2012 PGN Sustainability Report

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Welcome to PGN’s 2012

Sustainability Report.

This is the fourth annual

sustainability report

since the Company’s irst

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 beneit of all our

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‘11

‘12

OBTAINED ECONOMY VALUE

(USD)

2,247,944,5762,683,170,085

‘11

‘12

DISTRIBUTED ECONOMY VALUE

(USD)

2,066,714,2012,143,177,455

‘11

‘12

REWARD FOR WORKERS

(USD)

59,538,36959,785,653

‘11

‘12

PAYMENT TO SUPPLIERS

(USD)

878,854,180957,261,487

‘11

‘12

PAYMENT TO FINANCIERS (USD) 477,767,884349,306,788

‘11

‘12

DIVIDEND FOR STATE

(USD) 176,718,567236,206,468

‘11

‘12

VARIOUS TAXES FOR STATE (USD) 246,339,310220,537,636

‘11

‘12

CRS FUND AND ENVIRONMENT FOSTERING (USD) 18,241,587 9,966,966

‘11

‘12

TOTAL AMOUNT OF PARTNERSHIP FUND CHANNELING

(USD)

20,763,00729,961,557

Outline of Sustainability Performance 2 Economic Performance

Years 2011 The

effe

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ene

ss rat

io of c hanne

ling the num

ber o_{f as} siste_d

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art_n

e

rs

Custo

mer Satis

f cat

ion

Inde

x (C

SI)

Cu_sto

mer Im_{portance Index(C}II)

96. 57%

96.10 % 45,181

32,₃₂ 1 N O N E

Economic Performance

Th_e in fr_a ct_io

n o_f m a r k e tin g c a s e s 85.

33 %

83.33 %

86.6_{7 %}

88.50% Years 2012

fun

d pa rtnersh

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 3 Environment Performance

CO

₂

(Ton)

770.38

1,194.30

(Gigajoule) GAS

656,173

673,454

(Liter)

320,733

497,225 934,638

570,858

(Gigajoule)

19,714

18,367

Number of Female Workers

369

359

Number of Male Workers

1,195

1,157

Total Number of Workers

1,564

1,516

Outline of Sustainability Performance 4 Social Performance

Social Performance

Wo rke

rs r otat

ion

Workers received annualKPI

Wo_rker

s i_nC o_r

po

rat_ed

in_Work

er_{s Fe}

de_ra

tio_n

W ork_e

r_s w a_lk e_d o_u t

Casesof

infring

ement

s

C

asesof infringements of

workers regulations

3.4

5%

3.23

%

100%

10_0%

N O

N_E

Wo

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red

fu nd

SU FFIC

IEN TLY

NON

E

N_ONE

Years 2012 Years 2011

of hum

an rig

Occupational accidents; Fatality

0

Minor Occupational accidents

3

0

Awards in occupational safety

3

4

Social Performance

Occupational accidents; LTIF

0

Outline of Sustainability Performance 5 Social Performance

Hours

Workers t rain

in_g

221,776

178,160

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 ofice, 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 lood victims in Banten areas (Tangerang and Cilegon) and Greater Jakarta areas

• Aid for lood 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 ire 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

Gas Source

Power Plants

LNG Transportation Vessel

Compressor Station

1

2

3

4

1

2

3

4

Gas for

5

6

7

_{Household Customers}

Commercial Customers

Industrial Customers

5

6

5

PGN’s Response to

Climate Change

6

Improving the Climate Together

with PGN

Prioritizing the Interests of Stakeholders

7

Good Corporate Governance

8

19 Reporting Period

19 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 Index 21 Assurance

21 Contact Details

25 The Impact of Climate Change on PGN

25 Business Opportunities Resulting from Climate Change 26 Carbon and Other Gas Emissions from PGN’s Business Activities 26 Carbon Footprint

27 Energy Consumption

28 Controlling Carbon Dioxide Gas Emissions 32 Environmental Transformation

33 Energy Audit

34 PGN’s Roadmap for Environmental Transformation 2013 to 2017 34 Implementation of AMDAL or UKL-UPL (Environmental Impact Analysis) 35 Changes in Environment Management Policies

35 Sustainable Environmental Management and Monitoring 36 Biodiversity 36 Rehabilitation and Revegetation

37 Use of Materials 39 Waste Management

40 The Conservation of Water Resources

41 Preserving the Environment through Our Environment Management Program 41 Compliance with Environmental Regulations

41 Water Consumption

46 The Management of Stakeholder Interests 49 Stakeholder Engagement

51 Membership in Industrial Associations and Other Organizations 54 Management Resistance

57 Management Structure 57 General Shareholders’ Meeting

59 Structure of Board of Commissioners and Directors 59 Board of Commissioners

59 Directors

59 The Mechanism of Selection and Appointment of Commissioners and Directors 60 Remuneration for Commissioners and Directors

61 Fundamental Policies of Management 61 Internal Monitoring and Controlling

61 Prevention Against Corruption

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

62 Integrity Pact

62 Avoiding Politics Involvement 63 Procurement of Products and Services

63 The Mechanism of Expressing Opinions to Directors 63 Implementation of International Standards

65 Precautionary Approach

67 Internalization of Company’s Culture and Code of Ethics 71 Relationships with Employees

72 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 Life

12

Improving Economy

13

PGN’s Proile

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 89 Product Quality and Compliance with Regulations and Standards 90

Customer Service 91 Customer 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 118 Environment Preservation 118 Education Sector 119 Health Sector 120 Public Infrastructure Programs 121 Natural Disaster Relieve 121 Distribution of Economy Values 127

Contribution to the State 128 Contribution to Regional Economy Growth 129

Relationships with Partners 129 Partnership Programs 129 The 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 145 The Company’s Milestones 147 The Company’s Shares 149

Economy Scale 149 PGN’s Operational Structure 150

PGN’s Groups 151 Subsidiaries and Affiliations 152 Scheme of Business Structure 153

PGN’s Operational Map 155 A Succession of Important Events 157 Achieved Appreciations and Certifications in 2012 159

Increasing Customer Satisfaction

10

Prioritizing Health and Occupational

Safety (OSH)

11

Assurance Statement by Mazars

Application Level Check by NCSR

15

16

GRI G3.1 Content Index

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.

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

“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 13 Remark from the Directors

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 fulill the present generation’s needs for natural gas energy without disrupting the ability of the future generations to fulill 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 signiicant 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 oficial 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 14 Remark from the Directors

allocated annually from the Company’s proits. 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 igure. 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 signiicant 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 Regasiication 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 Santoso President Director

About This Report

4

About This Report

About This Report 18 About This Report

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 beneit of all our

stakeholders.

Amongst otherpurposes, this report is a fulillment of our obligation to report on the implementation of PGN’s Social and Environmental Responsibility (SER), as deined 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 signiicant 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 signiicance 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 fulillment 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 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-inancial 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 reclassiications 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.

Important to Stakeholders

1 5

4

3

2

1 0

2 3 4 5 6 7 8 9 10

8

7

6

X Y

Gas supply assured

Gas distribution safety Kemudahan Pembuatan Kontrak

Workers rights The diversity and respectful of Human

Training and development

Wellness and safety work

Empowerment community economic Donation for life’s

community

Environment impact analysis

Electricity consumption

Carbon Footprint Management and Carbon Emission Mitigation

Head Office (2.4)

PT Perusahaan Gas Negara (Persero) Tbk Jl. K.H. Zainul Ariin No. 20

Jakarta 11140, Indonesia. T +633 4838 F +633-3080 www.pgn.co.id

Contact Center

T 0800 1500 645 T +6221-633 3000 E contact.center@pgn.co.id Jl. K.H. Zainul Ariin No. 20

Jakarta 11140, Indonesia. www.pgn.co.id

Company Secretary

PT Perusahaan Gas Negara (Persero) Tbk Jl. K.H. Zainul Ariin No. 20

Jakarta 11140, Indonesia.

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

E contact.center@pgn.co.id www.pgn.co.id

About This Report _{21 GRI Application Level and Index}

GRI Application Level and Index

(3.12)

In terms of the GRI Application Level System, we can state that this report has fulilled the criteria for a “Level A+” report as deined by the application level systems promulgated by GRI. According to the GRI Application Level System, sustainability reports can be classiied according to 3 (three) levels, these being Levels C, B, and A.This statement has been checked and conirmed 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)

PGN’s Response to Climate

Change

PGN’s Response to Climate Change

PGN’s Response to Climate Change 24 PGN’s Response to Climate Change

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)

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 loods 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 beneit 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 signiicant inluence on PGN’s business, in some cases disrupting the Company’s operations. For example, when Jakarta was recently aflicted by loods, 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 signiicant potential inancial 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 signiicant 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.

PGN’s Response to Climate Change 26 Carbon Footprint

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 signiicant use of electricity at the Company’s ofice 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) Convertion

2008 1.000.000

800.000

600.000

400.000

200.000

0

2009 2010 2011 2012

1.055 401.831

860.884

771.498 813.930 908.232

423.931

1.055 1.055 1.055 1.055

621.965 656.173

638.345 673.454

PGN’s Response to Climate Change 28 Controlling Carbon Dioxide Gas Emissions

Indirectly, the Company consumes energy to operate ofice facilities in the Company’s Head Ofice, the ofices 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 igures for 2011, when the total stood at 5,476.13 MWh or 19,714 GJ. (EN4)

We have implemented a number of eficiency measures to reduce the indirect use of energy, including the following: (EN7)

1. The use of energy-eficient 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 ofice space to achieve a higher level of proiciency.

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 igure of 320,733 litres in 2012. This igure 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 igure for 2012, when this consumption was equivalent to carbon dioxide emissions of770.38tons. (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 ield;

• Limitations on the use of electronic equipment, including computers and similar equipment, by limiting ofice hours.

PGN’s Response to Climate Change The Replacement of Chiller Fuel for Cooling Ofice 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 deined 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 speciic 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 33 Environmental Transformation

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 Ofice, 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 identiication of facilities which consume a disproportionate volume of energy;

• Increased awareness and attention to energy expenditures;

• The identiication of low eficiency facilities;

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

PGN’s Roadmap for Environmental Transformation 2013 to 2017

PGN’s Roadmap for Environmental Transformation 2013 to 2017 represents a further development and clariication 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 conirmed 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 eficient 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 signiicant 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 signiicant. 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 36 Biodiversity

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-NO2

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 37 Use of Materials

has been used to cover the piped network under the ground. Other displaced earth, which is not usually of signiicant 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 eficient 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 38 Use of Materials

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

Steel pipe 1935 1921

PE pipe 1930 1915

Others 3865 3836

TOTAL LENGHT

Steel pipe 3982 3968

PE piipe 1930 1915

GRAND TOTAL 5912 5883

Other materials used in our primary activities is ilter which placed inside the pipes at the point of intake. The function of these ilters 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 ilters are replaced. Discarded ilters 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 39 Waste Management

We also use a signiicant volume of paper to support our operational and administrative activities. We implement a policy mandating the recycling and eficient 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 signiicantly, 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 signiicant 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 speciic material such as pipes and paper waste, the process is managed by competent third parties. (EN27)

Improving The Climate Together with PGN 40 The Conservation of Water Resources

The primary use of water within our operations is for the cooling of compressor pump installations and sanitarypurposes within our ofices. 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 Ofice is always within limits deined 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 signiicant areas of open space surrounding its Head Ofice 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 ofices 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 speciic audit of the volume of water released into bodies of water either at our Head Ofice or at supporting ofices. (EN21)

We have not yet applied optimal facilities for the recycling of water resources, with water recycling facilities at our Head Ofice utilizing a carbon ilter based iltration 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)

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 ines or other legal sanctions as a result of non-compliance with regulations governing environmental management. (EN28)

Water Consumption

The use of water in ofice 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

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 fulillment 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.

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:

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 signiicant stake in PGN. As such, the government has a legitimate interest in the Company’s inancial 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 beneits to the government by creating employment opportunities, tax revenues and dividends, and macroeconomic beneits.

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 fulill 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 speciic 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 48 Consumers

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 fulill 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 Visit

Conference Call Site Visit Analyst Meeting Non-deal Roadshow Investor Summit RUPS Public Expose

Minimal 12 times/ quarter

Minimal 3 times/year Minimal 1 times/year Minimal 1 times/year Minimal 4 times/year 1 times/year Minimal 1 times/year Minimal 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-PGN

Management and Employee Forums

In accordance with need

• Equality. • Welfare.

• Deined career path. • Non-discriminatory workplace practices

• conducive work conditions.

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

Contracts for the supply of services and goods Evaluations of the

performance of supplies and business partners.

In accordance with need, at least once per year

• Fair and transparent procurement processes • objective evaluation and selection processes • mutually beneicial growth Government

Authorities and Regulators

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

Tentang PGN 165 GRI G3.1 Content Index

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 beneit

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 signiicantly 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, Efluents, 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 signiicant air emissions

35,29

EN21 Waste water discharge 40

EN22 Waste and disposal method 38 EN23 Total number and volume

of signiicant 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

Tentang PGN 166 GRI G3.1 Content Index

Pages/ Notes Aspect: Over all

EN30 Total environmental protection expenditures

37,41

Labor Practices

Performance Indicators

Aspect: Employment

LA1 Proil of workforce 79,80

LA2 Recruitment and employee turnover 73 LA3 Beneits 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 Rights

Performance 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

Tentang PGN 167 GRI G3.1 Content Index

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 Reponsibility

Performance 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 Signiicant ines for non-compliance with laws and regulations concerning the provision and use of products

Paper and Ink Specification

This report is printed on FCS Certiied Coated paper, and printer using alcohol free ink

Cover Page Paper Specification: Tusche FSC CO20981

Colors: all

Calipers: 13 pt - 24 pt

Recycled Content: White and Cream are 40% Other Recycled Fiber only; Cool Grey has 5% PCW and 35% Other recycled Fiber; Burgundy, state Blue and Black have 20% PCW and 40% Other Recycled Fiber.

Recyclable: No

When it comes to taking care of the environment, FiberMark focuses on inding ‘naturally creative’ ways to make it opertaing facilities and products more environmentally friendly. From the efforts of the environmental ‘Heroes” at our Brattleboro manufacturing facility, to the achievement of ISO 14001 registration in the Red Bridge, UK facility, FiberMark employees are striving every day to develop and implement creative, innovative approaches to limit the company’s environmental footprint and honor its commitment to the environment.

Inside Page Paper Specification: Mohawk Navajo WEIGHT RANGE: 24 lb. writing - 180 double thick cover FINISH RANGE: Smooth, Label

Mohawk Navajo is now part of Mohawk Options, Navajo Smooth inish. Navajo inish will transition to FSC virgin iber. Some legacy inventory may still be available. Please check the Streamline Product Finder to search for available inventory of legacy items.

Mohawk Navajo is a virtuoso performer on any press. Manufactured with Mohawk’s proprietary Inxwell process, Navajo is the brightest, smoothest uncoated paper available anywhere. Navajo is optimized for both digital and offset presses, delivering brilliant color, high opacity, and superior print quality for all the ways you print. Acid free. 20% recycled.

Inxwell paper for high ink holdout and opacity

Use for digital, color copiers, offset (web and sheetfed), and relief processes Vibrant four-color process

Bright printed solids 98 bright Brilliant White Crisp score and fold

Manufactured with Green-e certiied windpower

Sustainability Report