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Monday, 24 June 24
PLN'S FINANCIAL SUSTAINABILITY RESTS ON ACCELERATED COAL RETIREMENT AND RENEWABLES DEPLOYMENT - MUTYA YUSTIKA
 On 28 May 2024, Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), released its financial report for 2023. Although the report showed a net profit increase of IDR22 trillion (tn), a 53% rise from 2022, the Institute for Energy Economics and Financial Analysis (IEEFA) calculates that PLN would have recorded a substantial loss of IDR120tn without subsidies and compensations from the Government of Indonesia (GOI).
At first glance, PLN’s cash reserves increased by 9% for the fiscal year 2023, and its electricity sales rose around 7%. This increase in sales contributed the most to PLN’s income growth, amounting to IDR22.2tn. However, despite the improved performance and positive figures, there are underlying red flags.
Despite increased cash reserves, PLN’s liquidity ratio (0.92), quick ratio (0.79), and cash ratio (0.39) were all below 1.00. These figures indicate that the utility is struggling to meet its urgent payment obligations with cash or current assets.
PLN’s financial performance heavily depends on GOI’s subsidies and compensations, which have risen by 16.4% from IDR123tn in 2022 to IDR143tn in 2023. However, these incremental increases could halt in 2025. Discussions at the Ministry of Finance are underway to reduce PLN’s subsidies and compensations under the new administration's programs and policies.
An imminent solution for PLN's financial independence is required. PLN's fiscal potential can be unlocked with minimal GOI assistance by improving efficiency, particularly by reducing operating costs through the adoption of renewables.
Reducing cost and volatility via renewables
The Basic Cost of Providing Electricity (BPP) is arguably the main factor determining electricity costs, which are then translated into tariffs paid by customers. Any increase in BPP adds to the GOI’s financial burden.
Since 2020, coal and gas purchase costs have increased significantly. In 2023, purchased electricity from coal and gas contributed to a 14% increase in operational expenses and accounted for 63% of total operating costs. On average, PLN spent around US$4-5 cents per kilowatt hour (¢/kWh) for coal purchases, almost 40% higher than in 2020.
Additionally, PLN’s exposure to US$-denominated coal prices requires reconsideration. Despite the GOI's coal price cap, PLN has struggled with coal price fluctuations due to exchange rate changes. While purchases are denominated in US$, PLN’s tariff collections are in Indonesian rupiahs.
Apart from the base fuel purchasing costs, PLN also had to factor in shipping and plant maintenance costs. As coal-fired power plants age, they lose efficiency and require more coal to produce each kilowatt hour (kWh) of electricity.
Considering the difficulty in reducing purchased electricity costs and renegotiating power purchase agreements with independent power producers, PLN should accelerate the transition from fossil fuel-based energy to avoid price volatility.
Renewable energy sources are low-cost to operate compared to fossil fuel power plants. Furthermore, IEEFA’s recent report has shown that the levelized cost of electricity is around US$4.78¢/kWh for solar and US$4.77¢/kWh for wind. In comparison, coal costs around US$6.5¢/kWh, which is at least US$1.7¢/kWh more.
Solar and wind are now the lowest-cost energy sources globally and are expected to become even cheaper by 2030. Notably, maintaining coal-fired power plants is more expensive than constructing entirely new, rapidly built renewable energy plants.
Consequently, the gradual retirement of coal-fired power plants and a concerted transition to renewable energy sources will be a win-win solution for Indonesia to fulfill its Paris Agreement commitments and financial goals.
Mutya Yustika, IEEFA
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Wednesday, 28 April 21
MARKET INSIGHT - INTERMODAL
Despite the current challenges as a result of the global pandemic, 2021 is turning out to be a landmark year for the iron ore market with spot pric ...
Monday, 26 April 21
CHINA TO FURTHER CUT COAL USE IN 2021 - XINHUA
China aims to reduce the share of coal in its energy mix to less than 56% this year, according to a guideline released by the National Energy Admin ...
Wednesday, 21 April 21
COAL FINANCING COSTS HAVE SURGED IN PAST 10 YEARS - UNIVERSITY OF OXFORD - THE GUARDIAN
Coal financing costs have surged over the last decade as investors demand returns four times as high as the payoff required from renewable energy p ...
Tuesday, 20 April 21
US DOLLAR LIBOR TRANSITION IN ASSET FINANCE - WHERE ARE WE NOW? - WATSON FARLEY & WILLIAMS
Since our last article, there has been a raft of regulatory and market body announcements relating to the transition away from LIBOR and the follow ...
Sunday, 18 April 21
INDONESIA LIKELY TO WITNESS 119 OIL AND GAS PROJECTS STARTS ACROSS VALUE CHAIN BY 2025, SAYS GLOBALDATA
Indonesia is expected to witness 119 oil and gas projects commencing their operations across value chain during 2021-2025, accounting for 6% of the ...
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- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
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- Edison Trading Spa - Italy
- Carbofer General Trading SA - India
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- GMR Energy Limited - India
- Metalloyd Limited - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Lanco Infratech Ltd - India
- Uttam Galva Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- PowerSource Philippines DevCo
- Leighton Contractors Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- White Energy Company Limited
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
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- Barasentosa Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Grasim Industreis Ltd - India
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- Global Green Power PLC Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
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- PTC India Limited - India
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- Directorate General of MIneral and Coal - Indonesia
- ASAPP Information Group - India
- Marubeni Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Indika Energy - Indonesia
- Indian Energy Exchange, India
- Indogreen Group - Indonesia
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- Chamber of Mines of South Africa
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- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
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- Xindia Steels Limited - India
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- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Sarangani Energy Corporation, Philippines
- Tata Chemicals Ltd - India
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- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- Interocean Group of Companies - India
- Wood Mackenzie - Singapore
- Straits Asia Resources Limited - Singapore
- Gujarat Electricity Regulatory Commission - India
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
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- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- Jindal Steel & Power Ltd - India
- LBH Netherlands Bv - Netherlands
- Bhatia International Limited - India
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
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- Vedanta Resources Plc - India
- Energy Link Ltd, New Zealand
- Borneo Indobara - Indonesia
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Rio Tinto Coal - Australia
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Semirara Mining and Power Corporation, Philippines
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- Maheswari Brothers Coal Limited - India
- PNOC Exploration Corporation - Philippines
- Aditya Birla Group - India
- Eastern Coal Council - USA
- Mintek Dendrill Indonesia
- Global Coal Blending Company Limited - Australia
- Mercator Lines Limited - India
- Electricity Authority, New Zealand
- Deloitte Consulting - India
- ICICI Bank Limited - India
- MS Steel International - UAE
- Sindya Power Generating Company Private Ltd
- Eastern Energy - Thailand
- Sical Logistics Limited - India
- CIMB Investment Bank - Malaysia
- Banpu Public Company Limited - Thailand
- Salva Resources Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Malabar Cements Ltd - India
- SMG Consultants - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ministry of Mines - Canada
- PetroVietnam Power Coal Import and Supply Company
- London Commodity Brokers - England
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Bulk Trading Sa - Switzerland
- Posco Energy - South Korea
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Trasteel International SA, Italy
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Central Electricity Authority - India
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- The State Trading Corporation of India Ltd
- Essar Steel Hazira Ltd - India
- VISA Power Limited - India
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Samtan Co., Ltd - South Korea
- CNBM International Corporation - China
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Minerals Council of Australia
- Bhoruka Overseas - Indonesia
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Meralco Power Generation, Philippines
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- Africa Commodities Group - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Merrill Lynch Commodities Europe
- Bharathi Cement Corporation - India
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Coalindo Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Cement Manufacturers Association - India
- Indonesian Coal Mining Association
- SN Aboitiz Power Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- European Bulk Services B.V. - Netherlands
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- The University of Queensland
- Pipit Mutiara Jaya. PT, Indonesia
- Standard Chartered Bank - UAE
- Sakthi Sugars Limited - India
- Singapore Mercantile Exchange
- Simpson Spence & Young - Indonesia
- Kartika Selabumi Mining - Indonesia
- Jaiprakash Power Ventures ltd
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- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Parry Sugars Refinery, India
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement PLC, Thailand
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Therma Luzon, Inc, Philippines
- Thiess Contractors Indonesia
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Commonwealth Bank - Australia
- Australian Commodity Traders Exchange
- Economic Council, Georgia
- India Bulls Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Agrawal Coal Company - India
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
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- AsiaOL BioFuels Corp., Philippines
- Medco Energi Mining Internasional
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