JAKARTA (TheInsiderStories) – Indonesia’s power producer, PT Perusahaan Listrik Negara (PLN) recorded a fantastic loss Rp18.4 trillion (US$1.22 billion) in the third quarter (3Q) of this year compared to the same period in 2017. In the 3Q of last year the company was still able to print a net profit of Rp3.05 trillion.
The finance director Sarwono Sudarto said on Tuesday (30/10), this loss was due to the exchange rate loss which reached Rp17.3 trillion in 3Q 2018.
Actually PLN’s revenue is still growing positively, rose 6.97 percent to Rp200.9 trillion from last year Rp187.8 trillion. But the foreign exchange loss and higher operating expenses making the company recorded huge losses.
In the 3Q, the state-owned company (SOE) recorded operating costs Rp224 trillion, whereas the same period of last year were only Rp200 trillion. The increased operating expenses were due to the increase in fuel and lubricant costs which were originally Rp85 trillion in the 3Q of last year to Rp101.8 trillion in this year.
PLN’s Finance Director, Sarwono Sudarto did not provide a clear reason why the company’s exchange rate loss could be that large. He only promised to maintain the financial condition of the company and try to maintain the growth of electricity consumption.
Meanwhile, PLN’s Director for Corporate Planning, Syofvie Rukman added that the electricity consumption growth in 3Q only grew above six percent, far from the target set in the 2017-2018 plan grow 8.3 percent. She did not specify why consumption growth could not reach the target.
“I hope that we can maintain the consumption growth at least above 6 percent this year not as drastic as the 2017. Yes, at least I can still maintain consumption above 6,” said Rukman.
This consumption growth, said Syofvie, will be very closely related to the shift in the Commissioning Operating Development schedule of the 35 thousand megawatt power plant project. She said, if the consumption did not grow well then this would certainly affect PLN’s ability to develop a power plant project.
She continued, various efforts to be able to maintain the electricity consumption are carried out by PLN.
In the latest report, the Organization for Economic Cooperation and Development (OECD) has reminded Indonesia, that state-owned enterprises which are involved in the government infrastructure and energy businesses could expose cash flow constraint and causing higher fiscal risks for the government
Its also said, the government policies to keep fuel and electricity prices unchanged despite higher global oil prices have also has a possibility hurting their balance sheets.
According to the government’s data, about 20 listed SOEs have seen their leverages gone up significantly with debt-to-EBITDA level soared to about five times from one times in 2011.
As the central government has limited funds at its disposal, SOEs as key agents of the infrastructure development has duty to fulfill the financing. However, this raised problems cause these SOEs have to borrow heavily to secure working capital budgets for some large projects.
Unfortunately, the projects are often delayed and take many years before starting to generate revenue. Even worse, some projects outside the island of Java may not be profitable at all.
If this trend continues, then the SOEs could be forced to cease all investment within the next five years to control their finances, renegotiate debt or ask for recapitalization from the government. In total, there are 26 SOEs recorded US$363.5 million loss last year. That was lower than $421 million in 2016.
The Joko Widodo’s administration is strongly supporting SOEs to lead economic development in certain sectors such as infrastructure, but at the same time the government is adopting liberalization policies in other sectors.
The Indonesian government has reiterated that SOEs are responsible for their own business expansion and should not expect the government to step in when losses arise. State capital injections into SOEs increased from $222 million in 2014 to $3.01 billion in 2018.
Next year, the government also planned to inject capital for state-owned power producer PLN and toll operator PT Hutama Karya with total amount Rp17 trillion ($1.17 billion). In details Rp6.5 trillion for PLN, while Rp10.5 trillion for Hutama Karya.
However, the government plans to shift the focus to fiscal sustainability during the second half of the administration, and the capital injection into SOEs is expected to shrink from Rp50.5 trillion in 2016 (revised budget) to Rp10 trillion in 2019. That leaves the SOEs with only one option to fund their expansion: debt.
However, it is difficult to imagine that the government will turn a blind eye if the SOEs carrying out social-oriented activities or the nation’s long cherished infrastructure projects face financial troubles.