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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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Tuesday, 14 January 20
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- Coal and Oil Company - UAE
- PowerSource Philippines DevCo
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- CIMB Investment Bank - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Bahari Cakrawala Sebuku - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- Mintek Dendrill Indonesia
- Kobexindo Tractors - Indoneisa
- Bhoruka Overseas - Indonesia
- OPG Power Generation Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- New Zealand Coal & Carbon
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- Georgia Ports Authority, United States
- The University of Queensland
- White Energy Company Limited
- Heidelberg Cement - Germany
- Semirara Mining Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- Port Waratah Coal Services - Australia
- Parry Sugars Refinery, India
- Global Green Power PLC Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- Global Coal Blending Company Limited - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parliament of New Zealand
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- Economic Council, Georgia
- Bhushan Steel Limited - India
- Barasentosa Lestari - Indonesia
- Indika Energy - Indonesia
- Tamil Nadu electricity Board
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
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- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
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- Directorate General of MIneral and Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Renaissance Capital - South Africa
- Gujarat Sidhee Cement - India
- Africa Commodities Group - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Finance - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
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- Karaikal Port Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Rashtriya Ispat Nigam Limited - India
- Central Electricity Authority - India
- PTC India Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Goldman Sachs - Singapore
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- McConnell Dowell - Australia
- TeaM Sual Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Petron Corporation, Philippines
- Wood Mackenzie - Singapore
- Miang Besar Coal Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- Therma Luzon, Inc, Philippines
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- European Bulk Services B.V. - Netherlands
- GAC Shipping (India) Pvt Ltd
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- Kapuas Tunggal Persada - Indonesia
- MS Steel International - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Energy Link Ltd, New Zealand
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- The State Trading Corporation of India Ltd
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Salva Resources Pvt Ltd - India
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- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- IEA Clean Coal Centre - UK
- Merrill Lynch Commodities Europe
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Central Java Power - Indonesia
- Iligan Light & Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- International Coal Ventures Pvt Ltd - India
- The Treasury - Australian Government
- Intertek Mineral Services - Indonesia
- Siam City Cement - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Transport, Egypt
- Medco Energi Mining Internasional
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- ICICI Bank Limited - India
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- Essar Steel Hazira Ltd - India
- Savvy Resources Ltd - HongKong
- Posco Energy - South Korea
- Ministry of Mines - Canada
- Jorong Barutama Greston.PT - Indonesia
- Trasteel International SA, Italy
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- Grasim Industreis Ltd - India
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Metalloyd Limited - United Kingdom
- Makarim & Taira - Indonesia
- Star Paper Mills Limited - India
- Banpu Public Company Limited - Thailand
- Leighton Contractors Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- Planning Commission, India
- Indo Tambangraya Megah - Indonesia
- Agrawal Coal Company - India
- Minerals Council of Australia
- Kumho Petrochemical, South Korea
- SMG Consultants - Indonesia
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Independent Power Producers Association of India
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Thai Mozambique Logistica
- Attock Cement Pakistan Limited
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Madhucon Powers Ltd - India
- Larsen & Toubro Limited - India
- Electricity Authority, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Edison Trading Spa - Italy
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
- Australian Coal Association
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Jindal Steel & Power Ltd - India
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- VISA Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Tata Chemicals Ltd - India
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Formosa Plastics Group - Taiwan
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
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