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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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- Billiton Holdings Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- The State Trading Corporation of India Ltd
- Anglo American - United Kingdom
- Coastal Gujarat Power Limited - India
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- Maheswari Brothers Coal Limited - India
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- Sakthi Sugars Limited - India
- Larsen & Toubro Limited - India
- Economic Council, Georgia
- Banpu Public Company Limited - Thailand
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- GMR Energy Limited - India
- Globalindo Alam Lestari - Indonesia
- Bharathi Cement Corporation - India
- Simpson Spence & Young - Indonesia
- Mercuria Energy - Indonesia
- Eastern Coal Council - USA
- Cigading International Bulk Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Bhoruka Overseas - Indonesia
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Kumho Petrochemical, South Korea
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- India Bulls Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Vedanta Resources Plc - India
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Asmin Koalindo Tuhup - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- PowerSource Philippines DevCo
- SMG Consultants - Indonesia
- Global Green Power PLC Corporation, Philippines
- Cement Manufacturers Association - India
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Baramulti Group, Indonesia
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- Central Java Power - Indonesia
- Carbofer General Trading SA - India
- Goldman Sachs - Singapore
- CIMB Investment Bank - Malaysia
- McConnell Dowell - Australia
- Aditya Birla Group - India
- ICICI Bank Limited - India
- Parliament of New Zealand
- Karaikal Port Pvt Ltd - India
- PTC India Limited - India
- Energy Development Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Renaissance Capital - South Africa
- Binh Thuan Hamico - Vietnam
- Samtan Co., Ltd - South Korea
- Kobexindo Tractors - Indoneisa
- VISA Power Limited - India
- Australian Coal Association
- Ceylon Electricity Board - Sri Lanka
- PetroVietnam Power Coal Import and Supply Company
- Parry Sugars Refinery, India
- Krishnapatnam Port Company Ltd. - India
- Tamil Nadu electricity Board
- Australian Commodity Traders Exchange
- Therma Luzon, Inc, Philippines
- Thiess Contractors Indonesia
- Merrill Lynch Commodities Europe
- GVK Power & Infra Limited - India
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Global Business Power Corporation, Philippines
- Heidelberg Cement - Germany
- Indian Energy Exchange, India
- Chamber of Mines of South Africa
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Metalloyd Limited - United Kingdom
- Straits Asia Resources Limited - Singapore
- Ind-Barath Power Infra Limited - India
- Timah Investasi Mineral - Indoneisa
- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Standard Chartered Bank - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Singapore Mercantile Exchange
- Sindya Power Generating Company Private Ltd
- Uttam Galva Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Deloitte Consulting - India
- Bhushan Steel Limited - India
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- Bhatia International Limited - India
- Sree Jayajothi Cements Limited - India
- Eastern Energy - Thailand
- The Treasury - Australian Government
- Toyota Tsusho Corporation, Japan
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- Meralco Power Generation, Philippines
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Sical Logistics Limited - India
- Gujarat Sidhee Cement - India
- San Jose City I Power Corp, Philippines
- Rio Tinto Coal - Australia
- Planning Commission, India
- Bahari Cakrawala Sebuku - Indonesia
- Indian Oil Corporation Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- Xindia Steels Limited - India
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Dalmia Cement Bharat India
- MS Steel International - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Electricity Generating Authority of Thailand
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- Siam City Cement - Thailand
- Central Electricity Authority - India
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- Posco Energy - South Korea
- Oldendorff Carriers - Singapore
- Altura Mining Limited, Indonesia
- Minerals Council of Australia
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Lanco Infratech Ltd - India
- Savvy Resources Ltd - HongKong
- Ministry of Mines - Canada
- Kalimantan Lumbung Energi - Indonesia
- Thai Mozambique Logistica
- South Luzon Thermal Energy Corporation
- Energy Link Ltd, New Zealand
- Bangladesh Power Developement Board
- Indogreen Group - Indonesia
- Medco Energi Mining Internasional
- Indo Tambangraya Megah - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- Bukit Baiduri Energy - Indonesia
- Mercator Lines Limited - India
- Vizag Seaport Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- European Bulk Services B.V. - Netherlands
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