflect the risks and opportunities

encountered by PGN. The performance measurement

required and accounted for shall include performance

in the economic, environmental and social

aspects. (4.10)

In addition to assessing the performance of the

Board of Commissioners and the Board of Directors,

the GMS/Extraordinary GMS forum can also adopt

various important decisions concerning the Corporate

action plan, including the following:

1. Appointment and dismissal of members of the

Board of Commissioners and the Board of

Directors;

2. Increasing the Company’s capital;

3. Merger, consolidation, acquisition and separation

of business units of the Company with other

companies or to become another business unit;

4. Collateralization of the company’s assets;

5. Ratification of material transactions, and even

changes in the core business activities of the

Company, etc.

Structure of Governance

57


Sustainability Governance Governance Structure58

Internal Auditor (SPI)

Corporate SocialResponsibility

Corporate Governance

Board of Directors

Board of Commisioners

Corporate Secretary

Risk Management

General Meeting of Shareholders

Audit Committee

Risk Management and Business DevelopmentMonitoring CommitteeInvestor Relations

Corporate Bodies

SupportingBodies

PGN’S Corporate GOVERNANCE


Sustainability Governance Structure of the Board of Commissioners and the Board of Directors

Pursuant to Law No. 40 year 2007 concerning

Limited Liability Companies, PGN has adopted

the two-tier board system, namely the Board of

Commissioners and the Board of Directors, with each

of the boards having their clear duties and authorities

according to their respective functions as mandated

in the Articles of Association and the applicable

laws and regulations (fiduciary responsibility). They

both have the responsibility to maintain PGN’s

sustainability. The Board of Commissioners may not

hold concurrent positions as the Board of Directors,

similarly, members of the Board of Directors may not

hold concurrent positions at one level below them,

except in emergency situations.

Board of Commissioners

The main duty of the Board of Commissioners is to

conduct supervision of the policies implemented by

the Board of Directors, concerning the Company and

its business activities, as well as to provide advice to

the Board of Directors for the interest of PGN.

There are currently five members of the Board of

Commissioners of PGN, chaired by a President

Commissioner, two of them are Independent

Commissioners. Therefore, the percentage of the

composition of Independent Commissioners in the

Board of Commissioners is 40%, which means that

the composition of the Board of Commissioners

meets the minimum requirements stipulated in the

Limited Liability Companies Law. (4.3)

The Board of Commissioners presents the

accountability report to the Shareholders at least

once a year, namely in the GMS. In performing its

duties, the Board of Commissioners is assisted by

several Committees which have been established,

and are responsible to the Board of Commissioners.

The committees include; the Audit Committee

and the Risk Management Business Development

Monitoring Committee. A detailed description of the

functions and duties of each committee can be found

in the 2012 PGN Annual Report.

Board of Directors

The Board of Directors of PGN consists of five

Directors and it is chaired by a President Director who

has the duty as the primus inteIDRares, coordinating

the activities of the Board of Directors. The Board

of Directors has full authority and responsibility for

the management of the Company and to represent

PGN both inside and outside the court of law in

accordance with the provisions of the Articles of

Association. The duties and responsibilities of the

Board of Directors are shared collegially, although

they may act and make decisions according to the

distribution of duties and authorities, including in the

environmental and social aspects.

In order to support the effectiveness of the company’s

management, the Board of Directors has established

functional committees, namely: Knowledge

Management Committee, Risk Committee, and

Occupational Health, Safety and Environmental

Management Committee. A detailed description of

the composition of the committees as well as their

functions and responsibilities can be found in the

2012 PGN Annual Report.

Structure of the Board of Commissioners and the Board of Directors (4.1,4.2)

59


Sustainability Governance Mechanism for Selection and Appointment of Members of the Board of Commissioners and the Board of Directors

Mechanism for the Nomination and Appointment of Commissioners and Directors (4.7)

Members of the Board of Commissioners and the

Board of Directors are nominated, appointed and

dismissed through the GMS. As a SOE, the initiative

right to propose the appointment and dismissal

of members of the Board of Commissioners and

the Board of Directors in the GMS is held by the

majority shareholder, also referred to as the A series

shareholder, namely the Government of the Republic

of Indonesia, which is exercised by the State Minister

for State-Owned Enterprises. Prior to proposing

the appointment of Members of the Board of

Commissioners and the Board of Directors in a GMS,

the State Minister for State-Owned Enterprises first

conducts selection through the fit and proper test

process of the prospective members of the Board of

Commissioners and the Board of Directors.

The candidates’ qualifications and views concerning

the resolution of environmental and social issues are

also highlighted in this process. The selection results

are subsequently brought to and decided upon

in the GMS.

Commissioners’ and Directors’ Remuneration (4.5)

Each member of the Board of Commissioners receives

a monthly honorarium and certain allowances,

and receives a bonus for the performance and

achievement of PGN the amount of which is

stipulated in the GMS. Each Member of the Board

of Directors receives a monthly salary and other

allowances, and receives a bonus for the performance

and achievement of PGN. Taxes on the bonuses

received by the Commissioners and the Directors are

borne by the receiving party concerned.

Members of the Board of Commissioners and the

Board of Directors also receive functional facilities and

allowances such as vehicles/transportation allowance,

communication allowance, club/professional

membership, legal protection services, health

security, insurance, religious holiday allowance and

representation allowance.

The total honorarium of the Commissioners, the

salaries of the Directors, the bonuses and the

allowances are evaluated and decided upon in the

GMS, based on the achievement of the Company’s

performance, including the performance in the

context of supporting sustainability, which includes

60


Sustainability Governance Key Principles of Governance

Internal Supervision and Control

In order to ensure the improvement of accountability

of the recording of all financial transactions and

the reporting thereof, PGN implements a risk-based

internal supervision and control system based on

Internal Audit Operating Procedures. The report is

prepared with reference to the Statement of Financial

Accounting Standards (Pernyataan Standar Akuntansi

Keuangan/PSAK) and the Internal Audit Guidelines

(Audit Charter). This provision has been stipulated in

the Decision of the Board of Directors, by referring

to the Decision of the ChaiIDRerson of the Capital

Market and Financial Institutions Supervisory Board

No: KEP-496/BL/2008.

The organizational instrumentality which has the

responsibility to ensure quality of the recording of

transactions and the reporting of financial position

are the Internal Supervisory Unit (Satuan Pengawasan

Intern/SPI) and the External Auditor. Those two

working units perform the Internal Supervision and

Control function using the Audit Management

Information System (Sistem Informasi Manajemen

Audit/SIMA) and the Audit Command Language

(ACL) as reference. As part of the effort of improving

accountability, PGN engages competent auditors,

who possess internal auditor profession certificates,

such as “Qualified Internal Auditor” (QIA) and

“Professional Internal Auditor” (PIA). The total SPI

staff who hold profession qualification certificate in

the field of audit as at the end of 2012 was 9 persons

or 40.9% of the total staff in the SPI unit consisting

of a total of 22 persons.

As part of the intensification of the movement for the

prevention of acts of corruption and in connection

with the implementation of supervision, we require

all SPI staff to participate in sufficient education and

training on audit procedures and detection of the

risk of deviation such as fraud auditing, investigative

audit and advanced internal auditing. (SO3)

In order to ensure the efficiency of the supervision

process, the audits to be conducted are prioritized

on the units which are prone to corruption and

deviation, such as the procurement, project

construction, finance and sales units. In the year

2012, SPI conducted audits of 100% of the total

programs and no fraud cases have been

discovered. (SO2)

Preventing Corruption (SO3, SO4)

We are strongly committed to preventing other

fraudulent acts by implementing strict rules and

taking firm action when a deviation is discovered. It

is affirmed in the company’s internal policy that All

Parties at PGN are prohibited from commiting acts

of corruption or acts which lead to corruption, and

they are also not allowed to give or receive bribes.

In addition to the strict policy regulation, through

the improvement of the quality of supervision as

described above, we are also going to apply the

whistleblowing system to ensure the effectiveness

of the movement for the prevention of acts of

corruption and other fraudulent acts which harm

all parties.

Through the whistleblowing system, we encourage

All Parties at PGN to make a report if they become

aware of any acts of corruption or any acts which

may potentially lead to corruption. We will protect

the identity of All Parties at PGN who report the act

or the potential act of Corruption. We will formulate

and apply the whistleblower policy as one of the

methods used by the Company for preventing the

occurrence of acts of corruption or abuse of power.

Those who commit the criminal act of corruption

will be processed in accordance with the applicable

legal provisions. In order to create a common

Key Principles of Governance

61


Sustainability Governance Policies Related to Transparency and the Publication of Information

perception, determination and effectiveness of the

movement for the prevention of acts of corruption,

we will also organize education and training on anti

corruption. The education will be conducted in the

form of seminars and workshops, participated by all

employees in the Internal Supervision Unit (Satuan

Pengawasan Intern/SPI), the Procurement working

unit and other units which are prone to the acts of

corruption, fraud, bribery and the like (SO2).

Policy on Disclosure of Information and Transparency

In the context of implementing the transparency

principle as one of the pillars in the implementation

of GCG best practices, we try to disclose information

in a complete, accurate, and timely manner to our

stakeholders, particularly to the shareholders.

We conduct the disclosure of information in

a reasonable manner by taking into account

the interest of the company, the interest of the

stakeholders as a whole, as well as applicable

laws and regulations. We provide for the policy on

confidentiality and disclosure of information of

the Company in the Decision of the Board of

Directors Number 01100.K/132/UT/2006 Concerning

Information Management Policy of the Company.

We conduct disclosure of information using

various media, such as the Company’s website:

www.pgn.co.id, the mass media, Annual Report,

Sustainability Report, meetings with customers,

public presentations, meetings with analysts,

conference calls, analyst visits, site visits, participation

in conferences and non-deal roadshows.

Avoiding Conflict of Interest (4.6)

We apply the policy on the prevention of conflict

of interest which may hamper the performance of

the functions, duties and authorities of the Board

of Commissioners, the Board of Directors and other

Officers at PGN. The objective is to improve the

quality of decision making and implementation of

the independence principle. We have set forth this

policy in the code of conduct for All Parties at PGN

in the form of “Employees’ Code of Ethics” and

“Executives’ Code of Ethics”.

The Employees’ Code of Ethics in general contains

the code of conduct of All Parties at PGN in the

daily work activities and the procedures related to

stakeholders. The Employees’ Code of Ethics also

provides for the practical guidelines on conflict of

interest, corruption, bribery, gratification, information

management, etc. The Executives’ Code of Ethics in

general provides for the code of conduct for PGN

executives in carrying out their responsibilities. The

Employees’ Code of Ethics and the Executives’ Code

of Ethics have been published and compliance with

the same is mandatory for all parties at PGN.

Integrity Pact

As one of the manifestations of the implementation

of business ethics, PGN requires all parties involved

in the procurement of goods and services to sign

an integrity pact. The objective is to prevent the

occurrence of fraud and collusion in the goods and

services procurement process.

Avoiding Political Involvement (SO5, SO6)PGN prohibits the utilization of the Company’s

funds or assets for the interest of political parties or

candidates from political parties, either directly or

indirectly. This is in accordance with the regulation of

the State Minister for State-Owned Enterprises which

prohibits all SOEs from making financial contributions

and other forms of contributions to political

parties, politicians and related institutions. PGN’s

involvement in the formulation of public policies is

limited to the expression of views before the House

of Representatives (DPR) at the invitation of the

62


Sustainability Governance Goods and Services Procurement63

relevant parties in the context of formulating policies

related to the business field of gas distribution and

transmission.

Goods and Services Procurement

In order to ensure transparency in procurement

process, we have been applying Goods or Services

Procurement Guidelines P-001/0.57 year 2008

pursuant to Decision of the Board of Directors

Number: 020500.K/LG.01/UT/2008 dated November

17, 2008, with the following principles:

a) Efficient; b) Effective; c) Open and Competitive;

d) Transparent; e) Fair/Non-Discriminatory; and

f) Accountable.

The objectives are as follows:

• To improve efficiency;

• To support the creation of the Company’s added

value;

• To simplify and accelerate the decision-making

process in goods/services procurement;

• To increase independence, responsibility and

professionalism of all elements involved in goods

or services procurement;

• To enhance synergy among SOEs and/or

Subsidiary Entities.

For the procurement of certain other goods and

services, we have been applying a quotation

process using the e-auction system for ensuring a

procurement process which is more transparent and

efficient as well as able to result in the lowest price.

However, this does not mean reducing the quality of

the work.

Mechanism for Expressing Opinion to the Board of Directors (4.4)

As an important element of the company’s

management, PGN employees have the right to

express opinions and make suggestions to the

Board of Directors through formal mechanisms,

such as meetings of the Workers’ Union with the

Management and the Company’s work meetings.

Suggestions and opinions can also be conveyed

to the Board of Directors through the events of

employees’ meetings with the Board of Directors

and during Working visits of the Board of Directors.

Employees can also convey opinions or suggestions

to the Board of Directors through correspondence

media such as letters or electronic mails.

All mechanisms for conveying opinions, suggestions

and recommendations have been implemented

properly in 2012. In addition to gaining various

thoughts related to the enhancement of various

policies of the company, the mechanisms

implemented have resulted in a more conducive

relationship with the internal stakeholders,

particularly employees in the context of promoting

the growth of PGN’s business.

Implementation of International Standards (4.12, SO2)

In order to achieve the vision of becoming a world

class company, PGN has been implementing

operational standards which are generally recognized

and accepted by the international community. We

have been implementing various key operational

standards in accordance with the international

standards including: risk management, quality

assurance, implementation of reporting standards

and implementation of MDG’S program.

• Risk Management

We manage risks as important part of the

implementation of governance best practices with

the main objective of preventing the disruption of

PGN’s operational and business activities. The method

that we use is by implementing an ERM-COSO-based

risk management system. This system includes the


Sustainability Governance Implementation of International Standards 64

Prediagnostic risk mapping conducted by the Risk

Management Division. The result of the mapping is

followed up in phases by conducting remediation

activities or joint monitoring with the owners of the

relevant risks.

In order to increase all parties’ awareness of

the importance of Risk management, upon the

initiation of the Risk Management Division, PGN has

established a Risk Champion Team which constitutes

risk management representatives acting as change

agents in their respective working units. In addition

to that, we have also been conducting dissemination

activities, namely in the form of workshops,

refreshment, and group discussions.

Through risk management, which involves all levels of

the management, we have subsequently formulated

the blue print and roadmap of risk management

which serve as reference in the implementation of

the risk management function development. This is

in line with one of the focuses of the management

development in the Company’s 2011-2015

Long-Term Plan.

In addition to the above, we have also identified and

conducted the mitigation of seven main risks which

can affect operations and business sustainability,

which include: country risk, regulation risk,

operational risk, supply risk, currency risk, business

competition risk, and demand risk.

• Quality Assurance

In managing the quality of PGN’s services and

products, we have been applying ISO 9001 : 2008

international standards, which have been accredited

by LQRA (Lloyd’s Resister Quality Assurance) and valid

until January 2015.

• Reporting Standards of Global Reporting

Initiative (GRI)

PGN has been implementing a sustainability reporting

system by using the reporting standards issued by

Global Reporting Initiative (GRI). The objective is

to further increase accountability and transparency

in the company’s management related to the

environmental, manpower, human rights, community,

and product responsibility aspects.

• Millennium Development Goals (MDG’s)

Program

The government has formulated various policies

related to the MDG’s program as a sign of the

government’s seriousness in improving the welfare

and social condition of the community. PGN has

implemented the government policies through the

implementation of the Partnership and Environment

Development Program (Program Kemitraan dan Bina

Lingkungan/PKBL) which is in line with the

MDG’s Program.

We have been continuously improving the

sustainability governance system by implementing

other international standards, such as ISO 26000 and

UN Global Compact. In addition to that, we have also

been implementing several international initiatives to

deal with global warming and climate change, such

as, carbon footprint.


Sustainability Governance Precautionary Approaches65

The adoption of international standards and principles as mentioned above and PGN’s participation in

various professional associations (see the description on “Prioritizing the Stakeholders”) constitute one of the

precautionary approaches in the Company’s risk management and business development.

We have issued the various policies in order to support the implementation of international standards by PGN.

We use facilitation and or evaluation services of competent external parties whenever necessary.

Precautionary Approaches (4.9,4.11)


Sustainability Governance Precautionary Approaches66

The direction, control and supervision of the implementation and compliance with the international

standards which have been adopted are conducted by PGN’s Board of Directors through internal meetings

and the application of periodic reporting system by the relevant working units. We have also assigned

competent external parties to conduct evaluation and to provide inputs as well as recommendations for

further improvement. The assessment of the sustainability performance, particularly with regard to the

implementation of Social and Environmental Responsibility is conducted through meetings between the

company’s leadership and the relevant working units.


Corporate Culture constitutes the values and philosophy, which have been agreed upon and believed by All

Parties at PGN as the basis and reference for PGN for achieving the objectives. PGN defines Corporate Culture

in the form of five values briefly abbreviated as ProCISE and elaborated in 10 Key Conducts of the Company.

(See the description on “About PGN”). The implementation of the 10 Key Conducts of the Company is

elaborated in the provisions of the Executives’ Code of Ethics and the Employees’ Code of Ethics as

mentioned previously.

The internalization of the culture and key conducts, which also include the economic, environmental and

social aspects, is conducted routinely through various approaches, such as dissemination by the Board of

Directors in the events of face-to-face meeting with the employees, counseling through in-house training and

the issuance of booklet which contains the rules of conduct. The internalization of the culture and principles

adopted by PGN has been implemented properly and continuous improvement will be made in order to ensure

that the conduct of All Parties at PGN is in line with PGN’s vision and mission at all times.

Internalization of PGN Culture and the Corporate Code of Conduct (4.8)

Sustainability Governance Internalization of PGN Culture and the Corporate Code of Conduct

67


9 Improving the Well-Being of Employees



Improving the Well-Being of Employees Improving the Well-Being of Employees

Improving the Well-Being of Employees

70

Human resources also play a vital role in ensuring the sustainability

of business, not only in terms of generating profits, but also in terms of improving mutual

welfare (people) and ensuring the preservation of the environment

(planet).


Employees constitute a significant stakeholder

group for the Company, playing a vital strategic

role in the achievement of PGN’s long-term

goals. Human resources also play a vital role in

ensuring the sustainability of business, not only in

terms of generating profits, but also in terms of

improving mutual welfare (people) and ensuring the

preservation of the environment (planet). Thus, in the

management of human resources, we are committed

to paying full attention to the aspirations and needs

of all stakeholder groups, including our employees.

We have identified a number of the chief aspirations

of our employees, which include: a conducive

working environment, a defined career path and

clear systems of performance evaluation, appropriate

remuneration and guaranteed welfare. Based on

this conception of our human resources, we have

formulated and implemented a number of programs

and mechanisms to manage human resources in

order to achieve a balance between the interests

of the Company, which strives to achieve optimal

performance from its human resources, with the

interests of our employees, including an improvement

of their capabilities and competencies.

Programs and mechanisms to manage human

resources include the following:

Relationships with Employees

We manage our relationships with employees,

whom we regard as partners in the achievement of

PGN’s Vision 2020: “To become a world-class energy

company in the supply of natural gas”. Thus, we

strive to develop healthy labor relations through the

formulation of a Collective Work Agreement (CWA).

This CWA was formulated in cooperation with

representatives of our employees’ trade union, which

will monitor its implementation every twice months

basis. The CWA was agreed and implemented on

1 July 2011.

The successful formulation of the CWA by PGN

together with the SP-PGN is a clear manifestation

of the Company’s commitment to developing

harmonious industrial relations. The CWA defines the

rights and obligations of both the Company and its

employees in a balanced fashion. The CWA is

intended to:

• Provide legal certainty regarding the rights

and obligations of the Company and employees,

including working relations, working conditions,

and the implementation of the Company’s Code

of Conduct;

• To reinforce and strengthen cooperation between

the Company and Employees;

• To regulate the fair settlement of differences

of opinion by ensuring that differences are settled

through deliberation and consensus and do not

result in disputes.

Thus, the rights of all permanent employees of PGAS

(100%) are protected by Corporate Regulations.

(LA4)

Refinements to the CWA will be conducted the

future in order to provide further assurance that

the rights of employees are respected. One revision

under immediate consideration involves the need to

include a clause in the CWA that guarantees that

the Company will provide employees with at least

one month’s notice before making any fundamental

changes to the structure of the Company,

including such changes as acquisitions, mergers or

organizational restructuring. (LA5)

Improving the Well-Being of Employees Relationships with Employees71


Improving the Well-Being of Employees Compliance with Labor Regulations and Laws

As a company that is managed in accordance with

the principles of good Corporate governance, in the

management of its system of employee relations,

the management of PGN strives to achieve full

compliance with all laws and regulations governing

labor. By achieving full compliance with these laws

and regulations, the Company minimizes its risk

of breaching human rights in the workplace. The

foundation of the system of management of labor

relations is the CWA, which is discussed in the

previous section. A list of the points covered in this

CWA demonstrates our full compliance with laws and

regulations governing labor and labor relations,

as follows:

Freedom to Participate in Unions (HR5)

As a public company, we strive to guarantee the

rights of employees to engage in collective action

through participation in trade unions. We provide

this guarantee because management is committed

to a paradigm in which the relationship between

employees and business should be cooperative

and mutually beneficial. The right of employees to

establish and participate in trade unions is enshrined

in Act Number 21, 2000 concerning Trade Unions.

Membership in trade unions is not mandatory. We

believe that the relationship between the Company

with the employees union, SP-PGN, is working well.

The trade union which represents PGN’s employees

is the PT Perusahaan Gas Negara (Persero) Tbk

Employees Trade Union, commonly known as

SP-PGN. SP-PGN is an autonomous organization,

without affiliations. SP-PGN is registered with the

Ministry of Labor, under the registration number

387/II/P/IX/2009, with the date of registration being

19 September 2009 at the West Jakarta office

of the Ministry of Labor. SP-PGN is organized by

representatives within the respective organizational

units of the Company, with overall guidance and

coordination provided by the central administrative

unit based at PGN’s Head Office. With the

establishment of SP-PGN, it is hoped that the three

fundamental principles of partnership governing

industrial relations (partner in profit, partner in

responsibility, and partner in production) can be

manifested through employees’ daily activities.

In order to ensure the implementation of this

partnership, we engage in routine surveys to

determine the level of satisfaction of employees and

to collect direct feedback from employees to assess

their concerns and opinions regarding employment

at PGN.

Workplace Environment

As a company committed to the implementation of

the principles We are aware that in the conduct

of our day-to-day activities, the Company must

always strive to ensure harmonious relationships

with employees.

To facilitate their ability to contribute to the

Company’s success and to foster relationships based

on sound family values and equality for employees

at all levels. In this fashion, we will achieve full

compliance with laws and regulations governing

labor and labor relations in Indonesia.

To achieve this, a high level of cooperation and

mutual respect and trust is required, together with

a commitment on the part of all parties to engage

in good communication.

Compliance with Labor Regulations and Laws

72


Improving the Well-Being of Employees Employee Turnover73

To achieve good communication between employees

and management, we have implemented a Corporate

portal which can be used to support communication

on a day-to-day basis. The features of this Corporate

portal are as follows:

• Corporate email application;

• e-SMS applications to provide information about

incoming or outgoing correspondence;

• e-attendance applications in order to determine

employees attendance online;

• Online knowledge management applications

in order to socialize best practices and to provide

information related to daily duties.

PGN has established its ability to foster a conducive

workplace and to develop a system in which

employees feel that they are part of team, thereby

promoting good teamwork. Throughout PGN’s

operations, there have been no incidences of mass

demonstrations or strikes reflecting employees’

dissatisfaction with policies and practices

implemented by management.

Employee Turnover

With a conducive working environment, the level

of employee turnover is relatively low. Throughout

2012 still have 54 employees ceased employment

at PGN. The main reasons that employees left PGN’s

employment were that they reached retirement age

or deceased. Only a small number of employees

voluntarily resigned from employment for

personal reasons. (LA2)


Improving the Well-Being of Employees Elimination of Forced Labor

Elimination of Forced Labor

PGN strives to avoid all practices that might be suggestive of forced labor or of undue compulsion by

establishing clear limits to working hours in accordance with the specific nature of the area of operations and

of the specific work force in question. Staff may work during normal working hours or on shift work, or during

other specified hours in specific operations in certain areas. When employees are required to work for periods

in excess of the defined working hours, they are entitled to be paid overtime payments calculated at a rate

defined by internal regulations.

Fair Remuneration

PGN ensures that the basic salaries of entry-level staff are set at least at the level of the Regional Minimum

Wage (RMW). In particular, the Company provides allowances in excess of normative requirements, leave al-

74

Clasification 2012 2011

Men Women Total Men Women Total

New employee by age group

<30 63 18 81 10 2 12

30 - 40 12 1 13 - - -

>40 3 - 3 1 - 1

Total 78 19 97 11 2 13

New employee by work region

Head Office 30 7 37 2 1 3

SBU Distribution Region I 22 5 27 4 - 4

SBU Distribution Region II 10 1 11 2 1 3

SBU Distribution Region III 3 3 6 3 - 3

SBU Transmission Sumatera - Jawa

11 3 14 - - -

Project 2 - 2 - - -

Total 78 19 97 11 2 13

Employee out

Voluntary resigned 8 5 13 2 6 8

Disciplinary Sanction - - - 1 - 1

Death 5 2 7 4 1 5

Retired 29 3 32 23 - 23

Early retired - - - 6 3 9

Others 2 0 2 3 - 3

Total 44 10 54 39 10 49

EMPLOYEE TURNOVER TABLE


Improving the Well-Being of Employees Fair Remuneration75

TABLE OF AVERAGE RATIO OF GENDER REMUNERATION (LA14)

Men Women

Senior Management 1,01 1,00

Middle Management 1,00 1,01

Junior Management 1,00 1,06

Staff 1,01 1,00

No Operation Region Amount of Basic Salary in Region/Province (IDR)

New Worker Amount Basic Salary (IDR)

Ratio

1 Head Office 2,200,000 2,400,000 109%

2 SBU Distribution Region I 2,200,000 2,400,000 109%

3 SBU Distribution Region II 1,740,000 2,400,000 138%

4 SBU Distribution Region III - 2,400,000 -

5 SBU Transmission Sumatera - Jawa 2,200,000 2,400,000 109%

6 Gas Pipeline Construction Project 2,200,000 2,400,000 109%

7 Subsidiary 2,200,000 2,400,000 109%

RASIO BASIC SALARY

PGN has established its own mechanisms for determining the entitlements of staff, with these mechanisms

being based on the principle of equality between male and female workers. PGN also strives to ensure equal

opportunities through the provision of health facilities that meet the specific needs of female employees,

ensuring that female employees have the same level of security and opportunity as male employees. Similarly,

the principle of equal opportunity is implemented through the provision of equal wages for similar work

conducted by male and female workers.

The table below demonstrates that differences in entitlement packages between employees of different

genders are less than 10 percent. On average, the female employees in operational and lower to mid-level

managerial positions receive higher entitlement packages than male employees. The only level at which

male employees receive higher entitlement packages on average than female employees is at the senior

management level.

lowances that exceed the minimum levels required by regulation, annual bonuses and other incentives

for employees.

The minimum wages received by PGN employees of the lowest ranks are determined with reference to the

RMW, or Provincial Minimum Wage (PMW) in each region where PGN operates. This can be demonstrated

through the following table, which clearly shows that the wages of newly recruited staff at the lowest levels

are always in excess of the defined minimum wages (EC5).


Improving the Well-Being of Employees Entitlement Package of Non-Organic Workers76

For outsourcing workers, Company to continue to ensure that these rights should be normative in the

existing provisions, although the coaching responsibilities in the hands of providers Company workers.

No Return Type Services Organic Workers Non-Organic Workers

A Wages

B Support Facilities:

Workplace Accident and Disability Insurance

Work-Related Death Benefits

Non-Workplace Accident and Disability Insurance

Non-Work-Related Death Benefit

Health Benefits for Employees

Health Benefits for Employees’ Spouses

Health Benefits for Employees’ Children

Leave Entitlements

Maternity Leave

Menstrual Leave

Pilgrimage Leave and Leave for Spiritualpurposes

Facilities for the Celebration of Religious Holidays

Pension Fund

Severance Payments

Special Needs Facilities and Support

BENEFITS PROVIDED TO ORGANIC WORKERS THAT ARE NOT PROVIDED TO NON-ORGANIC

Entitlement Package of Non-Organic Workers (LA3)In general, the Company’s employees fall into two main categories, organic employees, and non-organic

employees. Currently, all Company’s employees are organic workers.

While all employees receive appropriate remuneration for their contributions to PGN, the entitlement packages

of organic workers may vary from those of non-organic workers. The variance between these packages is

related to a number of factors, including differences in the facilities and support provided to workers in the

different classes, as the following table shows: (LA3)


We are strongly committed to respecting the

human rights of employees in the workplace. We

fully support the establishment of a trade union for

our employees, SP-PGN, and respect the rights of

employees to express their opinions and to strive

to fulfill their aspirations freely, both individually

and collectively through the SP-PGN, in accordance

with the ILO Convention 87 of 1948 concerning the

rights of workers to protect their interests through

the establishment of an organization. Our respect

for human rights is also reflected in our recruitment

practices and through the establishment of a

conducive working environment. We are strongly

committed to equal rights without regard for gender,

ethnic background, religion, race, or group affiliation

and prohibit discriminative practices in the treatment

of employees. Thus, in the period of this report,

PGN has not received complaints or claims related to

discriminatory practices involving its employees. (HR4)

In addition, as part of our commitment to the

avoidance of practices that violate human rights, we

have implemented a strict policy of not employing

underage workers. At the time of the publication of

this report, the youngest employee at PGN was 20

years old. The minimum age at which an individual

can apply for employment at the Company is

18 years old. (HR6)

This policy is strictly enforced and monitored.

Throughout the period of this report, there were

no cases of underage individuals employed at PGN.

In this regard, we have achieved full compliance

with policies established by the government, which

has ratified a number of international conventions

regarding human resources, including the

International Labour Organisation Convention (ILO).

Human Rights Training and Awareness

Raising

In order to prevent infringements of human

rights resulting from a lack of knowledge and

understanding of the basic principles of these rights,

we conduct specific training to raise awareness of

issues related to these. Training and information

materials concerning human rights are specifically

provided for employees involved in the enforcement

of security within the Company’s operations.

Training in matters related to human rights is

provided in cooperation with the police force. By the

end of 2012, approximately 85% of the Company’s

security officers had received refresher training

courses involving instruction in issues related to

human rights. (HR3, HR8)

In the conduct of all projects and activities to

develop the pipeline network distribution system, the

Company completely refrains at all times from forcing

affected communities to comply with the wishes

of the Company. Rather, it conducts socialization

activities to raise awareness of the importance of the

pipeline distribution network to the development

of the affected area, so that members of affected

communities support the Company’s programs

to utilize natural gas. Throughout the period of

this report, no reports were received related to

infringements of human rights by the Company

in the areas in which it conducts its

operational activities. (HR9)

Preventing Corruption (SO3, SO4)

We are strongly committed to playing a full part

in the movement to eradicate corruption. This

commitment is driven by our conviction that

corrupt practices peIDRetrated by employees have

a significant potential to cause both financial and

non-financial damage to the Company in particular

Improving the Well-Being of Employees Respect for Human Rights77

Respect for Human Rights


and to the nation in general. In many cases, the non-

financial damage takes the form of damage to the

Company’s reputation and limitations on its ability to

expand. In addition, damage may take the form of a

degradation of morals within the workplace.

Thus, we have established and implemented strict

regulations to mitigate against the risk of corrupt

practices. We emphasize that no employee of PGN

may engage in corrupt practices or in practices that

enable corruption. We also urge employees to report

any knowledge of corrupt actions or actions that

are potentially corrupt. We protect the identity of

employees who report actual or potential acts of

corruption.

We have implemented these policies regarding the

reporting of corrupt or potentially corrupt acts to

minimize such practices and to prevent the abuse of

authority. Any employee found engaging in corrupt

practices will be processed in full accordance with the

prevailing laws and regulations and their employment

at PGN will be terminated. To ensure that all work

units are free of corrupt practices or the abuse of

authority that may lead to fraud and corruption,

we conduct an ongoing process of auditing and

inspection, particularly for units where the potential

for corruption is high. These units include work

units involved in procurements, finance, project

maintenance and other units whose work involves

frequent interactions with third parties.

In the implementation of GCG (Good Corporate Governance) and to support the government in the state apparatus is clean and free of corruption, collusion and nepotism, PGN requires all officers of the level of the supervisor to make the report of public officials wealth (LHKPN) as an education on the prevention of corruption to all PGN officers. The Company also has been working with the Commission to conduct education and

outreach, and prevention of corruption charge LHKPN technical guidance.

The Company’s Internal Audit unit is responsible

for conducting periodic assessments and audits,

which may be based on inputs from the whistle

blowing system. Thus, we provide special training

and education for personnel attached to the

internal audit unit in order to ensure that the quality

of the audits that they conduct is in accordance

with current auditing standards. In addition, the

Company provides special training and education

related to the prevention of corruption in the form

of workshops and seminars which are followed by all

employees within the Internal Monitoring Unit and in

procurement units.

Improving the Well-Being of Employees Preventing Corruption78


Improving the Well-Being of Employees Contribution to Political Parties79

COMPOSITION BASED EMPLOYEES LEVEL POSITIONS (LA1)

Level 2012 2011


Vice President 55 12 67 54 12 66

Assistant Vice President 115 28 143 107 26 133

Manager 144 60 204 96 60 156

Assistant Manager 130 52 182 132 39 171

Supervisor 100 45 145 122 40 162

Senior Staff 88 40 128 77 46 123

Staff 563 132 694 569 136 705

Jumlah 1.195 369 1.564 1.157 359 1.516

Contributions to Political Parties (SO5, SO6)

We fully respect the rights of all employees to fulfill their political aspirations, in accordance with their rights.

However, we prohibit employees from forcing their opinions and wishes through their participation in political

activities. In addition, in accordance with regulations promulgated by the State Minister for State-Owned

Enterprises that forbid SOE’s from making contributions, financial or otherwise political parties, politicians

and related institutions, PGN forbids the use of company funds or assets to promote the interests of political

parties or political candidates, either directly or indirectly.

The Company’s involvement in public policy-making is limited to presenting its views before parliament (the

DPR) or at the invitation of the parties concerned in relation to the formulation of policy related to meeting the

demand for natural gas for domestic consumption, whether for the needs of the fertilizer industry or for other

uses as an environmentally friendly fuel.

Labor Force Profile (LA1)

The total number of the Company’s employees in 2012 was 1564 individuals, an increase of 3.17% over the

total number of 1516 in 2011. The increase in the number of employees is in accordance with plans for the

development of the Company. In the future, we will continue to increase the number of employees while at

the same time increasing the minimum standards of expertise as part of the ongoing process to expand PGN’s

business and to fulfill its vision of becoming a world-class energy company in the utilization of natural gas.


Education 2012 2011

permanent permanent

S - 3 1 1

S - 2 114 94

S - 1 633 547

Diploma 494 514

High School 322 360

Total 1,564 1,516

NUMBER OF EMPLOYEES BY EDUCATION LEVEL

Improving the Well-Being of Employees Labor Force Profile80

NUMBER OF EMPLOYEES WORKING AREAS IN 2012

Region 2012 2011


Head Office 301 140 440 260 133 393

SBU Region I West Java 377 89 466 389 87 476

SBU Region II East Java 172 41 213 164 39 203

SBU Region III North Sumatera 113 40 153 117 38 155

SBU TSJ 156 33 189 149 32 181

Gas Pipeline Construction Project 64 24 88 47 19 66

Subsidiary 12 2 14 31 11 42

Total 1,195 369 1,564 1,157 359 1,516


With the growth of our organization and the expansion of our activities, our human resources requirements

are becoming increasingly stringent and varied. We require employees who have a high level of competence in

their field and whose qualifications meet the standards of the Company. In order to fulfill our needs for these

human resources, we provide equal opportunities to all individuals working or serving as employees within the

Company’s sphere of operations.

In the process of recruitment, we involve independent, competent third parties and announce employment

opportunities openly, both through the media and through our Corporate website, in order to provide equal

opportunities to all candidates with the appropriate qualifications. We conduct our recruitment selection

processes through three main programs, as follows:

1. Regular Recruitment from External Sources

This recruitment and selection program was intended to facilitate the hiring of new, highly qualified

employees who have graduated from tertiary educational institutions. To assure independence and

transparency, PGN conducted the selection process with the assistance of a number of independent

third parties.

2. Recruitment from non-permanent staff (internal sources)

This recruitment and selection program was intended to facilitate the hiring of new workers from amongst

third-party contract workers (outsourcing) or from amongst workers on fixed term contracts. This program

was intended to recognize the loyalty and contribution made by many of these workers.

3. Recruitment from amongst National Athletes

This program was established to express the PGN support for government programs to facilitate the

personal development of national athletes and to express appreciation for athletes who have served to

increase Indonesia’s national prestige.

In the recruitment process, in cases of selection of candidates with equal qualifications and experience, we

prioritize the employment of candidates from the area in which our operations are based. Before being

appointed as a permanent employee, candidates must participate in an orientation program and pass

through a probation period. After being appointed as a permanent employee, new employees participate in

professional development programs related to their individual areas of expertise. (EC7)

We also conduct a Bonded Scholarship Program for the specific benefit of graduates of the Taruna Nusantara

Senior High School, whose students come from throughout Indonesia. This program is a manifestation of our

commitment to assist high achieving students from disadvantaged socio-economic backgrounds. Recipients

of this scholarship will receive support to continue their education at the Energy and Mineral Institute (STEM)

until their completion of the Diploma 3 Program. Following their graduation, recipients of this program will be

appointed as employees of PGN. This program has been implemented since 2006, with the cumulative number

of recipients of scholarships who have been appointed as employees of PGN with total of 41 individuals.

Equal Opportunity in the Workplace (LA13)

Improving the Well-Being of Employees Equal Opportunity in the Workplace81


Improving the Well-Being of Employees Equal Opportunity in the Workplace82

Demonstrating our commitment to diversity and equal opportunity in the recruitment and deployment of

employees, the following table presents information related to the number of employees of different genders

in various structural positions.

Clasification Number of Employees in 2012 Employees based on Age (Men)

Employees based on Age (Women)

Men Women Total <30 30-50 >50 <30 30-50 >50

Senior Management 55 12 67 - 22 37 - 3 9

Middle Management 115 28 143 - 90 30 - 27 5

Junior Management 374 157 531 14 329 35 13 133 13

Staff 651 172 822 317 237 83 108 52 7

Grand Total 1,195 369 1,564 331 678 185 121 215 34

TABLE OF EMPLOYEES PROFILE

During the year 2012 we have conducted 21,886 training mandays for workers with a total cost of

IDR23,955,161,083,-


In order to assess the level of performance of each

employee and to establish a career path, we have

developed the Individual Performance Management

System (SMKI). This system was first implemented in

2012 to develop synergies between the capacities

and performance of employees as a means of

developing our business capabilities.

In the implementation of this system, the targets

of each employee are set with reference to the

Company’s Strategic Business Priorities. The

Company’s targets are integrally related to the

individual targets of each member of the Board of

Directors, and to each particular level of staff. This

reflects the integration of endeavors to achieve

the Corporate vision and mission in terms of the

capacities of individual members of staff.

The SMKI is supported by web-based applications

that are used by a portion of our staff to record

information related to the management of their

performance. Merely by connecting to the Internet,

from any location and at any point in time, an

individual member of staff can conduct all matters

related to the management of their productivity

throughout the year.

At the end of the period covered by this report,

we conducted an evaluation of individual levels of

achievement and classed these in terms of five basic

ratings, as follows: Outstanding, Exceed Expectation,

Meet Expectation, Reasonable and Unsatisfactory.

All of these rankings are based on quantitative and

qualitative data expressed through Key Performance

Indicators (KPI). The rating system is used to guide

adjustments to salary packages and the career

paths of individual employees. Matters related to

promotion, change of position and rotation are also

based on the findings of the assessments conducted

on a biannual basis.

By the end of 2012, all employees (100%) have

received KPI for the 2011 assessment period.

In addition to being based on an evaluation of

performance, decisions related to promotion are

based on three primary considerations, these being

the needs of the Company, an assessment of the

level of performance of the employee, and his or her

level of work experience. In no cases are such matters

influenced by considerations related to gender, age,

ethnic background, religion, race, group affiliation

or any other consideration that may be considered

discriminatory.

Career Management (LA12)

Improving the Well-Being of Employees Career Management83


Improving the Well-Being of Employees Career Management84


In order to ensure ongoing access to high-quality

human resources, we have implemented a program

to develop competencies of employees in a planned,

systematic and focused fashion that meets the

business needs of the Company. One of the primary

programs through which this has been achieved is

the Education and Training Program (Diklat), which

has been designed to maintain and improve the

quality of our human resources.

In order to ensure that the implementation of this

program is conducted systematically and in a focused

fashion to meet the Company’s needs for professional

competencies, we have developed a system,

syllabus and modules, together with comprehensive

guidelines for the program in specific areas, including

technical, operational and commercial areas, which

are integrally related with the Company’s ability to

increase its revenue, distribute gas reliably and ensure

the satisfaction of PGN’s external clients.

In 2012, these aspects of the training program were

based on the distinctive competencies required

by PGN. Following this model, it is hoped that the

training program will fulfill the needs of the Company

for competencies in a number of areas.

In 2012, we provided 21,886 days of training for our

employees at a total cost of IDR23,955,161,083.

In addition to training intended to develop the

competencies and professional skills of our

employees, we also conduct specific training for

employees reaching their retirement age. This training

involves the provision of equipment to prepare these

employees for their retirement period and to enable

them to engage in productive activities to meet their

basic needs. The preretirement training program is

available for employees who are within three years of

reaching their retirement age. (LA11)

Pension and Insurance Programs

Pension and Insurance Programs

In order to ensure the welfare of all employees,

since 2009, the Company has required employees to

participate in a fixed contribution pension scheme,

which will provide a pension to guarantee their

welfare in their retirement. With the participation of

employees in this fixed contribution pension scheme,

all employees have the right to choose to participate

in a range of pension funds with different investment

portfolios, in accordance with their personal wishes.

In order to guarantee the welfare of employees,

PGN also involves all employees in the government’s

social insurance scheme, Jamsostek. In addition

to complying with government regulations, the

Company also provides hospital benefits and

medical benefits for all employees and members of

their family. In addition, PGN enrolls its employees

in a personal accident insurance program which

provides coverage in cases of workplace accidents for

hospitalization and funeral benefits. (LA3)

Training and Competency Development (LA10)

Improving the Well-Being of Employees Training and Competency Development85


10 Increased Customer Satisfication



Increased Customer Satisfaction

Increased Customer Satisfication Increased Customer Satisfication88

One of PGN’s Corporate values states that the Company and all levels of staff and management must be committed to “Placing

top priority on the satisfaction of clients, including both internal

and external clients, through the provision of excellent service”.


The Company’s clients and consumers are a

vitally important stakeholder group, ensuring the

sustainability of the Company’s business activities

through the purchase of services and their payment

for these services. Clients have the right to expect

that PGN will provide them with the products and

services they require in a timely fashion and in the

quantities and of the quality they require.

To meet its obligations to its clients and to fulfil their

expectations, PGN has implemented a number of

programs to ensure the achievement of full client

satisfaction. These programs are described in the

following sections:

Information regarding Products (PR3)

PGN derives its revenues from margins on the

distribution of natural gas to end users and from

toll fees from the transmission of natural gas from

its producers to its end users through the pipeline

transmission network under the Company’s

management. In order to ensure that the quality

of gas provided meets the standards established

through the sales contract entered into with end

users, PGN conducts a number of procedures to

test standards.

PGN distributes natural gas through a pipe

distribution network which is clearly marked with

marker posts along the length of the network as a

control and security measure. The pressure levels of

the natural gas in the pipes is controlled according to

contracts that emphasise safety aspects.

The chemical composition of the natural gas is

examined periodically in order to ensure compliance

with current regulations and to determine that

Increased Customer Satisfication Information Regarding Products89


it meets the parameters established in contracts

with end users. The results of the examinations to

determine the chemical composition of the natural

gas, from its point of production to its delivery to the

client, as well as periodic examinations of pressure

levels, are attached to the manifest presented to the

client. The goal of this measure is to ensure that all

information related to the supply of the natural gas

received by the end-user is clear and

delivered accountably.

Product Quality and Compliance with

Regulations and Standards (PR1, PR4)

In order to ensure the quality of the product passing

through the Company’s transmission networks

and other distribution networks, PGN adheres to

ISO 9001:2008 Quality Management Standards.

According to these standards, before entering into

a contract with a supplier of gas, PGN conducts an

inspection of reserves of gas, of the equipment used

to produce the gas, and of the quality of gas coming

from the supplier.

Gas samples are examined at a number of points,

at the intake point and a number of random points

along the transmission pipes. Examinations of these

samples are conducted by competent independent

inspection agencies. These examinations are also

intended to determine available quantities of gas.

Reports related to these quality gas examination are

attached to gas sales contract to end users in order

to enable consumers to accurately determine the

quality of the gas that they use. After entering into

a contract with its suppliers, PGN conducts ongoing

examinations to determine the quality and quantity

of gas provided by these suppliers, with its findings

Increased Customer Satisfication Product Quality and Compliance with Regulations and Standards

90


made available for end users as soon as possible,

particularly in cases where the findings indicate that

supply to end users may be disrupted.

In order to ensure the quality of gas to its clients,

amongst other measures, PGN may mix gas provided

by a number of different suppliers. This has the

potential to alter the quality of gas supplied. In order

to ensure that the quality of gas supplied and the

pressure of gas transmitted through the distribution

network is maintained, PGN has implemented a

system of filters and scrubbers in offtake stations

and filters in clients’ meters. Through means such as

these, complaints and claims related to the quality of

gas distributed through PGN’s pipeline transmission

network or other distribution networks can be kept

to a minimum.

In 2012, no cases of transgressions against relevant

regulations and standards covering the transmission

and distribution of gas were recorded. In addition,

there were no recorded complaints or claims by

clients related to the quality of gas transmitted

through PGN’s pipeline network system or distributed

through other means. (SO8, PR2, PR7)

Customer Service (PR9)

As a manifestation of its commitment to improving

customer service and to implementing the Corporate

values explicated in PGN ProCise, the Company has

established a customer complaints and information

center known as the Gas Contact Center, which can

be reached by phone on 0800 1 500 645 (toll free)

or 021 633 3000, or by email at [email protected].

The Gas Contact Center deals with inquiries and

complaints from customers and the public alike, and

operates 24 hours a day, 7 days a week. The Contact

Center is a centralized unit in the Head Office and

is integrated with the Company’s three Strategic

Business Units in Jakarta, Surabaya, and Medan.

Any general inquiries about PGN are dealt with

directly by a Contact Center Agent, while complaints

are forwarded to the person or department

authorized to handle them, and are dealt with within

no more than 24 hours of receipt. All complaints

and inquiries are recorded in the Contact Center

database. In order to facilitate customer service, in

2012 PGN settled a number of customer complaints

that were received verbally or in writing. There were

no recorded cases of violations of the stipulations of

contracts regarding products or services provided by

the Company.

Customer Gatherings (PR2, EN26)

PGN implements a Customer Gathering program.

The goal of this program is to make customer service

more proactive and to foster better relationships

between the Company and its clients, who are a

strategically important stakeholder group.

The nature of the customer-gathering program

conducted in 2012 varied for each of the different

SBU. However, all of these activities were conducted

with the same basic goal, which was to narrow

the gap between customers’ expectations and the

Company’s capacity to provide such services.

Another goal of customer gatherings is to promote

the use of natural gas and of the pipeline distribution

network operated by the Company. Activities

conducted by PGN to promote its products include,

amongst activities, sponsorship of events to

socialize the use of environmentally friendly energy,

participation in trade shows for the same puIDRose,

gatherings for existing and potential customers,

exhibitions for the public and for representatives

of local governments, and family events involving

clients.

Increased Customer Satisfication Customer Service91


All these activities are intended to improve the public

standing of the Company and to foster customer

loyalty. Through various events of this kind, the

Company gathers mutually beneficial feedback and

input regarding its ability to meet the needs of its

customers and their expectations. In addition, these

events provide the Company with the opportunity

to generate a greater awareness and to provide

explanations related to the safe use of gas as a fuel,

including explanations related to the security of the

pipeline gas network located in both industrial and

residential zones. In addition to formal gatherings,

the Company facilitates routine visits to potential

clients to foster a mutually beneficial awareness

of issues related to the safe installation and use of

gas. In addition, the Company facilitates visits to

existing clients to check meters and installed pipes,

to conduct routine maintenance, and to follow up on

complaints made by these clients.

These activities are conducted in order to minimize

any possible negative effects resulting from the

distribution of gas on the environment and in order

to ensure full compliance with safety regulations.

Measuring Customer Satisfaction (PR5, PR8)

One means through which PGN strives to improve

its levels of customer service is through measuring

customer satisfaction. The results of customer service

satisfaction surveys are used as a reference for

updating Service Excellence Standards.

In 2012, PGN again conducted internal customer

satisfaction surveys in each sales and service area.

The results of these surveys were formulated into a

number of matrices, including Customer Satisfaction

Index (CSI) and Customer Importance Index (CII)

Through these surveys, a number of issues and

expectations that have emerged during the period of

this report were uncovered. The findings will provide

input for the Company to improve its customer

service and its overall performance.

In 2012, the customer satisfaction survey emphasized

on the performance of Account Executives and online

payments for residential customers. The following

scores were derived from the surveys:

CSI 85,33% and CII 88,5%.

PGN consistently strives to update its Service

Excellence Standards in order that these standards

continue to meet the expectations of clients and

facilitate the provision of excellent service.

PGN has continued to work in cooperation with an

independent service provider to improve its level of

service. The puIDRose of the cooperation is to map

client expectations against the Company’s current

management policies and practices. Based on this

mapping, the Company has published a Service

Excellence Pocket Book, which has been socialized

throughout its operations.

PGN has also realized a significant investments in

a upstream due to frequent complaints by clients.

These client complaints relate to inadequate gas

pressure in the parts distribution network in areas

close to the end user’s outlets, because from

inadequate supplies by producers.

Thus, in the future, when supplies of gas from

producers are inadequate, PGN will be able to

compensate for this deficiency with the supply of gas

from its own sources or from FSRU (Floating Storage

Regasification Unit) facilities, CNG (Compressed

Natural Gas) facilities or from the LNG Receiving

Terminal that is currently being developed in areas

located in proximity to the Company’s primary clients,

Increased Customer Satisfication Measuring Customer Satisfication92


Increased Customer Satisfication Measuring Customer Satisfication93

these being areas of industrial and commercial

operations. The measures described above are a

manifestation of the Company’s commitment to

customer satisfaction, which requires management

and staff at all levels to prepare themselves to meet

both the business challenges and the competitive

challenges in the future.

Photo by: Mas Agung Hamzari, Marketing Division


Prioritizing Occupational, Safety and Health (OSH)11



Prioritizing Occupational, Safety and Health (OSH)

Prioritizing OSH Prioritizing OSH96

“Always give priority to occupational health and safety,

both for themselves and the environment surrounding “

Photo by: Achmad Ismawan, KSU Division


For PGN, implementing best practices in occupational, safety, and health (OSH) is one of the primary

importance in the strategic planning for the development of the Company. The commitment of management

and all employees of PGN to implement best practices in this area is also reflected in the Company’s Cultural

Values. One of these values is emphasizing the importance of “continuously prioritizing occupational, safety,

and health, both with regards to oneself and to the surroundings.”

To emphasize the Company’s commitment of occupational, safety, and health for its workers, PGN has

formulated a number of regulations through the Collective Work Agreement (CWA), which has been signed

by the PGN Employees Trade Union and management. (LA9)

The main considerations underlying our commitment to this issue due to the characteristics of natural gas

which is distributed through distribution and transmission pipeline network. One of the characteristics of

natural gas is highly inflammable. Thus, OSH must be a top priority in the implementation of all operational

activities.

The high priority placed by the Company on OSH issues is also in accord with the spirit of Article 86 (2) of Law

Number 13, 2003 regarding Labor, which states that “To protect the safety of employees or laborers in order

to ensure optimal productivity, measures shall be taken to ensure occupational, safety, and health”.

OSH Organization and Policies

In accordance with our commitment to occupational, safety, and health, since 2009, PGN has formulated and

implemented a comprehensive OSH program. This program, which is called the Safety Excellence Journey, is

subject to ongoing evaluation at each stage of its implementation. The OSH program has been formulated and

explicated in a specific document, the OSH Culture Roadmap.

To realize the culture that prioritizes safety, the Board of Directors has formulated the PGN Vision to aachieve

Safety Excellence, which are consists of the fundamental principles as follows:

1. Zero incidents

2. Inherently Safe and Environmental Friendly Performance in all activities

In 2012, PGN has formulated a new vision and policies as part of its Occupational, Safety, Health and

Environmental Management Program (K3PL). PGN is not only committed to ensure high levels of occupational,

safety, health and environmental management, but also actively strives to optimize the use of natural gas as

an energy sources, which are more environmentally friendly than coal. With this renewal, policies and the

organizational structure for the management of OSH have been adjusted.

Now, PGN’s OSH policies have been comprehensively defined as stated in the Decision of the Board of

Directors as follows:

Prioritizing OSH OSH Organization and Policies97



POLICY SAFETY, HEALTH AND ENVIRONMENTAL AND ENERGY (OSH)

State Gas Company (Limited) Tbk. Energy is a company that has a vision of zero incident in the areas of safety, health, environment and energy. In the implementation, the Company has a target to zero in: death, disease and environmental pollution caused by the management of the company’s business. For that company establishes the following policy:

1. Implementing a Safety Management System, Occupational Health, Environmental Management and Energy (SMK3PL-E) and comply with provisions of Law and other applicable requirements.

2. Perform proactive and preventive actions in order to achieve a safe working environment, hygienic, no environmental contamination and efficient in energy utilization.

3. Energy conservation efforts to achieve efficiency and optimization energy utilization.

4. Implement coaching to each worker through education and training activities K3PL-E on an ongoing basis and develop provision rewards and sanctions.

5. Conduct investigations on any incidents, accidents at work and occupational diseases as well as environmental pollution and ensure follow-up the findings as a precaution.

6. Evaluating the performance of system-E K3PL regularly for improvement sustainable.

Jakarta, 31 October 2012

Hendi Prio SantosoPresident Director


With the promulgation of this new policy, the Occupational, Safety, Health and Environmental Management

Committee has been transformed to become the Occupational, Safety, Health, Environmental Management

and Energy Committee (K3PL-E). This committee has a dual structure, Central Safety Committee (CSC) and

Executive Central Safety Committee (ECSC).

Central Safety Committee (CSC) is operating for each directorate. CSC is the responsibility of a Director, whose

function is to formulate policies and to monitor the implementation of measures to ensure occupational,

safety, and environmental management throughout all areas of the Company’s operations.

Executive Central Safety Committee (ECSC), is under the direct management of the President Director, who

coordinates and monitors the implementation of the OSH policies formulated by the CSC, and the Company’s

overall OSH program. The ECSC was formerly established on 5 October 2012. (LA6)


ECSC STRUCTURAL GRAPHIC

President Director(Head of ECSC)

Head of ECSC Division (ECSC Secretary)

Corporate Secretary

Finance Director

Director of Concessions

Director of Human Resources and

General

Director of Technology and Development

Director of Investment Planning

and Risk Management


As part of its endeavors to facilitate the achievement of a higher level of awareness concerning OSH and to

formulate a working system involving operational procedures and working instructions related to OSH, both

the committees (CSC and ECSC) meet the Central Committee on a regular basis. These meetings are held

to comprehensively discuss, evaluate and renew operational procedures and working instructions with the

involvement of all members of K3PL-E from Head Office, all SBU, and all company projects.

These regular meetings are also conducted with the involvement of representatives from all sections, including

employee representatives, to foster a high level of understanding and to improve the implementation of the

Company’s OSH program. This is an integral part of the program to internalize OSH culture amongst all levels

of staff and to ensure that they maintain a high level of commitment to conduct their duties in accordance

with OSH principles.

In 2009, PGN has formulated and implemented a roadmap to internalize OSH culture. The roadmap is

described in the diagram below:

Roadmap and Internalization of OSH Culture

Prioritizing OSH Roadmap and Internalization of OSH Culture100

Foundation and Systems Building

Skills and Countinuous Improvement

Achieving and Sustaining Safety Excellence

Safety Behaviour Improvement & Reinforcement Program

Process Safety Improvement and Reinforcement Program

Safety Behav-iour Improve-ment & Reinforce-ment Program

Safety Behaviour Improvement

Process Safety Improvement

Safety Behaviour Reinforcement Program

Process Safety Reinforcement Program

Process Safety Improvement

Safety Behaviour Improvement

Driving all employee throughout PGN strive to improve safety all the time

Integrating all safety program across organiza-tion within safety strategic committee

Jour

ney

Imp

lem

enta

tion

Sta

ges

Reactive Dependent Independent Interdependent

2009 2011 2013 2014

SB

U I

SB

U II

, III

& S

BU

Tra

ns

CULTURAL ROADMAP CHART OSH

The

Rest

of

Org

aniz

atio

n


The implementation of programs outlined in the OSH roadmap is driven by the shared awareness of all levels

of staff at PGN regarding the recognition of safety and health risks. Divergence of perceptions concerning

these risks create the conditions in which serious accidents may occur. If perceptions regarding these risks are

shared by all employees, the risk of frequent accidents is significantly reduced. This can be demonstrated by

the following diagram:

To foster a shared deception regarding these risks, all employees of PGN should understand the ‘risk pyramid’

defined by the following diagram:

Prioritizing OSH Roadmap and Internalization of OSH Culture101

Accident

Leading Indicator

Lagging Indicator

AccIncident

gBe

emec

BASIC APPROACH TO SAFETYTo Reduce The Variation in Perceptions of Risk

Throughout the Organization

serious accidents

safety sustainability to be achieved tominimize the risk:

- Risk Containment Audit- Observation- Training- implementation of the PO and IK consistent- reward and punishment- continuous internalization

times

uncertainty in the application of safety with the high variation in perceptions of safety risk

Perc

epti

on

of

Ris

k

RISK PYRAMIDS

Fatal Incidents

Majors Incidents

MinorIncidents

First Aid Near-Miss

96% Unsafe Action, 4% Unsafe Condition

Minimize risk


The Company has conducted a number of activities

intended to socialize a deeper understanding of OSH

related risks in 2012. The puIDRose of these activities

was to accelerate the institutionalization of safety

excellence among all employees in accordance with

the formulated roadmap. These activities included the

following:

• Management Visits

Senior management visits to strategic business units

have been conducted to motivate and intensify the

implementation of OSH regulations and policies.

Through direct interactions between senior managers

and staff at lower levels, hopefully senior managers

will gather feedback and gain a better understanding

of the position of junior members of staff in matters

related to the implementation of OSH.

• Safety management evaluation audit and

diagnostic assessment (SMK3 and OHSAS

18001:2007)

This activity was conducted by independent third

parties who assessed the implementation of OSH

and endeavors to entrench best practices throughout

PGN’s operations. The specific goals of the activity

were as follows:

• To facilitate the formulation of safety goals

and objectives;

• To identify strengths and concerns, or areas

that need to be improved by the organization or

by individual SBU;

• To identify good practices for sharing among

other elements of the organization or other SBU.

Quick wins (easy to implement practices) and

recommendations for long-term improvements as

an action plan on the basis of the assessment of

OSH practices.

Intensified OSH Socialization in 2012

Prioritizing OSH Intensified OSH Socialization in 2012102


The results of the audit conducted of a number of working units show that the Safety Excellence Journey can

build PGN’s culture and the transformation from a reactive culture become a dependent culture. However, in a

number of areas, the audit found that responses were still reactive, as shown in the following diagram:

PGN also implemented a Diagnostic Assessment, which was conducted by the National Certification Agency.

This was conducted in order to determine variations in the implementation of OSH in PGN, in order to

eliminate these variations and achieved the SMK3 certification target and OHSAS 18001:2007 in 2013.

• OSH Campaigns

Safety campaigns are conducted on a routine, ongoing basis in order to raise the level of awareness of

all member staff. It is expected that these campaigns will reduce risks related to OSH. These campaigns

take a number of forms, including seminars and informational campaigns involving posters, banners and

other media.


Natural instincts

Supervision

Self

Teams

Toward Safety Excellence

Inju

ry R

ates

• Safety by natural istinct• Compliance is the goal• Delegated to Safety Manager• Lack of management involvement

• Management commitment Training• Rute/Procedurs Supervisor control, emphasis, and goals• Condition of employment• Fear/discipline Expectations• Value all people

• Personal knowledge commitment and standards• Internalization Personal value• Care for self Practice, habits• Increased communication• Individual recognition

• Help other conform• Other’s keeper• Networking contributor• Care for others• Organizational pride• Open communication

Reactive Dependent Independent Interdependent



No Name of Training Numbers of Attendance Numbers of Session

1 Safety Management for Manager & Observasi 185 12

2 Risk Containment Audit 184 13

3 Contractor Safety Management 17 1

4 Incident Investigation 22 1

5 Process Safety Management 21 1

6 Process Hazard Analysis 13 1

7 Office Safety 18 1

8 Manual Audit OSH 16 1

9 Internal Audit OSH ( Certification ) 24 1

10 Health Risk Assessment 25 1

11 Basic Fire and Safety Training 81 3

RECAPITULATION OF SAFETY TRAINING IN 2012

Besides conducted at the central Corporate level, training was also provided through individual units and

individual projects.

• OSH Training (LA10)

The Company has facilitated the provision of training intended to raise the competencies of employees

regarding procedures, risks and knowledge audits related to OSH. It is hoped that these activities will support

and accelerate the achievement of established targets in this area. Details of the OSH training provided in

2012 can be seen from the following table:



• K3PL Workshops

These workshops were held throughout 2012 to evaluate the level of achievement of each operational unit

and project towards the achievement of targets set for 2013. Through these workshops, it was expected to

achieve the following targets:

1. The 100% achievement of targets defined in the safety metric;

2. The achievement of OHSAS 18001, SMK3 and PROPER Biru certification in 2013;

3. Improvements level of efficiency in the use of electricity, fossil fuels, gas, water, and paper, with the target

set of a 10% increase in cost efficiency in these areas by 2013.


Prioritizing OSH Activities within SBU and Projects106

SBU I SBU II SBU III SBU TSJ Project

Safety Journey Safety ProcessManagement Stage 2 (advance)

Safety Journey (PSM I)

Safety Journey Safety Journey Safety Journey Project

Procedure - Socialitation of PO & IK OSH- Protocol arrangement and Coaching MIQA

Socialitation PO & IK OSH




Health Occupational Health and IndustrialHygiene

- HO SBU Office Clinic- Medical Check Up- Catering for workers Offtake Station

Occupational Health and IndustrialHygiene

Monitoring & Socialization field of Occupational Health

- Health Talk - Giving Hepatitis Vaccine- Medical Check Up - Site Health Review

Training Training & coaching for all workers

- Safety Management- RCA & Observasi - Incident Investigation- R & P- EIDR- CSM- PSM (PHA, PSSR, MOC)- AECT & Office Safety- Fire Fighting- First Aid- Difensive Driving Exercise- Safety Training PGAS Solution Outsourching, OB, & Driver- Safety

- First Aid- Defensive Driving Course- Refresment RCA & Observasi

- TOT Observasi & RCA- HUET & SEA SURVIVAL- FIRST AID TRAINING (Sertifikasi Kemenake trans RI)

- Safety Inspektor Migas- OSH Gas Experts- First Aid- Sea Survival - RCA and Observation

Exercise & Ceremony

- Table Top & MERE- SHE Day (Safety @ Home)

- EIDR Drill Sidoarjo Office - EIDR Drill Hosbu Office- MERE MR/S Ngagel and Ngagel Office- SHE Day (Safety @ Home)

- MERE- SHE Day (Safety@ Home)

- Table Top & MERE- SHE Day (Safety @Home)

Table Top & MERE

Activities within SBU and Projects

In addition to the activities and programs initiated and implemented at the initiative of Head Office, 4 SBU

and Project Unit, the Company is also carrying out various activities with the aim of improving the quality of

implementation of OSH.


SBU I SBU II SBU III SBU TSJ Project

Determination of Membership

Formation of Committee ofOccupational Health and Safety(P2K3)

Establishment and Validation CSC P2K3 By Manpower Surabaya

Formation of Committee ofOccupational Health and Safety(P2K3)

Award - OSH and Zero Accident Award from Labor Agency Jakarta- Appreciation of Zero Accident of Ministry of Labor

Zero Accident Award from Labor Agency Surabaya, November 2012

Awarded granted for 4,451,616 Hours with Zero AccidentIn 2011 fromManpowerprovinceNorth Sumatra.

Prioritizing OSH Activities within SBU and Projects107


Prioritizing OSH OSH Performance in 2012108

As a result of the high commitment of senior management and the efforts of all member staff to socialize

an increasing awareness of OSH risks, there were significant improvements in a number of indicators related

to OSH in 2012. In 2012, there were no reported incidences of workplace accidents resulting in lost working

time. This is a significant improvement over the situation in 2011.

2012 Safety Metric

The safety metric contains indicators for Head Office and for each SBU in terms of their management

and implementation of OSH. Through this metric, PGN has monitored, evaluated and identified areas for

improvement in the achievement of OSH goals on a monthly basis:

OSH Performance in 2012 (LA7)

Item Head Office SBU Distribution I

SBUDistribution

II

SBUDistribu-

tion III

SBU TSJ Project Information Target

Fatality 0 0 0 0 0 0 0

LTIF 0 0 0 0 0 0 0

Minor accidents 0 3 0 0 0 0 3

First Aid 2 3 8 0 18 4

Near Missed 13 13 14 3 15 0

Vehicle Accident 29 10 5 8 8 1

TSAF 0,97 0,27 0,29 0,42 0,23 0,09 < 0,45

Safe working hours (Hours)

3,618,039 10,067,099 6,266,626 5,724,407 5,440,574 2,523,910 cumulative to Dec’12

Risk containment Audit

% Partisipation 100% 100% 100% 100% 100% 100% Division K3PL perform in the RCA headquarters

100%

% Severity 4/5 - 8.81% 0,00% 1,70% 0,96% 3%

% Fixed Severity 4/5

- 100% 100% 88.89% 100% 0% 100%

Observation

% Partisipation 100% 100% 100% 100% 100% 100% Division K3PL observed in the central office

100%


Safe Working Hours

Amongst all units and projects, there were no incidences of working time lost as a result of injury in 2012. This

achievement represents the results of extraordinary efforts and cooperation by and between all member staff.

The level of achievement can be seen from the following diagram:

Prioritizing OSH Safe Working Hours109

SBU Distribution I

10.000.000

6.000.000

2.000.000

0

10.067.009

4.000.000

8.000.000

SBU Distribution II

SBU Distribution III

SBU TSJ

6.266.626

5.724.4075.440.574

3.618.039

Head Office Project

2.523.910

SAFE WORKING HOURS 2012

(in hours)

SBU Distribution I

8.000.000

7.000.000

5.000.000

3.000.000

2.000.000

0

6.768.643

4.000.000

6.000.000

SBU Distribution II


SBU TSJ

4.612.734 4.352.499 4.107.097

2.281.601

Head Office Project

182.722

SAFE WORKING HOURS 2011

(in hours)


Safe Driving Distance

In 2012, no accidents involving operational vehicles occurred at either Head Office or any of SBU. Thus, the

aggregate total of safe driving hours in 2012 can be seen from the following diagram:

Prioritizing OSH Safe Driving Distance110

SAFE DRIVING DISTANCE 2012

SBU Distribution I

5.000.000

3.000.000

1.000.000

0

6.230.808

2.000.000

4.000.000

SBU Distribution II


SBU TSJ

2.890.922

11.209.281

5.989.324

Head Office Project

3.192.140

6.000.000

11.000.000

4.645.232

(in Km)

SAFE DRIVING DISTANCE 2011

SBU Distribution I

5.000.000

3.000.000

1.000.000

0

2.656.215

2.000.000

4.000.000

SBU Distribution II


SBU TSJ

1.395.858

5.701.437

4.497.833

Head Office Project

643.143

6.000.000

2.459.317

(in Km)


Total Sickness Absence Frequency (TSAF)

This parameter is used to measure the level of workplace health and the total time lost due to employees’

illnesses. PGN has a vested interest in improving workplace health in order to reduce the time lost to sickness

and to increase the overall productivity of employees. The compiled data shows that the total working time

lost as a result of employee sickness was still within the established target of 0.45. In 2012, the total time lost

due to sickness in the Company’s Head Office was significantly lower than in 2011, although still above the

targeted number. The compiled TSAF for 2011 and 2012 can be seen from the following diagrams:

Prioritizing OSH TSAF111

SBU Distribution I

1

0,6

0,2

0

0,52

0,4

0,8

SBU Distribution II


SBU TSJ Head Office Project

1,2

0,5 0,5 0,5 0,5 0,5

0,43

0,20,18

1,23

0,17

0,52

TSAF 2011

Target 2011

TSAF 2011

SBU Distribution I

1

0,6

0,2

0

0,4

0,8

SBU Distribution II


SBU TSJ Head Office Project

1,2

0,45

0,42

0,23

0,97

0,09

0,45 0,45 0,45 0,45 0,45

0,270,29

TSAF 2012

Target 2012

TSAF 2012


Prioritizing OSH Health Information Programs112

PGN has established and implemented a number of programs to improve the level of occupational health

within its operations. These programs are a manifestation of the Company’s commitment for ensuring

occupational health and the health of its employees. By ensuring occupational health and health in the

workplace, the productivity of PGN’s employees will improve and the volume of working hours lost due to

ill health will be reduced. One measuring which is implemented by PGN to achieve it is create a program to

raise awareness related to coronary illness, cholesterol levels, and similar matters. These program such as

conducting training and informational campaigns to raise awareness of preventative measures that can be

implemented by individual employees and members of the community.

In order to raise the level of awareness of the employees related to health risks and their impact on the

Company’s operations, PGN has also formulated a number of programs through the Occupational Health

Roadmap, as presented in the following diagram:

Health Information Programs (LA8)

HEALTH CHART ROADMAP

Occupational Health Setting Program

Sertifi kasi SMK3 & OHSAS

Hazard Identifi cation & Risk Asessment (Health)

Meningkatnya status kesehatan pekerja, medical

cost reduction,

penurunan absenteeism, data base kesehatan update

2012 2013 2014

Awarness

Job related medical exam

Pelatihan, sanitasi & higienis,

ergonomik, MERP, health

surveillance, mobil serba guna,hearing conservation program,respiratory protection program


Prioritizing OSH OSH Awards and Recognition in 2012113

For its achievements in the area of OSH, PGN has received numerous awards and other tokens of recognition

by independent third parties. These awards and tokens of recognition have been granted for its successful

implementation of measures to ensure a zero accident workplace and for other achievements related to

occupational health. The awards included the following:

Agency for Labor and Transmigration,

North Sumatra, granted in May 2012.

(SBU III)

Award for OSH

Compliance granted by

the Jakarta provincial

government in March

2012. (SBU I)

Award for 5,869,687 accident free hours

until 31 October 2012 by the Agency of

Labor, Surabaya, granted in November

2012. (SBU II)

Award for 6,839,951

accident free hours granted

by the Jakarta provincial

government in March

2012. (SBU I)

OSH Awards and Recognition in 2012


Community Members Life’s12



Improving the Quality of Life of Community

Community Member’s Life Improving Community Member’s Life Quality116

PGN is fully committed to the efforts for improving the quality

of community life and it is materialized through various

programs in the social community field which is commonly

referred to as “Corporate Social Responsibility” (CSR).


PGN is fully committed to the efforts for improving the quality of life of community, particularly the community

who live around the operational areas. The commitment is materialized through the implementation of

various programs in the social community field in the form of what commonly referred to as “Corporate Social

Responsibility” (CSR), consisting of the Environment Development (Bina Lingkungan/BL) and the Social and

Environmental Responsibility (Tanggung Jawab Sosial dan Lingkungan/TJSL) programs.

PGN has been implementing CSR programs in order to materialize the Company’s mission of “developing

with the community”, through balanced and harmonious development of the economic (profit), community

(people) and environmental (planet) performance. PGN has designed the implementation of CSR programs so

as to reach various aspects of the stakeholders’ main interests, so that they are able to provide various benefits

in line with the company’s development. The various benefits of the CSR programs implemented by PGN

among other things are as follows: (SO1)

• Providing positive contributions for the empowerment of the surrounding community and environment,

particularly in PGN’s operational areas.

• Improving the public’s understanding of PGN through information in social community activities.

• Supporting the uninterrupted implementation of PGN’s operations with the support from the Units/Areas

Rayon in assisting the implementation of CSR programs.

• Developing the community’s empathy for PGN.

• Creating the PGN’s positive image in the public eye.

• Increasing the company’s value through the establishment of reputation.

In the implementation process of its CSR programs,

PGN adheres to the 5 Principal of Commitments that

have been formulated through the “PGN Share”

statement, as follows:

Contributing to community WELFARE improvements;

Creating HARMONIOUS relationships with

stakeholders;

The program contribution meant for CHARITY;

RESPONSIVE to the community needs;

EMPATHIC to the issues faced by the community.

Community Member’s Life Improving Community Member’s Life Quality117


The CSR activities implemented by PGN in 2012

include environmental conservation programs,

particularly those related to carbon (CO2) emission

mitigation initiative. Aid programs related to

education, health, worship facilities, development of

public facilities and infrastructure as well as natural

disaster relief have also been implemented.

Environmental Conservation

Through CSR Programs, PGN has implemented

several activities in 2012 aimed at environmental

conservation, the funds of which were in the amount

of IDR 9.49 billion. The activities implemented include

the following:

• Planting of Mangroves in the Forest Area of

Sedyatmo Toll Road, Muara Angke Kapuk,

Special Capital Region of Jakarta, Karawang,

Cirebon, Coast of Medan City, Surabaya,

Sidoarjo, Pasuruan and other cities, with a total

of approximately 41 thousand mangrove trees,

and fruit trees as well as other plants with a total

of 69 thousand trees.

The activities were implemented in cooperation

with local universities such as IPB, USU, UNBRAW

and ITS, and also the Mangrove House

Consortium (Konsorsium Rumah Mangrove).

• IPB’s Reforestation Program for the Villages

Surrounding the Campus (Program Penghijauan

Desa Lingkar Kampus IPB). In cooperation with

LPPM IPB, by engaging the communities around

the campus to increase the awareness of

protecting and preserving the nature as well as

biodiversity, through the cultivation of

Indonesian endemic fruit plants.

• Tree Planting Program in the Sentul Forest Area

of ECO-EDU Tourism Forest of approximately

460,000 trees. PT. Perusahaan Gas Negara

(Persero) Tbk. This program constitutes a

form of synergy cooperation between PGN and

Perum Perhutani in the context of replantation

and reforestation Program to accelerate the

effort of improving the quality and productivity

of forest and environmental resources, as a

buffer zone and an education and ecology-based

tourism area.

• The continuation of integrated waste

management, namely by processing waste

into compost, in accordance with the policy

of the Ministry of Environment. This program

has commenced since 2011 in 5 cities (Batam,

Palembang, Lampung, Bogor, and Surabaya)

which has been giving positive impact in general

on the stakeholders. For the community, this

program has opened job opportunities. For the

Environment, it has reduced the flow of waste

to the final disposal site (tempat pembuangan

akhir/TPA). For the State, it helps in achieving the

targeted national waste reduction of

7% annually.

The construction of Waste Disposal Site and

Reforestation Activity in Offtake Rawamaju, Bekasi.

The aforementioned various activities constitute

the actual manifestation of PGN’s contribution to

the efforts for preserving nature which will result in

positive impacts on the environment, dealing with

global warming and climate change. It is expected

that the activities will inspire the community and

particularly the employees to become more aware of

the importance of clean and sustainable environment.

Realization of Activities

Community Member’s Life Realization of Activities118


Education Sector

In the education sector, PGN has been contributing

to the increase in the reading interest, motivation and

nationalism of the children, through the publication

of the Comic Book, Archipelago Legend Series (Seri

Legenda Nusantara) of 33 titles (representing 33

provinces), in cooperation with Balai Pustaka. The

Comic Books were printed in a total of 3,000 copies

and distributed to schools, particularly those located

around the operational areas. This program has been

recorded as a world record by MURI as the Initiator

of Seri Legenda Nusantara Comic Books with the

Highest Number of Copies.

In addition to the above, PGN has also made

contributions to the education sector, namely:

• Sending Young Teachers to 25 Elementary

Schools in remote areas (among other things,

Musi Banyuasin, Muara Enim, Tulang Bawang

Barat and Gresik), as well as giving assistance to

the recruitment partner program, in cooperation

with Yayasan Indonesia Mengajar.

• Competence education for 110 teachers from

55 Early Childhood Education (PAUD) in PGN’s

operational areas in cooperation with Ancora

Foundation.

• Building several units of Community Library

(Taman Baca Masyarakat) in various areas, in

cooperation with WIKA and Balai Pustaka.

• Building and renovating schools as well as other

educational facilities around PGN’s operational

areas in cooperation with WIKA and PP.

• Granting scholarships to 1,050 university students

in 14 State Universities in Indonesia.

Granting educational funds assistance for

2,400 students of the Elementary Schools, Junior

High Schools, and Senior High Schools around

the operational areas

Health Sector (EC8)

During 2012, the activities which have been

implemented in the health sector assistance program

include the following:

• Improvement of health services for the

community, particularly those located around

the operational areas by using PGN’s health cars

(mobil sehat), in cooperation with Rumah

Zakat. In the period of 2012, Mobil Sehat PGN

have provided health services for 36,212

beneficiaries within PGN’s operational area.

The services are given in the forms of pregnancy

examination during pregnancy and the provision

of supplements for pregnant women,

contraceptives services, general health and basic

dental services, toddlers growth and

Community Member’s Life Education Sector119


Community Member’s Life Health Sector120

development examination and the provision of

supplementary food for children and toddlers.

• Provision of health services through the

establishment of Healthy House (Rumah

Sehat) in Sidoarjo. This program is targeted

on the people who need it, particularly in

Sidoarjo and the surrounding areas, in order

to ensure that they obtain health services

properly without any charges, and therefore, the

poor people can maintain and improve the

quality of their health physically, mentally, and

environmentally in order that they become more

productive economically and socially. The Rumah

Sehat was built with two floors in an area of

863 m2 complete with a Polyclinic, Blood

Laboratory, Doctor and Emergency Rooms,

Medical Record Room, Laundry Room, Praying

Room (Musholla), Toilet, Meeting Room,

Management Room, Waiting Room, Nurse

Room, Equipment Room, Physiotherapy Room,

and Inpatient Room. 30 medical and supporting

personnel, by empowering the local people, have

been prepared to provide services for

the community.

• The establishment of PGN Healthy Holiday

Travel Coordination Post (Posko Mudik Sehat

PGN), providing services for the community

during the 2012 Iebaran holiday travel. The

coordination post’s services include the

following: Health Services, health examination

by general practitioners and the provision of

medicines as well as first aid in traffic accidents

for minor injuries which can be conducted in the

coordination post, as well as the distribution

of health supplements; Provision of

entertainment facilities such as LCD television,

internet facilities and music, electronic games

and giving away door prizes, as well as free

massage service for the holiday travelers.

• Provision of other health facilities, such as the

donation of one ambulance unit for the

community in Tambak Village, Lekok District,

Pasuruan; the aid in the form of one ambulance

unit for the Indonesian Red Cross (PMI) of

Palembang; the aid for the construction of

Inpatient Community Health Centers (Puskesma

Rawat Inap) in Way Mili and Marga Tiga, as well

as the renovation of the community health

center in Sukadana, East Lampung.

Jakarta 7,441 people

Medan 7,659 people

Tangerang 6,181 people

Surabaya 5,001 people

Lampung 5,029 people

Palembang 4,901 people

Total 36,212 people


Public Infrastructure Program (EC8)

In the field of Public Infrastructure in 2012, PGN has

implemented the following activities:

• Donation of 2 units of genset (gas engine) for

supporting electricity generation in Pemping

Island in order to help fulfilling the need of

electricity of the community in Belakang Padang

District, Batam City.

• Provision of assistance for the fulfillment of the

need for electricity to the community in the form

of people’s independent electricity (listrik mandiri

rakyat/limar) program in Way Kanan and Pacitan

in the form of switch panel consisting of LED

light, terminal connector, low battery indicator,

power cable and accumulator, as well as training

and assistance.

• Donation of 3 Arm Roll Trucks in order to

support the sanitation facility in Bandar

Lampung city.

• Construction of community hall in Marga Tiga

District, East Lampung.

• Renovation of suspension bridge and road in

Pagardewa Village, South Sumatra.

• Construction and renovation of the village office

and hall, school, gate, mosque, as well as

Community Health Center in Sriminosari Village,

East Lampung.

• The delivery of installation for processing

sea water into clean water and drinking water

in Panggang Island of Kepulauan Seribu to the

local community, to be subsequently managed

by the community through the sub-district PKK.

Worship Facilities Program

This program is aiming at improving the

implementation of religious activities. In 2012, PGN

has granted aid for the renovation and construction

of worship facilities and other supporting facilities

as well as the aid for religious activities. In addition

to that, PGN has also given donations to oIDRhans,

mass wedding activity and other religious activities.

Natural Disaster Relief

In 2012, PGN provided assistance for natural

disaster victims, as a manifestation of PGN’s care

and empathy for those affected by natural disasters,

namely:

• Emergency response relief for flood in Banten

area (Tangerang and Cilegon) and the Special

Capital Region of Jakarta.

• Disaster relief for the flood and tornado in Garut,

West Java.

• Disaster relief for the flood and tornado in Garut,

West Java.

• Assistance in the form of 500 packages of nine

essential commodities (sembako) for the

landslide victims in Bali.

• Assistance for dealing with the drought in

East Java.

• Assistance in the form of 9 tons of rice for the

victims of fire in Karet Tengsin and

Bendungan Hilir, the Special Capital Region of

Jakarta. Aid in the form of coordination post and

public kitchen for earthquake victims in

Sukabumi, West Java.

Community Member’s Life Public Infrastructure Program121


Community Member’s Life Testimonials Governor of Lampung122

THE GOVERNOR OF LAMPUNG TESTIMONIAL

PGN as State-owned Company, which one of it’s business areas located in Lampung has proven it’s presence as a company that actively engaged in our region’s development.

The realizations manifested by PGN are increaasing the society welfare, reforming environment and improving the society’s life qualty in health, environment, education as well as facility and public infrasturcture sectors.

On behalf of the Governmnet of Lampung Province, we would like to thank you profusely to PGN in supporting the society welfare of Lampung.

Governor of Lampung,

Sjachroedin Z.P


Community Member’s Life Testimonials Anies Baswedan123

Since December 2011, PGN has been present to be the partner of ‘Indonesia Mengajar’. Support from PGN develops the confidence that social movement in Indonesia is able to stand out independently and move along with local companies. PGN presence as the first State-owned Company who beliefs with ‘Indonesia Mengajar’ approach also spreads the spirit to other business institutions to participate and drive the social and economy progress through education.

PGN’s contribution through the movement of ‘Indonesi Mengajar’ by presenting Young teacher to assist elementary schools and society in local area shows significant impact. A real contribution for the improvement of education in Indonesia. As matter of fact, every welfare and education of the nation written on the Constitution 1945 Preamble is a promise that must be paid to every citizen of Indonesia, even to the remote areas of the Country.

Anies Baswedan

ANIES BASWEDAN TESTIMONIAL


13 Increased Economic Value



Increased Economic Value

Increased Economic Value Increased Economic Value126

The sustained growth of the national economy has resulted in overall increases in market

demand. At the macroeconomic level, this has also resulted in

increases of supply to meet this increased demand. As a result, all industrial sectors are increasing

their volume of production, which in turn is increasing their need for

energy fuel sources.


Distribution of Economic Value

With the increase demand for fuel for energy, particularly natural gas, there is an urgent need to ensure

that there is no gap between supply and demand for this commodity (gas balance). PGN plays a vital role in

ensuring that gas supplies are sufficient to meet demand. These conditions result in increases in the volume

of gas that the Company sells, which in turn results in increased revenues and net profits for the Company.

Increases in the Company’s net profits will have significant benefits for the nation, with increased contributions

to state revenues through taxes and the payment of dividends, and to members of the community through

the Company’s Corporate Social Responsibility and Environmental Management Programs (PKBL). Thus, these

conditions will result in increases in the economic value generated for all stakeholders.

The following table contains an overview of the Company’s economic performance, including details of the

economic value generated for stakeholders, including business partners, employees, shareholders, creditors,

the government, and members of the community. The table also depicts the added value created by PGN for

the national economy through a synergistic snowball effect involving stakeholder groups:

Increased Economic Value Distribution of Economic Value127

DIRECT ECONOMIC VALUE GENERATED AND DISTRIBUTED (EC1)

(USD) 2012 2011

DIRECT ECONOMIC VALUE GENERATED

Revenues: 2,576,493,037 2,230,397,076

Interest Income 27,824,136 35,107,116

Gain (Loss) on foreign exchange 49,757,553 (26,249,402)

Other income 29,095,359 8,689,785

Total 2,683,170,085 2,247,944,576

ECONOMIC VALUE DISTRIBUTED

Operating Costs 1,448,115,834 1,213,513,320

Employee wages and benefits:

- Operation department 41,392,899 45,314,282

- Administration department 83,087,327 82,926,763

Total employee wages and benefits 124,480,226 128,241,045

Payment to providers of capital:

- Dividend payment 327,730,116 450,058,318

- Interest payment 21,576,672 27,709,566

Total payment to providers of capital: 349,306,788 477,767,884

Payment to government 220,537,637 246,339,311

Community investments 736,970 852,641

Total economic value distributed 2,143,177,455 2,066,714,201

Economic value retained 539,992,630 181,230,375


From table besides, it can be seen that the higher the total value of revenues received by PGN, the greater is

the economic value generated for stakeholder groups. Similarly, the higher the total value of profits generated

by PGN, the greater is the total value of funds available for community empowerment programs. Thus,

stakeholder groups have a vested interest in involvement in positive relationships with the management of

PGN as they benefit from the sustainable growth achieved by the Company.

Contributions to the State

Each year, PGN contributes the state revenues through its payment of tax and dividends, the value of which is

determined by shareholders at the AGSM.

The dividend payout ratio for dividends paid to shareholders ranges from approximately 50%-60% of the total

value of net profits in the current year. In 2012, the total value of dividends paid to the state amounted to

IDR1,709 billion, an increase from the figure of IDR2,142 billion paid out in 2011. In addition to the payment

of dividends, PGN also contributes to state revenues through its payment of taxes. In 2012, the total value of

taxes paid by PGN to the state amounted to IDR2,133 billion. In addition to dividends, PGN contribute to the

state through taxes and dues payment BPH Migas. Contribution to the state in the form of tax payments in

2012 amounted to USD2133 billion, while in 2011 amounted to IDR2,234 billion. Dues BPH Migas in 2012

amounted to IDR62 billion and in 2011 amounted to IDR32 billion. Thus, the total contribution to the state

PGN during the year 2012 amounted to USD3,903 billion, while in 2011 amounted to USD4,407 billion.

At this point, PGN does not receive direct financial assistance from the government. The only form of

assistance provided is in the form of tax relief for import duties for specific capital goods required to facilitate

the development of the Company’s business. (EC4)

Increased Economic Value Contributions to the State128

Dividend

Tax

OVERVIEW CONTRIBUTION TO THE STATE PGN (IDR BILLION)

2012 2011

0.00

500.00

1.000.00

1.500.00

2.000.00

2.500.00

1.708,87

2.233,802.132,60

2.141,92


Contributions to Regional Economic Growth

PGN’s activities also make a significant contribution

to the promotion of regional economic growth,

particularly through the availability of gas from the

pipeline gas distribution and transmission network

under the Company’s management.

The ready availability of natural gas in a particular

region may result in increased investor interest in

the establishment of new industrial zones in that

region. As a result, this will stimulate growth in a

number of sectors in that region, including through

the development of housing facilities, shopping

facilities, hotels, and other facilities that support

the development of the new economic zone. New

economic zones will have a significantly positive

effect on the economy of the region in which they

are located, providing employment opportunities,

facilitating the exploitation of natural resources as

inputs for industrial activities, increasing regional tax

revenues, and providing other benefits. All of these

activities will generate direct and indirect benefits for

the region in question. (EC9)

Relations with Business Partners (EC6)

PGN has established both long and short-term

relationships with suppliers of goods and services

in order to support its operational activities. The

supply of these goods and services involves PGN’s

business partners, who are required to fulfill their

roles efficiently, effectively, openly, competitively,

transparently, accountably, and in a timely,

non-discriminatory, responsible manner. PGN requires

its business partners to provide goods and services

of the appropriate quality, with high levels of service,

and in compliance with open, mutually beneficial

business ethics.

The procurement process implemented in

cooperation with business partners involves four

specific stages, as follows: Procurement Specification,

Procurement Method, Contract Agreement, and

Contract Management.

PGN also conducts regular periodic evaluations

in order to ensure the contractual quality of the

partnership it has entered into with these business

partners for the supply of goods and services.

One aspect of these relationships that is evaluated

includes the level of compliance of business partners

with the terms of contracts involving substantial

sums (to a value in excess of IDR 100 billion) and of

compliance with labor regulations and human rights.

In cases of contracts of a lower value, (less than IDR

500 million), in order to achieve a higher level of cost

efficiency, PGN prioritizes the selection of

local partners.

In 2012, PGN conducted a periodic evaluation

of all business partners included in its vendor

database. This evaluation was facilitated through the

Company’s e-procurement system.

In the period covered by this report, PGN entered into

a significant investment contract for the development

of a Floating Storage Regasification Unit/FSRU, which

is intended to facilitate the expansion of the Com-

pany’s business. All stipulations and requirements

related to procurement contracts of significant value,

such as compliance with human rights and other

issues, have been addressed through the contract

between the Company and its business partner.

Partnership Program

PGN implements its Partnership Program in order to

facilitate the growth of small to medium enterprises

and to enable them to achieve independence

and autonomy. This program is implemented as a

manifestation of the Company’s commitment to

distributing the economic value derived from the

Company’s net profits and to achieve compliance

Increased Economic Value Contributions to Regional Economic Growth129


with government regulation. This program is an

integral component of the Company’s Partnership

and Environmental Management Program (PKBL),

the goal of which is to facilitate economic growth

amongst the community, particularly amongst

communities in areas surrounding PGN’s operations,

in order to facilitate the achievement of autonomy.

This program is also in accordance with government

programs to reduce poverty and to fulfill its

commitment to the achievement of millennium

development goals (MDG’s), with one of these goals

mandating the global eradication of poverty.

PGN utilizes its Partnership Program Funds for the

followingpurposes:

• The provision of soft loans for business

development;

• The provision of grants to develop business skills

through the provision of training and education

and to facilitate participation in marketing

and promotion endeavors by small and

medium enterprises.

These funds are channeled through three main

means, as follows:

• Direct channeling implemented by PGN;

• Channeling in cooperation with other state

owned enterprises;

• Channeling in cooperation with other competent

third parties of proven integrity.

In the implementation of the Partnership Program in

2012, PGN established a number of small to medium

enterprise clusters to facilitate guidance, coordination

and communication with its community partners, and

to enable better monitoring of the program. These

clusters include the following:

• Animal husbandry cluster in Caringin, Bogor,

West Java;

• Weaving cluster in Garut, West Java. Through

this cluster, PGN’s Guided Weaving Village

was established in cooperation with the Cita

Tenun Indonesia organization as a means to

preserve handicraft traditions, to develop business

opportunities, and to increase the sales value

of output;

• Embroidery cluster in Bukittinggi, West

Sumatra, which was established to develop

business opportunities and to increase the sales

value of output.

In order to increase levels of production, and to

improve the quality of output and of technical,

administrative and marketing capacities, PGN has

provided specific guidance to its community partners,

including technical facilitation, financial management

training, English language training, marketing

training, as well as support for participation in local,

national and international trade fairs.

In addition, PGN has also implemented a number of

other programs to support the development of its

community partners, with these programs involving

the development of management and financial skills,

marketing and motivation, animal husbandry skills

for the breeding of cattle and goats, rice planting

techniques, cane growing techniques, and design

and coloring skills for weaving.

PGN has also conducted a number of activities

to facilitate the marketing of the outputs of its

community partners. These activities include support

for participation in the following trade events: Gelar

Karya PKBL BUMN, Inacraft, Indonesia Fashion &

Craft 2012, Indonesian Product Expo in Jordan, Trade

Expo Indonesia, Pameran Spring Cultural Event Tokyo

& Trade Tourism, New York Gift Show, a Fashion

Show as part of the United Nations ladies program in

New York, and a number of others.

Increased Economic Value Partnership Program130



In addition to the above, PGN has also actively

strived to ensure stability in the supply and price of

agricultural inputs through cooperation between

the Company’s Partnership Program and a number

of other state owned enterprises operating in the

field of food production and supply, including the

following:

• Support for the Corporate Based Increased Food

Productivity Movement Program (GP3K)

conducted in cooperation with PT Pertani

(Persero) and PT Sang Hyang Seri (Persero) to

improve rice production productivity;

• The provision of funds for cane farmers in East

Java to ensure the stability of production and the

stability of sugar prices through cooperation with

PTPN X (Persero) and PTPN XI (Persero);

• Increases in the national production of salt

through the provision of loans to salt producers,

in cooperation with PT Garam (Persero).

The total value of Partnership Program funds

channeled by PGN in 2012 was IDR 289.73 billion.

This is an increase of 53.89% over the value of funds

disbursed in 2011, when the total value stood at

IDR 188.27 billion. The level of effectiveness in the

disbursement of funds was 96.58%, compared to the

figure of 96% achieved in 2011.

In 2012, funds were disbursed to a total of 45,181

business partners, representing an increase of

39.79% over the figure of 32,321 business partners

in 2011. The nature of the businesses operated

by community partners varied, with major groups

including animal husbandry, farming, market

gardening and handicrafts.




PGN-Fostered Garut Weaving Village

Increased Economic Value PGN-Fostered Garut Weaving Village133


Initially, Garut was known as a center for the

manufacturing of sarongs, produced by Pabrik Tenun

Garut. As time went by, Garut’s woven sarongs could

not compete with batik sarongs from other regions

due to the changes in technology and fashion. The

inability to compete in the market had led to the

continuous decline in Garut’s weaving business, as a

result, weavers could only fulfill the demand for white

basic woven fabrics.

As a manifestation of the concern for the

empowerment of the community’s economy and the

nation’s cultural heritage, PGN has been cooperating

with Cita Tenun Indonesia (CTI), through the

partnership and environment development program

since December 2010 up to the present day, to

conduct community development by organizing

Training and Development Program for Garut

Weavers located in Panawuan Village.

With this training, the weavers can produce silk

woven fabrics a la Garut which is now famous for

its weaving technique, varied motif and texture. In

addition to improving the weaving quality through

the training program, PGN has also provided

assistance in the form of weaving equipment,

improvement of the workshop and construction of

a gallery for the weavers, renovation of a praying

room (musholla) and village gate. The development

and training have helped the weavers to continue

innovating in creating fashion products according to

the development of time.

With the various forms of assistance, Panawuan

Village has become a PGN-fostered Weaving Village.

Inaugurated by the Minister of Tourism and Creative

Economy, Mari Elka Pangestu, who designated it as a

Creative Zone on June 27, 2012.

In the marketing of its products, the trained

craftsmen have participated in various exhibitions,

aimed at introducing Garut’s unique woven fabrics,

both domestically, such as the ASEAN Fair 2011

in Bali, InaCraft 2012 in JCC Senayan and MOIE

Summer Party 2012 in Kemang, Jakarta, and in

several countries, such as the Ladies Luncheon F4D in

New York, Unites States of America, Spring Cultural

Event in Tokyo, Japan, and Trade, Tourism, and

Investment in Beijing, China.

Increased Economic Value PGN-Fostered Garut Weaving Village134


The Company’s Products and Services

As a company, PGN operates in the field of the transmission and distribution of natural gas

Increased Economic Value The Company’s Products and Services135

Distribution of Natural Gas

PGN implement sales to end users through its

pipeline distribution network, receiving a margin from

sales. In order to improve the level of effectiveness

and efficiency of the distribution of natural gas, PGN

has established a number of SBU, including SBU

DW (Distribution Region) I Western Java, SBU DW II

Eastern Java and SBU DW III North Sumatra.

The level of pressure of the gas in the pipeline

distribution network is determined through the

stipulations of contracts regarding the distribution

of gas. The primary components of the natural gas

are evaluated periodically in order to ensure that

the composition of the natural gas accords with

regulatory requirements and with the stipulations of

the contracts entered into regarding the distribution

of this gas. PGN’s primary product is natural gas,

which is distributed to end users through the

pipeline transmission and distribution network. The

distribution of this gas does not involve packaging.

(EN27)

PGN’s customers fall into three main categories,

these being residential users, commercial users,

and industrial uses. Approximately 96.8% of the

Company’s customers consist of residential end users,

with the remaining 3.2% consisting of commercial

and industrial end-users. At present, PGN controls

approximately 90% of the market for the distribution

and transmission of gas within Indonesia. (2.7)

More comprehensive information regarding the

Company’s products and services can be found in the

Company’s Annual Report.

Transmission of Natural Gas

The transmission of natural gas involves the

transportation of this gas from the field operated

by the producer of gas through the high-pressure

pipeline transmission network to the point where it

is delivered to the end users. In the conduct of this

business, PGN operates as transporter, collecting

a toll-fee for the provision of its services. The legal

basis for transactions related to the transmission of

gas includes PGN’s Gas Transportation Agreement

(GTA) with shippers for periods of 10 to 20 years.

To implement this business, PGN has established

a Strategic Business Unit (SBU), the Sumatra-Java

Transmission SBU.


Business Development

PGN strives to develop its business in a planned,

structured sustainable manner in order to facilitate

the maximum possible level of national and

regional economic growth. With this commitment,

PGN continuously strives to implement sound

plans of a number of years duration to expand

its pipeline distribution network and other modes

of transportation in order to improve the level of

reliability of gas supplies to end users through

technical improvements and other measures to

improve the supply of natural gas.

Primary measures to expand the Company’s business

include the development of the FSRU in Lampung,

the development of a new distribution area in

Lampung, and the expansion of distribution networks

in current areas of distribution. The development

of pipes in current areas of distribution include

the construction of the Panaran-Tanjung Uncang

pipeline in Batam, the construction of Ringline 1 and

Ringline 2 in West Java, and the revitalization of the

pipeline distribution network in Medan. All project

units are also implementing a restructuring program

to improve the level of effectiveness of investment

programs, with the establishment of Projects I, II and

III to facilitate construction activities.

The FSRU located in Lampung will be integrated with

the existing network in South Sumatra - West Java

(SSWJ) (SSWJ I: Pagardewa-Bojonegara and SSWJ II:

Grisik-Muara Bekasi) and the distribution network in

West Java.

These development projects will ensure the supply

of gas through the piped distribution network.

The expansion of the pipeline distribution network

is being implemented in anticipation of market

developments, both in new distribution areas

in Lampung and in existing areas in West Java

(customer attachments). The significant expansion

in the market following the development of the

SSWJ pipeline in 2007 provides a basis for further

developments in the distribution networks.

The capacities and qualities of the network in West

Java have been significantly improved with the

development of primary pipelines, as follows:

• Bojonegara to Bitung, to optimize the allocation

of gas from the Bojonegara Station.

• Ring Line 1 (Muara Karang-Muara Bekasi), to

support the distribution of gas to the east of the

West Java Pipeline.

• Ring Line 2 (Bitung-Cimanggis), to optimize the

supply of gas from the Bojonegara Station to

end-users in Bogor and surrounding areas.

The development of a highly reliable pipe distribution

network is vital to achieve the integration of the

piped network in West Java, which represents PGN’s

largest market.

The development of the primary pipeline is also

being conducted in a number of other existing areas,

including the following:

• Eastern Java: The development of new customer

attachments is intended to facilitate increases in

the sales of gas on the basis of increased supply

from a number of new traders;

• Batam: The development of the Panaran-Tanjung

Uncang pipeline is intended to facilitate increases

in the sale of gas and the development of new

markets in the Tanjung Uncang area;

• Medan: The revitalization of the network is

required to strengthen the existing network,

which is showing signs of age. This is intended to

improve the reliability of the network in

the context of planned new supplies with the

development of the Arun-Belawan pipeline.

Increased Economic Value Business Development136


Increased Economic Value Business Development137


About Perusahaan Gas Negara14



About PGN Cultutral Values140

Cultural Values

PGN’S Corporate Values (ProCISE–5)

ProfessionalismAlways giving the best results by improving relevant

competencies and being responsible for all

decisions taken.

Continuous ImprovementCommitted to do better through innovation and

adaptable to change.

IntegritySincere, open mind and positive thinking toward

oneself; discipline and consistent in mind, word

and deed.

SafetyAlways prioritizing health and safety at work, as well

as caring for natural environment and social

community.

Excellent ServicePrioritizing satisfaction for both to internal and

external customers by giving excellent service.

Corporate Culture constitutes the values and philosophy which have been agreed upon and believed by All Parties at PGN as the basis and reference for PGN for achieving the objectives. PGN defines Corporate Culture in five values which are abbreviated as ProCISE and elaborated in 10 Key Conducts of the Company.


To be a world class energy company in natural gas

utilization

PGN’s Vision is stipulated based on the Decree of the Board of PT Perusahaan Gas Negara (Persero) Tbk No: 015700.K/HM.03/UT/2011 issued on 20 September 2011

Vision


To enhance the value of the organization for

stakeholders:

• Strengthening the core business in natural gas

transportation and trading

• Developing a gas manufacturing business

• Developing an operational, maintenance and

engineering business associated with oil and gas

industries

• Profiting from the Company’s resources and assests

by developing other business

Mission


Dissemination of and Efforts to Achieve the Company’s Vision and Mission

About PGN Dissemination of and Efforts to Achieve the Company’s Vision and Mission

143

In order to ensure the realization of the Company’s vision and mission, we periodicly engage in a socialization

process involving employees and staffs at all levels. This process of socialization involves regular socialization of

the Company’s vision, mission and values to ensure PGN’s vision achievement for 2020.

The internalization of PGN vision, mission and values is implemented through a top-down approached in

which senior management provides direct input to agents of change, who are then responsible for cascading

the information down through all levels of staff. During this process, we simultaneously conduct a process to

gather and assess the ideas and proposal from junior levels staffs input for the development of strategies to

achieve PGN vision and mission.

Just as importantly, the vision, mission and culture of PGN is inculcated at a number of point during the

staff’s career, starting from the new staff are recruited from the Company, during work evaluation and

preceding promotion or transfer to a new position. These steps are intended to facilitate the internalization

and implementation of PGN’s business strategy and policies by all staff. A full comprehension of these matters

by all staff members is vital to the achievement of PGN’s vision for 2020 and for ensuring the on going

sustaiability of the company. (4.8)


About PGN Dissemination of and Efforts to Achieve the Company’s Vision and Mission

144


About PGN About PGN145


About PGN

PGN originated from Firm L.J.N. Eindhoven & Co., a privately-owned Dutch gas company established in 1859.

It was the first introduced the use of town gas produced from coal to Indonesian. In 1958, the firma was

nationalized and in 1965 it became the Perusahaan Negara Gas or PN Gas (Gas National Company).

Currently, PT Perusahaan Gas Negara (Persero) Tbk., abbreviated as PGN or PGAS, is a State-Owned Enterprises

(BUMN) that operates in the field of gas transmission and distribution from the area of gas producer (gas

well located in oil and gas area) to the area of commercial, industrial and households customers. To facilitate

the gas distribution, the Company manages a distribution pipeline from the areas in which the gas is

produced either to the area of commercial and end-user customer or to storage stations to be transported

to other market locations by gas freighter. At the end of the period covered in this report, PGN controlled

by 90% of gas transmission and distribution market share in Indonesia, with industrial clients accounting for

approximately by 97% of the Company’s revenues, with the reminder being accounted for commercial and

household customers. (2.2, 2.7)

About PGN About PGN146


1859

2008 2009

2007

1965

2011 2012

1994

PGAS

19982003

PT Perusahaan Gas Negara (Persero) Tbk, more usually referred to as PGN, or by its stock code at the Indonesia Stock Exchange of ‘PGAS’, is a state-owned company that has been leading the way in Indonesia’s gas industry since 1859, when it went by the name of Firma L.I. Enthoven & Co.

On 13 May 1965, pursuant to Government Regulation No. 19/1965 the Company was designated a state company known as Perusahaan Gas Negara (PGN). The subsequent issuance of Government Regulation No. 2 year 1984 changed the Company’s legal status from State Company(PN) to Public Corporation (”Perum”).

Company’s change of status was accompanied by a broadening of the scope of its business to incorporate not just natural gas distribution but transmission as well, for which PGN functionedas a transporter.

On 11 March 2007, the Company succesfully conducted a Gas-In (�rst gas chanelling),which was followed by the commercialization of gas from Pertamina’s Pagardewa gas�eld through the South Sumatera-West Java pipeline to the Company’s cusomer in Cilegon (PT Krakatau Daya Listrik).

The Company’s shares were listed on the JakartaStock Exchange and the Surabaya Stock Exchangeon 15 December 2003, with the stock code PGAS.

In 1998 PGN successfully �nishedTransmission Pipeline Grissik- Dorsal followed by the establishment of a subsidiary in the transmission line, PT Transportasi Gas Indonesia.

Brief History

Pursuant to the provisions of Law No. 40year 2007 regarding Limited LiabilityCompanies, and in connection with a stock split, the Company’s Articles of Associationunderwent their most recent amendment by Deed No. 50 dated 13 June 2008 jo. Deed No. 8 dated 2 Jully 2008.

To optimize the Company’s accumulated strengths and competencies by taking advantage of oppurtunities to develop the business and realize PGN’s vision, the Company established another subsidiary, PT PGAS Solution.

In 2011 PGN established two subsidiaries thateach engaged in the upstream and downstreamnatural gas business. The Subsidiary in the upstream is PT Saka Energy Indonesia (SAKA) while the subsidiary in the downstream is Gagas Energy PT Indonesia (GAGAS). PGN’s Ownership in both subsidiary is 99% and 1% ownership by PT PGAS Solution.

PGN established subsidiariesPT PGN LNG Indonesia (PGN LNG).The scope of PGN LNG business includesprocuring LNG supply, LNG and natural gas transportation activity,inventory activities includesregasi�cation to the buyer, as well asperforming other business activities.


1859

2008 2009

2007

1965

2011 2012

1994

PGAS

19982003

PT Perusahaan Gas Negara (Persero) Tbk, more usually referred to as PGN, or by its stock code at the Indonesia Stock Exchange of ‘PGAS’, is a state-owned company that has been leading the way in Indonesia’s gas industry since 1859, when it went by the name of Firma L.I. Enthoven & Co.

On 13 May 1965, pursuant to Government Regulation No. 19/1965 the Company was designated a state company known as Perusahaan Gas Negara (PGN). The subsequent issuance of Government Regulation No. 2 year 1984 changed the Company’s legal status from State Company(PN) to Public Corporation (”Perum”).

Company’s change of status was accompanied by a broadening of the scope of its business to incorporate not just natural gas distribution but transmission as well, for which PGN functionedas a transporter.

On 11 March 2007, the Company succesfully conducted a Gas-In (�rst gas chanelling),which was followed by the commercialization of gas from Pertamina’s Pagardewa gas�eld through the South Sumatera-West Java pipeline to the Company’s cusomer in Cilegon (PT Krakatau Daya Listrik).

The Company’s shares were listed on the JakartaStock Exchange and the Surabaya Stock Exchangeon 15 December 2003, with the stock code PGAS.

In 1998 PGN successfully �nishedTransmission Pipeline Grissik- Dorsal followed by the establishment of a subsidiary in the transmission line, PT Transportasi Gas Indonesia.

Brief History

Pursuant to the provisions of Law No. 40year 2007 regarding Limited LiabilityCompanies, and in connection with a stock split, the Company’s Articles of Associationunderwent their most recent amendment by Deed No. 50 dated 13 June 2008 jo. Deed No. 8 dated 2 Jully 2008.

To optimize the Company’s accumulated strengths and competencies by taking advantage of oppurtunities to develop the business and realize PGN’s vision, the Company established another subsidiary, PT PGAS Solution.

In 2011 PGN established two subsidiaries thateach engaged in the upstream and downstreamnatural gas business. The Subsidiary in the upstream is PT Saka Energy Indonesia (SAKA) while the subsidiary in the downstream is Gagas Energy PT Indonesia (GAGAS). PGN’s Ownership in both subsidiary is 99% and 1% ownership by PT PGAS Solution.

PGN established subsidiariesPT PGN LNG Indonesia (PGN LNG).The scope of PGN LNG business includesprocuring LNG supply, LNG and natural gas transportation activity,inventory activities includesregasi�cation to the buyer, as well asperforming other business activities.


The Company Shares

PGN shares have been traded in the Indonesia Stock Exchange (Bursa Efek Indonesia/BEI) since the

5th December 2003 under the trading code PGAS. The price of PGN shares in BEI as at December 31, 2012 is

at the position of IDR4,600.- per share. The composition in the Company as at December 31, 2012 consisting

of the Indonesian Government in the amount of 56.97% and the public in the amount of 43.03%. (2.4 - 2.7)

Economic Scale (2.8)

PGN is operating in almost all regions in Indonesia, with the support of approximately 1,564 employees. In

order to finance the distribution pipeline construction investment activity, PGN’s assets as at the end of 2012

are in the amount of USD3,908 million with the sales value amounting to USD 2,576 million. The complete

economic scale of PGN is as follows:

About PGN The Company Shares149

2012 2011

Number of employees 1,564 1,516

Total net sales (USD million) 2,576 2,230

Total capitalization (USD million) :

- Liability 1,553 1,521

- Equity 2,355 1,879

Quantity of product provided (MMscfd) 807 795

Total assets (USD million) 3,908 3,400


PGN operates in two business segments:

• The distribution of natural gas to industrial, commercial and household customers;

• The transmission of natural gas.

In addition to the two main business segments, PGN owns Subsidiary Entities engaging in other operational

segments, namely establishing cooperation in the fields of natural gas/oil and gas upstream exploration and

exploitation, gas products downstream processing/utilization, provision of fiber optic rental services for the

provision of network, as well as construction and repair services for the customers.

About PGN PGN’s Operational Structure150

PGN’s Operational Structure


About PGN PGN Group

In order to provide maximum services for customers, PGN has divided its business areas into four operational

units in the form of Strategic Business Units (SBU), namely:

1. Region I Distribution SBU, which covers the Regions of Western Java and Palembang. Consisting of the

Sales and Services for the Banten, Jakarta-Bogor, Bekasi-Karawang, Cirebon and Palembang Areas.

2. Region II Distribution SBU, which covers the Regions of Eastern Java. Consisting of the Sales and for the

Surabaya, Sidoarjo-Mojokerto and Pasuruan-Probolinggo Areas.

3. Region III Distribution SBU, which covers the Regions of Northern Sumatra. Consisting of the Sales and

Services for the Medan, Batam and Pekanbaru Areas.

4. Sumatra-Java Transmission SBU, which covers the regions of South Sumatra, Lampung, Banten,

to West Java.

PGN Group (2.3)

151


About PGN SBU, Subsidiaries and Affiliates152

SBU, Subsidiaries and Affiliates

Percentage of Share Ownership

Subsidiaries

Strategic Business Unit (SBU)

PGN has three sales areas in the distribution business (SBU I, II and III) and one area in the transmission business (SBU Transmission Sumatera-Java) as well as seven subsidiaries in several businesses.

SBU III

SBU Transmission Sumatera -

Jawa

PT TransportasiGas Indonesia

60%

PT NusantaraRegas

40%

PT PGAS Telekomunikasi

Nusantara

100%

PT PGAS Solution

100%

PT Gagas Energi

100%

PT PGN LNG Indonesia

100%

PT Saka EnergiIndonesia

100%

SBU II

SBU I


Business Model

GTA Gas Transportation Agreement between PGN/Transgasindo as gas transporter and suppliers in transferring gas to suppliers from off taker point.

GSA Gas Sales Agreement

Sales Agreement between PGN as gas distributor and costumers.

PGN has two business models: transmission and distribution business.80% of PGN revenue is generated from distribution and 20% from transmission

PGN, as a integrater, purchases gas from various gas suppliers and distributes to costumers through PGN distribution pipeline.

GTAGas Transportation Agreement

GSAGas Sales Agreement

Industry, Commercial & Households

Customers

Transporter

Distributor

Supplier

StationCompressor

PGN & Transgasindo serve as gas transporters through transmission pipeline by charging toll fee, Transfered gas belongs to third party.

Gas produsers

Off-Taker*


R

espons

ible

Disciplin

ed a

nd C

onsi

sten

t

Creative and Innovative

Ho

nest, O

pen and Positive Thinking

Prioritize Safety and Healthy W

ork Environment

Prioritize Internal and External Customers’ Satisfaction

Co

mpetent

3

4

5

6

7

8

9

10

ProfessionalismContinuous imProvement

integrity

safety

exCellent serviCe

Adaptiv

e to

Cha

nge

Proactive

an

d Qui

ck R

espo

nse

2

1

I M PA C T

“Practice of Good Corporate Governance”

Concern

for S

ocia

l and

Nat

ural

En

viro

nm

ent

PGN’s 10 Major Behaviors


Pertamina EPRegion Sumatera1.006,05 BSCF

427 MMScfdPipa Transmisi Grissik - Duri

970 MMScfdPipa Transmisi Sumatera Selatan - Jawa Barat

970 MMScfd Pipa Transmisi Sumatera Selatan - Jawa Barat

K A L I M A N T A N

SU

MA

TE

RA

Medan

Singapore

Labuhan MaringgaiStation

Pertamina EPField P.Susu48,91 BSCF

ConocoPhillipsCorridor PSC2.488,75 BSCF

PagardewaStation

BojonegaraStation

Muara BekasiStation

Pertamina TAC EllipseJatirarangon PSC40,15 BSCF

Lapindo BrantasBrantas PSC1113,15 BSCF

Pertiwi Nusantara Resources (gas ex-Salamander Energy)12,86 BSCF

Medco E&P IndonesiaSouth & Central Sumatera PSC27,86 BSCF

Medco E&P LematangLematang PSC53,26 BSCF

Inti Daya Latu Prima(gas ex-Jambi Merang)12,06 BSCF

Gresik Migas(gas ex-PHE WMO)8,76 BSCF

PHE WMOMadura Barat Offshore PSC55,43 BSCF

Husky CNOOCMadura Strait PSC1146,00 BSCF

SantosMadura Offshore PSC242,90 BSCF

BBG & WNE, IKD SNR(gas ex-TSB)17,11 BSCF

Pertamina EPRegion Jawa376,06 BSCF

SULAWESI

J a v a

GrissikStation

Duri

Panaran Station,Batam

Infrastruktur dan Pipa BertekananTinggi Milik PGN

Sumber Gas Bumi Milik Lainnya

Stasiun

Wilayah Strategic Busines Unit (SBU)

SBU IIarea

SBU Iarea

SBU Iarea

SBU IIIarea

SBU IIIarea

SBU IIarea

Infrastructure and High-pressure pipeline owned by PGN

Sources of natural gas and other proprietary

Station

Strategic Business Unit (SBU) Region


PGN Operational Map (2.3, 2.7)

Pertamina EPRegion Sumatera1.006,05 BSCF

427 MMScfdPipa Transmisi Grissik - Duri

970 MMScfdPipa Transmisi Sumatera Selatan - Jawa Barat

970 MMScfd Pipa Transmisi Sumatera Selatan - Jawa Barat

K A L I M A N T A N

SU

MA

TE

RA

Medan

Singapore

Labuhan MaringgaiStation

Pertamina EPField P.Susu48,91 BSCF

ConocoPhillipsCorridor PSC2.488,75 BSCF

PagardewaStation

BojonegaraStation

Muara BekasiStation

Pertamina TAC EllipseJatirarangon PSC40,15 BSCF

Lapindo BrantasBrantas PSC1113,15 BSCF

Pertiwi Nusantara Resources (gas ex-Salamander Energy)12,86 BSCF

Medco E&P IndonesiaSouth & Central Sumatera PSC27,86 BSCF

Medco E&P LematangLematang PSC53,26 BSCF

Inti Daya Latu Prima(gas ex-Jambi Merang)12,06 BSCF

Gresik Migas(gas ex-PHE WMO)8,76 BSCF

PHE WMOMadura Barat Offshore PSC55,43 BSCF

Husky CNOOCMadura Strait PSC1146,00 BSCF

SantosMadura Offshore PSC242,90 BSCF

BBG & WNE, IKD SNR(gas ex-TSB)17,11 BSCF

Pertamina EPRegion Jawa376,06 BSCF

SULAWESI

J a v a

GrissikStation

Duri

Panaran Station,Batam

Infrastruktur dan Pipa BertekananTinggi Milik PGN

Sumber Gas Bumi Milik Lainnya

Stasiun

Wilayah Strategic Busines Unit (SBU)

SBU IIarea

SBU Iarea

SBU Iarea

SBU IIIarea

SBU IIIarea

SBU IIarea


Important Events in 2012

01

02

03

0405

06

07

08

09

10

01 22.02.12The 2012 Banten Flood PGN’s care for flood victims.

22.02.12Fire in Kampung BandanJakarta in 2012PGN’s care for the victims of fire inKampung Bandan.

04.04.12PGN’s Affordable Market (Pasar Murah).

21.03.12Rice Grand Harvesting in the GP3K program,A synergy between SOEs, namely PGNand PT SHS(Persero).

14.04.12Inspiration Class Volunteers Gathering,Sharing Inspirationthrough professions.

02 03 04 05

05.06.12Appreciation for Volunteers in 2012P2K-DKI at tower 165 ESQ 2012.

05.12Toddlers and Ederly People Nutrition Alert by PT PGN SBU III (Pekanbaru 24/5/12, Medan 30/5/12 dan Batam 30/5/12)

13.06.12Indonesia Mengajar at the Office of the Vice President in 2012.

14.06.12Synergy between PGN-Perum Perhutani in supporting the 1 billions trees planting.

27.06.12Inauguration of PGN’s Garut weaving villageand creative zone launching in 2012

06 07 08 09 10


1415

13

16

19

18

20

12

11

17

08.11 - 07.12Photos and documents reports of public health services through PGN’s healthy car in Medan and Jakarta.

31.07.12The acceptance ofgreen CEO Award in Gas Distribution Services Sector.

11 12 13 14 05.09.12A visit to Small and Medium Enterprises (UKM) in Palembangby the Deputy of the Ministry for State-Owned Enterprises to UKM MB of PGN in 2012.

1517.07.12Partnership synergy signing and opening nationwide launch of the comic series legend.

05.07.12Inauguration of Binaan Sriminosari village.

26.10.12Celebration of Idul Adha at the Head Office in Jakarta.

21.11.12Handover and first groundbreaking in the environtment development aid from PT PGN (Persero) Tbk. in the east of Lampung.

29.11.12Inauguration of the assistance for the drinking water installation program in Panggang Island.

14.12.12Planting of 16000Mangrove Trees,Green and CleanEnergy for life,Jadimulya Beach Area, Cirebon.

16 17 18 19 21.12.12SOE Care for Education-Appreciation for Teachers and Students with Outstanding Achievement in remote areas, outermost isles and Indonesia’s frontiers.

20


Tentang PGN Award and Certificate159

2nd Winner of Indonesia Sustainability Reporting Awards 2011 Organized by the National Center forSustainability Reporting(NCSR), in Group-A under the category of ‘Service’.

Award and Certicate

Participate Karya Salemba Empat 2012 Scholarship Programme.

Certificate of Appreciation from Indonesian Red CrossAppreciation from Indonesia Red Cross for the donation of 1 unit or Disaster Response Car in Palembang.

Certificate of Appreciation from the “Ministry of SOE”

Appreciation for participation in the Poverty Alleviation Program in DKI

Jakarta (P2K-DKI).


Tentang PGN Award and Certificate160

“Sound of Nusantara” AwardAward for participation in the Ramadhan Bazaar of “Sound of Nusantara” from Dharma Wanita of the Ministry of Finance.

“Indonesia Expo III” AwardAward for participation in Indonesian Expo III from Indonesian Embassy in Amman.

Award from the World Record MuseumAward as initiator of the Most Published Nusantara Legends Comic Books.

Award for Excellence from Rumah Zakat for the best

support of “Senyum Sehat” Program.


To the management of PT Perusahaan Gas Negara (Persero) Tbk.

We were engaged by PT Perusahaan Gas Negara (Persero) Tbk. (‘PGN’) to provide assurance in respect to it’s Sustainability Report 2012 (‘the Report’). The assurance has been car-ried out by a multi-disciplined assurance team with a broad range of skills and depth of experience, thus providing a high level of competency for the assurance engagement.

Independence

We were not involved in the preparation of any key part of the report and carried out all assurance undertakings with independence and autonomy. We did not provide any services to PGN during 2012 that could conflict with the indepen-dence of assurance engagement.

Assurance Standards

We conducted our work in accordance with ISAE3000 ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ issued by the International Audit-ing and Accounting Standards Board. In addition, we have also planned and carried out our work in accordance with AA1000AS (2008) ‘AA1000 As-surance Standards (2008)’, issued by AccountAbility.

Level of assurance and criteria used

Our evidence-gathering procedures have been de-signed to obtain a limited level of assurance based on ISAE3000 an a moderate level of assurance engagement as set out in AA1000AS (2008) in order to provide confidence to readers by reducing risks or errors to a very low but not to zero. The AA1000 AccountAbility Principles Standard (2008) of Inclusivity, Materiality, and Responsiveness has also been used as criteria to evaluate the Report.

Scope of Assurance

We provided Type 2 assurance engagement under AA1000AS (2008). This involved:1) an assesment of PGN’s adherence to the AA1000 AccountAbility Principles Standard (2008) and 2) an assesment on the accuracy and quality of specified sustainability performance information contained within the Report, in relation to the agree scope. The scope of work consists of: • partnership program • community stewardship program • occupational health and safety

Responsibility

PGN is responsible for all information and claims contained in the Report, including established sustainability management targets, performance management, data collection and report prepara-tion, etc. Our responsibility in performing this engagement is to management of PGN only for the puIDRose of veryfying its statements relating to its sustainability performance, more particularly as described in the agreed scope. Our responsibility is to express our conclusions in relation to the agreed scope.

Methodology

We have assessed several assertions and specified data sets included in the report and the system and processes used to managed and report these using the following methods:

• Reviewed report, internal policies, documentation, management and information systems.• Carried out interview, with staff involved in sustainability-related management and reporting.• Followed data trails to initial aggregated source and checked sample data to a greater depth during the engagement process.

Independent Assurance StatementReport No. 0019/BD/PGN

Jl. Sisingamangaraja no.26-Jakarta Selatan 12120-INDONESIATel: +62 21 720 2605 . Fax: +62 21 720 2606-www.mazars.co.idPT Mazars


Limitations

Our scope of work was limited to a review of the accuracy and reliability of specified data and interviews with data providers, person in charge of data collection and processing, as well as person in charge of sustainability performance-related infor-mation, and did not include any on-site validation of the mining site.

Conclusions

AA1000 AccountAbility Priciples Standard (2008)

Findings and conclusions concerning adherence to the AA1000 AccountAbility Principles of Inclusiv-ity, Materiality and Responsiveness include:

• Inclusivity An assesment has been made to determine wheter PGN has included all key stakeholders in developing and achieving an accountable and strategic response to sustainability issues.

We found PGN demonstrates a strong commitment to stakeholder inclusivity. PGN has an effective system in place for key stakeholders to participate in the development of the organization’s response in the context of sustainability. This is demonstrated for instance, by conducting needs assesment surveys in relayion to the community development program, and by conducting Stakeholder Forum Discussion in order to determine the report content.

However, we recommend that PGN’s countinues to improve stakeholders inclusivity systems and procedures on a regular basis to maintain it’s effectiveness.

• Materiality An assesment has been made as to wheter PGN has included in the Report the material information required by its stakeholders in order for them to be able to make inform judgements, decisions, and actions. We found PGN has a strong process in place to determine material issues. Key material issues were adequately reported and were found to provide balanced information about PGN sustainability performanced. A range of internal stakeholders are involved in PGN’s

materiality determination process. However, we recommend that PGN countinues to conduct materiality test on a regular basis in future reports.

• Responsiveness An assesment has been made as to wheter PGN demonstrates that its responds to its stakeholders and is accountable to them.

PGN was found to be responsive to key stakeholder concern and expectations. This was achieved trough the organization’s allocation of resources to stakeholder engagement, the timeliness and accesibility of reported information, and the types of communication mechanism regularly employed. However, we recommend that PGN countinues to improve stakeholder engagement procedurs on a regular basis in future reports.

Reliability of Sustainability Performance Infor-mation

Based on our limited assurance engagement, noth-ing has come to our attention that causes us to believe that the data of the Report has been materi-ally misstated.All key assurance findings are included herein, and detailed observations and follow-up recommenda-tions have been submitted to PGN management in a separate report.

Jakarta, March 11, 2013

James KallmanPresident Director

Mazars is an international, integrated and inde-pendent organization, specialing in audit and assurance, accountancy, tax, legal and advisory services. Mazars can rely on the skills of 13,000 proffesionals in the 61 countries that make up its integrated partnership in Europe, Africa, the Middle East, Asia pacific, North America, LatinA-merica and Carribean, whilst in Indonesia is served by PT Mazars, one of the leading sustain-ability assurance providers.

Jl. Sisingamangaraja no.26-Jakarta Selatan 12120-INDONESIATel: +62 21 720 2605 . Fax: +62 21 720 2606-www.mazars.co.idPT Mazars

07


The National Center for Sustainability Reporting (NCSR) hereby states that PT Perusahaan Gas Negara Tbk has presented it’s Sustainability Report to NCSR Application Level Check Services, which have concluded that the report fulfills the requirement of Application Level A+.

Application Levels communicate the extent to which the content of the GRI G3.1 guidelines has been used in the submitted sustainability reporting. The Check confirms that the required set and number of disclosures for that Application Level have been addressed in the reporting and that the GRI Content Index demonstrates a valid representation of the required disclosures, as described in the GRI G3 Guidelines.

Application Levels do not provide an opinion on the sustainability performance of the reporter nor the quality of the information in the report.

Jakarta, 11 March 2013

Drs. Elmar Bouma, CSRA Director

National Center for Sustainability Reporting (NCSR) dengan ini menyatakan bahwa PT. Perusahaan Gas Negara Tbk telah kepada NCSR Application Level Check Services, dan menyimpulkan bahwa laporan telah memenuhi persyaratan Level Aplikasi A+.

Tingkat Aplikasi memberi gambaran tentang sejauh mana pedoman GRI G3.1 telah diterapkan dalam laporan yang disampaikan. Kami menyatakan bahwa laporan tersebut telah memuat seperangkat pengungka-pan yang disyaratkan dalam Level Aplikasi tersebut, dan indeks GRI telah disajikan dalam laporan tersebut secara memadai, sesuai dengan Pedoman GRI G3.

Tingkat Aplikasi ini bukan merupakan opini atas kinerja keberlanjutan maupun kualitas informasi yang dimuat dalam laporan tersebut. -----------------------------------------------The National Center for Sustainability Reporting (NCSR) is an independent and non-for profit organization, established in 2005 to promote sustainability reporting in Indonesia, Malaysia and Thailand. NCSR is registered as an organizational stakeholder member of the Global Reporting Initiative (GRI) since 2006.

Statement GRI Application Level CheckedLaporan Pengecekan Tingkat Aplikasi GRI


Tentang PGN GRI G3.1 Content Index164

Pages/Notes

3.11 Significant changes form previous in the report

20

3.12 GRI content index 164

3.13 Assurance 161

4. Governance, Commitments, and Engagement

4.1 Governance structure of the organization 57,59

4.2 Status of the Chair of the Board 59

4.3 Independent Commissioners 59

4.4 Mechanisms to provide advice to the Board

57,63

4.5 Compensation Commisioners and/or Directors

60

4.6 Avoiding conflicts of interest 62

4.7 Mechanism for selection and appointment of Members of the Board of Commisioners and the Board of Directors

57,59

4.8 Socialization and realization of the Corporate Vision and Mission

67,141

4.9 Precautionary Approaches 65

4.10 Processes for evaluating the Board’s performance

57

Commitments to External Initiatives and International Standard

4.11 Precautionary approaches 65

4.12 International Standard Adoption 63

4.13 Members of industry assotiation Organization

51

Stakeholder Engagement

4.14 List of stakeholder groups 49,50

4.15 Basis for identification and selection of stakeholders

49,50

4.16 Approaches to stakeholder engagement 49,50

4.17 Key topics and concerns that have been raised through stakeholder engagement

49,50

GRI G3.1 Content Index

Pages/Notes

1. Strategy and Analysis

1.1 Remark from the Board of Commissioners and Board of Directors

11,13

1.2 Description of key impacts, risks, and opportunities

13

2. Organizational Profile

2.1 Name of the organization Sampul

2.2 Primary brands, products, and or services 146

2.3 Operational structure of the organization 155

2.4 Location of organization’s headquarters 21

2.5 Number of countries where the organization

149

2.6 Nature of ownership and legal form 149

2.7 Markets served 136,149,155

2.8 Scale of the reporting organization 149

2.9 Significant changes during the reporting period

20

2.10 Awards received in the reporting period. 159

3. Report Parameters

Report Profile

3.1 Reporting period 19

3.2 Date of most recent previous report 19

3.3 Reporting cycle 19

3.4 Contact point 21

Report Scope and Boundary

3.5 Process for defining report content of the report

19

3.6 Boundry of the report of the report

20

3.7 Limitations on the scope or boundary of the report

20

3.8 Basis for reporting on joint ventures, subsidiaries, etc

20

3.9 Data measurement techniques 20

3.10 Effect of any restatements of information 20



Pages/Notes

Economic Performance

Aspect: Economic Performance

EC1 Direct economic value generated and distributed

127

EC2 Financial implications due to climate change

25

EC3 Employee pension fund 85

EC4 Financial assitance received from goverment

128

Aspect: Local Aspect

EC5 Standard entry level salary 75

EC6 Locally-based suppliers 129

EC7 Local workers 81

Aspect: Indirect Economic Impact

EC8 Infrastructure investments and services provided for public benefit

119,121

EC9 Indirect economic impact 129

Environment Performance

Aspect: Materials

EN1 Materials used 37,39

EN2 Recycle materials used 39

Aspect: Energy

EN3 Direct energy Consumption 27

EN4 Indirect energy consumption 28

EN5 Energy saved 28

EN6 Initiative to provide renewable energy

28

EN7 Initiative to reduce indirect energy consumption

28

Aspect: Water

EN8 Total water withdrawal 40

Pages/Notes

EN9 Water sources significantly affected by withdrawal of water

40

EN10 Power of mining in protected forests

40

Aspect: Biodiversity

EN11 Location of biodiversity 36,37

EN12 Impacts on biodiversity NR

EN13 Habitats restored 37,41

EN14 Managing impact on biodiversity 36

EN15 Red list species. NR

Aspect: Emission, Effluents, and Waste

EN16 Greenhouse gas emissions 28,35

EN17 Other greenhouse gas emissions 35

EN18 Initiative to reduce greenhouse gas emissions

28,29

EN19 Emission of ozone-depleting substances

35

EN20 NOx, SOx, and other significant air emissions

35,29

EN21 Waste water discharge 40

EN22 Waste and disposal method 38

EN23 Total number and volume of significant spills

39

EN24 Hazardous waste 38

EN25 Biodiversity of water sources NR

EN26 Initiatives to mitigate environmental impacts

35,91

EN27 Products reclaimed 39,135

Aspect: Compliance

EN28 Fines and non-monetary sanctions 41

Aspect: Transportation

EN29 Environmental impacts of transportation products

29

NR= Not Relevan



Pages/Notes

Aspect: Over all

EN30 Total environmental protection expenditures

37,41

Labor PracticesPerformance Indicators

Aspect: Employment

LA1 Profil of workforce 79,80

LA2 Recruitment and employee turnover 73

LA3 Benefits provided to part-time employess

76,85

LA15 Parental leave -

Aspect: Labor/Management Relations

LA4 Collective bargaining agreements 71

LA5 Notice period for operational changes

71

Aspect: Occupational Health and Safety

LA6 Health and safety committees 99

LA7 Rates of injury and fatalities 108

LA8 Health education, training, counseling, and prevention programs

112

LA9 Clause health and safety topics 97

Aspect: Training and Education

LA10 Average hours of training 104

LA11 Retirement preparation programs 85

LA12 Employees performance and career development

83,85

Aspect: Diversity and Equal Opportunity

LA13 Employees diversity 81

Aspect: Equal Remuneration for Gender

LA14 Ratio of basic salary of gender 75

Pages/Notes

Human RightsPerformance Indicators

Aspect: Investment and Procurement Practices

HR1 Training workers about human rights

129

HR2 Human rights screening of suppliers and contractors

129

HR3 Employee training concerning aspects of human rights

77

Aspect: Non-Discrimination

HR4 Incidents of discrimination 77

Aspect: Freedom to Participate in Union

HR5 Rights of freedom of union 72

Aspect: Child Labor

HR6 Child labor 77

Aspect: Forced and Compulsory Labor

HR7 Forced or compulsory labor 74

Aspect: Security Practices

HR8 Security personnel trained human rights issues

77

Aspect: Indigenous Rights

HR9 Violations involving rights of indigenous people

77

Aspect: Assesment

HR10 Assessment of human rights practices or impact

NR

Aspect: Completion of Human Right’s Case

HR11 Case completion of human right’s mechanism

NR

Society Performance Indicators

Aspect: local Communities

NR= Not Relevan



Pages/Notes

SO1 Relations with local communities 117

SO9 Negative impact on local communities

35

SO10 Prevention of negative impacts 35

Aspect: Corruption

SO2 Business units analyzed for risks related to corruption

61,62,63

SO3 Employees trained on anti-corruption

61,77

SO4 Action taken in response to incidents of corruption

61,77

Aspect: Public Policy

SO5 Participant in public policy development

62,78

SO6 Contribution to political parties 62,78,90

Aspect: Anti-Competitive Behavior

SO7 Anti-Competitive Behavior -

Aspect: Aderenche

SO8 Fines and non-monetary sanctions for non-compliance with laws and regulations

91

Product ReponsibilityPerformance Indicators

Aspect: Customers Health and Safety

PR1 Life cycle stages; health and safety impacts

90

PR2 Incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services

91

Aspect: Labeling

PR3 Information of product ingredients 89

PR4 Violation of rules related to the provision of information products

90

PR5 Measurment the level of customer satisfaction

92

Pages/Notes

Aspect: Marketing Communication

PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications

90

PR7 Incidents of non-compliance with regulations and voluntary codes concerning marketing communications

90

Aspect: Customer Privacy

PR8 Substantiated complaints breaches of customer

92

Aspect: Compliance

PR9 Significant fines for non-compliance with laws and regulations concerning the provision and use of products

91


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Sustainability Report

2012

Documents

PGN Sustainability Report 2012