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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, 17 April 19
LNG WESTERN AFRICA CONFERENCE 2019
The only LNG Focus Platform to Accelerate Investment and Cooperation in Western African Countries
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Saturday, 13 April 19
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CAPESIZE: WEST AUSTRALIA TO CHINA IRON ORE CARGOES LIFTING FROM $4.60 PMT TO ABOVE $5.00 - BALTIC BRIEFING
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Friday, 12 April 19
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OFFSHORE MENA CONGRESS 2019
Offshore MENA Congress 2019
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Offshore MENA Congress 2019 Offshor ...
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- TeaM Sual Corporation - Philippines
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- Wood Mackenzie - Singapore
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- Tata Chemicals Ltd - India
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- Price Waterhouse Coopers - Russia
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- Tamil Nadu electricity Board
- GAC Shipping (India) Pvt Ltd
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- Attock Cement Pakistan Limited
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- SN Aboitiz Power Inc, Philippines
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- Siam City Cement PLC, Thailand
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- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Kideco Jaya Agung - Indonesia
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indian Oil Corporation Limited
- Romanian Commodities Exchange
- Port Waratah Coal Services - Australia
- IHS Mccloskey Coal Group - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- Semirara Mining and Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Cigading International Bulk Terminal - Indonesia
- Merrill Lynch Commodities Europe
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- Asmin Koalindo Tuhup - Indonesia
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- ICICI Bank Limited - India
- Leighton Contractors Pty Ltd - Australia
- Mercator Lines Limited - India
- Sical Logistics Limited - India
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- Posco Energy - South Korea
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Commonwealth Bank - Australia
- CNBM International Corporation - China
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Ministry of Mines - Canada
- Riau Bara Harum - Indonesia
- Africa Commodities Group - South Africa
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
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- Kapuas Tunggal Persada - Indonesia
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- Altura Mining Limited, Indonesia
- Neyveli Lignite Corporation Ltd, - India
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- Sindya Power Generating Company Private Ltd
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- Petron Corporation, Philippines
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- Savvy Resources Ltd - HongKong
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- SMC Global Power, Philippines
- Mjunction Services Limited - India
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- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Ministry of Transport, Egypt
- Globalindo Alam Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Madhucon Powers Ltd - India
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Meralco Power Generation, Philippines
- Indika Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- CIMB Investment Bank - Malaysia
- Orica Australia Pty. Ltd.
- Trasteel International SA, Italy
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- Latin American Coal - Colombia
- TNB Fuel Sdn Bhd - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- Energy Link Ltd, New Zealand
- Interocean Group of Companies - India
- The Treasury - Australian Government
- Australian Commodity Traders Exchange
- Australian Coal Association
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Formosa Plastics Group - Taiwan
- Malabar Cements Ltd - India
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- Heidelberg Cement - Germany
- Rashtriya Ispat Nigam Limited - India
- Antam Resourcindo - Indonesia
- PTC India Limited - India
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- Star Paper Mills Limited - India
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- Minerals Council of Australia
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- Pipit Mutiara Jaya. PT, Indonesia
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