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