JAKARTA (TheInsiderStories)—Power producers in Indonesia is facing obstacles in developing power plants. The Independent Power Producers Association of Indonesia (APLSI) and PricewaterHouse Cooper said a report that major obstacles are regulatory uncertainty, lack of coordination among ministry/institution, and the poor management of 35,000-megawatt projects.
Furthermore, investors also criticize the low tariff offered by state-owned electricity company PT Perusahaan Listrik Negara. In order to gain the insight of what the investors think about the electricity industry. TheInsiderStories interviews Vice President of Adaro Power Dharma Djojonegoro.
Q: How do you see the prospect of power plant business in Indonesia?
The business is currently in a difficult situation. PLN considers to revise cut future expansion plan for power plant development (the 35,000 Megawatt power plant project) due to the low electricity demand. Consequently, many projects tend to be canceled or postponed. In this condition, we are committed to help the government in the areas that we can help.
Q: What is the company’s plan to cope with the current difficulties ?
We take it easy because there are some projects, such as coal-fired power plant in Batang (Central Java) and another project called Tanjung Power Indonesia (in South Kalimantan) already in the construction phase. The two projects already reached 35% and 88% completion respectively. We are confident the two projects will be commenced on time. Tanjung Power will be operated next year and Batang project will be operated in 2020.
Q: How much your company’s capital expenditure this year?
We are about to invest a huge number of US$1.5 billion this year. But it will not be visible in our financial statement because of the two projects constructed by a consortium.
Q: How much the capacity of a mine-mouth power plant in East Kalimantan and how much is the investment?
The capacity is 2×100 megawatt and it needs around US$300-400 million this year.
Q: How do you see the regulatory reform pushed by the Ministry of Energy and Mineral Resources?
We do appreciate the government’s effort. For example a Ministerial Regulation No. 10/2018 that will make us easier to find project financing. However, we want to suggest the government to revise the ministerial regulations, including on the force majeure, a regulation that bans a tender winner of power plant projects to sell the company’s shares. I think the governments have a good intention […] but it brings negative effect for the power company because it makes use difficult to finance our project.
Q: Do you have a plan to go for an IPO in 2019?
We have a plan about it […] We may undertake an IPO after 2020 when the Batang coal-fired power plant is in operational. It could be 2020 or 2025, depends on the situation.
Q: Do you have a plan to sell power to markets in ASEAN?
We are very open to the option, but we should see the regulation, etc.
Q: How do you see the current power purchase rate offered by PLN?
Many power companies say the price is challenging. For our project in East Kalimantan, we can do that, but for other companies, I don’t know.
Q: President Joko Widodo is pushing to grow the manufacturing sector, the electricity sector still have to import some intermediary goods. Are you interested in establishing a factory that produces it?
We are open to the opportunities. We already discussed it many times.
Q: How do you see the prospects of Indonesia’s economy, our GDP has reached US$1 trillion?
We are optimistic. we are lucky; we have political stability, abundant natural resources, strong macro-economic conditions. The world praise us, especially when we received investment grade.
Q: Is Indonesia’s economy already on the right direction?
We are concerned about the low purchasing power rate. The growth of electricity rate only increased by 3% last year.
Q: Do you have plans to expand to the Eastern part of Indonesia?
We will be very happy to expand to the East, but the problem is we need power transmission to transmit the electricity. So we are waiting for the PLN to build the transmission. If the transmissions are ready, we will expand to the Papua.