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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, 20 October 21
MARKET INSIGHT - INTERMODAL
IMO 2020, Ballast Water Treatment regulations, Green Recycling, GHG emissions, EEXI, CII, ETS, Fit for 55, Carbon price/levy, the Poseidon Principl ...
Tuesday, 19 October 21
SPONGE IRON SECTOR MIGHT REPORT NEGATIVE GROWTH DUE TO COAL CRISIS: SIMA - PTI
The domestic sponge iron industry might report a negative growth in the ongoing December quarter “if the shortage of coal is allowed to conti ...
Tuesday, 19 October 21
COAL INDIA, THE FALL GUY FOR POWER CRISIS - INDIA EXPRESS
The post-Covid economic recovery has led to a major increase in the demand for power, both in India and globally. In India, coal-based power plants ...
Saturday, 16 October 21
SOLAR INSTALLATION SURGE PUTS INDIA ON TRACK TO CAP COAL-FIRED POWER AS EARLY AS 2024 - IEEFA
Recent increase in solar power installations could push coal to peak sooner than expected
If India keeps installing solar capacity a ...
Saturday, 16 October 21
DESPITE HIGHER COAL PRICES, U.S. COAL RECOVERY LOOKS WEAK BY MOST MEASURES - IEEFA
U.S. coal sector is locked into a long-term sectoral decline
Coal prices have surged to the highest level in years in the U.S., and have soare ...
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- Karaikal Port Pvt Ltd - India
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- Rashtriya Ispat Nigam Limited - India
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- Planning Commission, India
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- IHS Mccloskey Coal Group - USA
- Parliament of New Zealand
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- Indonesian Coal Mining Association
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- Mintek Dendrill Indonesia
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- Thai Mozambique Logistica
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- AsiaOL BioFuels Corp., Philippines
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- The Treasury - Australian Government
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- ICICI Bank Limited - India
- Samtan Co., Ltd - South Korea
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
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- Timah Investasi Mineral - Indoneisa
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- Standard Chartered Bank - UAE
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- Minerals Council of Australia
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- GMR Energy Limited - India
- Bhatia International Limited - India
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- Vedanta Resources Plc - India
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- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
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- Interocean Group of Companies - India
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- Wilmar Investment Holdings
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- Australian Commodity Traders Exchange
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
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- VISA Power Limited - India
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- Oldendorff Carriers - Singapore
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- Kepco SPC Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Billiton Holdings Pty Ltd - Australia
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- Iligan Light & Power Inc, Philippines
- ASAPP Information Group - India
- Aditya Birla Group - India
- Larsen & Toubro Limited - India
- Goldman Sachs - Singapore
- PTC India Limited - India
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- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
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- Miang Besar Coal Terminal - Indonesia
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- Videocon Industries ltd - India
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- Alfred C Toepfer International GmbH - Germany
- White Energy Company Limited
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- Bangladesh Power Developement Board
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- Georgia Ports Authority, United States
- IEA Clean Coal Centre - UK
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Wood Mackenzie - Singapore
- Gujarat Sidhee Cement - India
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- Petron Corporation, Philippines
- Commonwealth Bank - Australia
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- Electricity Authority, New Zealand
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- Rio Tinto Coal - Australia
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