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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, 23 August 22
SHIPPING: GLOBAL TAX REFORM - WATSON FARLEY & WILLIAMS
OECD rules designed to implement a global minimum corporate tax rate for very large multinational groups have now been published and are expected t ...
Tuesday, 23 August 22
PARTIES CONCLUDE JOINT R&D AGREEMENT FOR WORLD’S FIRST AMMONIA FLOATING STORAGE AND REGASIFICATION BARGE CONTRIBUTING TO PROMOTING THE EARLY INTRODUCTION OF AMMONIA FUEL - NYK
NYK Line, Nihon Shipyard Co., Ltd. (NSY), ClassNK, and IHI Corporation (IHI) signed a joint research and development agreement for the commercializ ...
Monday, 22 August 22
INDONESIAN GOVERNMENT IMPOSED ON NEW PROGRESSIVE ROYALTIES FOR COAL
Indonesian President Joko Widodo has signed a Government Regulation (Number 26 of 2022) on 15 August 2022 related to the progressive royalty rates ...
Monday, 22 August 22
CHINA'S JULY RUSSIAN COAL IMPORTS HIT 5-YR HIGH AS WEST SHUNS MOSCOW - REUTERS
China’s coal imports from Russia jumped 14% in July from a year earlier to their highest in at least five years, as China bought discounted c ...
Sunday, 21 August 22
COAL-RICH POLAND FACES WINTER OF ENERGY DISCONTENT - DW
Poland uses 10 million tons of coal a year to heat households — a whopping 87% of all coal consumed in EU homes in 2019, according to the War ...
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- Uttam Galva Steels Limited - India
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- Banpu Public Company Limited - Thailand
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- CNBM International Corporation - China
- The Treasury - Australian Government
- Maharashtra Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Gujarat Mineral Development Corp Ltd - India
- Marubeni Corporation - India
- Miang Besar Coal Terminal - Indonesia
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- Mercuria Energy - Indonesia
- Georgia Ports Authority, United States
- Energy Development Corp, Philippines
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- Goldman Sachs - Singapore
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- Asmin Koalindo Tuhup - Indonesia
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- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Trasteel International SA, Italy
- PowerSource Philippines DevCo
- MS Steel International - UAE
- Baramulti Group, Indonesia
- London Commodity Brokers - England
- White Energy Company Limited
- Tata Chemicals Ltd - India
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- Independent Power Producers Association of India
- Economic Council, Georgia
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- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Transport, Egypt
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- Madhucon Powers Ltd - India
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- The University of Queensland
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- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Coastal Gujarat Power Limited - India
- Mintek Dendrill Indonesia
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- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Electricity Authority, New Zealand
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- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
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- Jaiprakash Power Ventures ltd
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- Standard Chartered Bank - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Alfred C Toepfer International GmbH - Germany
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- Leighton Contractors Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Tamil Nadu electricity Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parry Sugars Refinery, India
- Bhatia International Limited - India
- Xindia Steels Limited - India
- Bangladesh Power Developement Board
- Singapore Mercantile Exchange
- Bayan Resources Tbk. - Indonesia
- Wilmar Investment Holdings
- Renaissance Capital - South Africa
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- AsiaOL BioFuels Corp., Philippines
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- Central Electricity Authority - India
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- New Zealand Coal & Carbon
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- Commonwealth Bank - Australia
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- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
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- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Wood Mackenzie - Singapore
- Billiton Holdings Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Pipit Mutiara Jaya. PT, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
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- San Jose City I Power Corp, Philippines
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- Sindya Power Generating Company Private Ltd
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- Indian Oil Corporation Limited
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- PTC India Limited - India
- Price Waterhouse Coopers - Russia
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- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Central Java Power - Indonesia
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- GMR Energy Limited - India
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- Australian Commodity Traders Exchange
- Cement Manufacturers Association - India
- Gujarat Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
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- PetroVietnam Power Coal Import and Supply Company
- Medco Energi Mining Internasional
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
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- Minerals Council of Australia
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- Planning Commission, India
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- Karbindo Abesyapradhi - Indoneisa
- Sakthi Sugars Limited - India
- India Bulls Power Limited - India
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Ministry of Finance - Indonesia
- Metalloyd Limited - United Kingdom
- Port Waratah Coal Services - Australia
- Directorate General of MIneral and Coal - Indonesia
- Indonesian Coal Mining Association
- Chamber of Mines of South Africa
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