JAKARTA (TheInsiderStories)— Indonesia’s state-utility company PT Perusahaan Listrik Negara (PLN) need to reduce its dependency on coal as energy source, apart from strengthening its financial performance in a bid to boost investor confidence for its plants to sell US$5 billion global medium term notes (GMTN) in this quarter.
The notes to be issued will likely have ten years-tenor. President Director Sofyan Basir said on Tuesday (24/04), proceeds from the GMTN sale will be used for its investment plan and pay its long-term debts.
The long-term tenor is needed as the power projects take a long time to build. The power plant projects usually take four to five years to be finished. After that, the projects need some time to operate until reaching the break-even point.
PLN is planning to raise up to Rp 60 trillion ($4.38 billion) this year through bank loans and bonds issuance in local and international markets to finance its projects. The power producer also looking coal mines to support its power plant supply.
Finance Director Sarwono Sudarto explained, the company has set capital expenditure for an investment of Rp90 trillion this year, slightly higher than Rp89.5 trillion last year. The funds will be used to finance the company’s power plants and transmission projects, which are part of the government’s 35,000 megawatts (MW) power plant development project.
Based on the 35,000 power plant capacity program, 35 power plants with a capacity of 10,681 MW will be developed by PLN and 74 projects with a capacity of 25,904 MW will be developed independent power producers.
Just over half of the power plants will be generated by coal. PLN has projected that its coal need will continue to rise in the next few years from 92 million tons in 2019 to 126 million tons in 2020 and 121 million tons in 2021, or an average of 123 million tons per annum.
Basir expects efficiency will improve in line with an improvement of gas infrastructure in the country. He said in addition to secure coal supply, the purpose the move is also to press down basic production costs in the long run.
Last year, PLN was heavily criticized for inefficiency and accumulating debts totaling $22 billion; these debts raised concerns on the part of Minister of Finance Sri Mulyani Indrawati about company debts and interest payable over the next 30 years exceeding cash-raising capability of the state-owned enterprise.
Many stakeholders warned that over the long run PLN may suffer cash flow problems because of the mandatory 35,000 MW mega power plant. PLN will need around US$10 billion at least for the construction of the 10,000 MW plants and for transmission.
Even so, Basir claimed PLN’S debts were still manageable. Around Rp100 trillion of debt was owed to local creditors, $1.1 billion to the World Bank and Asian Development Bank and the remainder of around Rp186 billion to various foreign creditors.