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PLN to fall short of 2018 target

27 October 2018

State-owned electricity firm PLN is expected to fall short of its investment target this year as it has recorded below expectation figures thus far, a company executive has said.

In its 2018 work plan and budget (RKAP), PLN targeted to invest a total of Rp 123 trillion (US$8 billion) throughout the year.

However, as of September, PLN’s investment has only reached Rp 60 trillion, or just 48 percent of its full year target.

PLN finance director Sarwono Sudarto said that the firm estimated that by the end of this year it would invest Rp 80 to 90 trillion, or just 65 percent of its initial target.

“We project that the realization of investments could reach Rp 80 trillion and hopefully we can reach that by year-end,” Sarwono told a press conference recently.

He went on to say that the investment needed in 2021 would likely be within a similar range, and that it would only decline in 2021 after several projects were completed.

Sarwono, however, did not explain why the firm could not reach its initial target, but gave assurances that there would be no delays in any power plant projects or any risks to the national electricity supply.

From this year’s expected investment of Rp 80 to 90 trillion, 90 percent will be allocated for power plant projects, such as the development of coal-fueled power plants (PLTU) and gas-fueled power plants (PLTG).

The latest data from the Energy and Mineral Resources Ministry shows that 50 percent of PLN’s projects in the government’s flagship 35 gigawatts (GW) electricity procurement program have reached construction phase while 10 percent are ready to begin operations.

PLN’s share in the program is 25 percent of the total 35 GW procurement, while the remaining will be procured from independent power producers (IPPs).

Fabby Tumiwa, the executive director of local energy watchdog Institute for Essential Services Reform (IESR), said that the lack of investment would impact the electricity supply in the medium term.

Fabby further said that the lowered investment target could be caused by delays in several big projects, such as the planned steam and gas-fueled power plant (PLTGU) Jawa 2, set to be developed in Cilamaya, West Java, that has yet to reach financial close.

Earlier this week, Kontan.co.id reported that the project had reached a dry close and would only reach financial close next month.

“There are also 45 renewable energy projects that are still struggling to reach financial close, even though they were initially expected to commence construction this year,” Fabby told The Jakarta Post on Thursday.

“We believe it is due to unsupportive regulations and PLN’s snail-paced progress to determine electricity suppliers.”

Overall, Indonesia has also seen a lack of investment in the electricity sector, which booked $4.8 billion as of September, or just a mere 39.3 percent of its full year target of $12.2 billion.

However, the ministry’s electricity director general, Andy Sommeng, was optimistic the figure could be boosted with PLN’s recent issuance of triple-tranche global bonds worth around $1.5 billion. He added that the funds would soon be disbursed from several power plant projects that have begun construction.

“[Companies developing] power plants that have reached construction phase will make purchases, and this will logically attract funding,” he said on Wednesday.

Regarding the bond issuance, PLN’s Sarwono said that the corporate action was needed to develop power plants and to reprofile the company’s debt to ensure its financial health.

The issuance of around $1.5 billion worth of global bonds on Oct. 18 was the second time this year PLN has issued bonds after it issued global bonds worth $2 billion in May.

Source: Jakarta Post, 27 October 2018