Perusahaan Listrik Negara

History

The history of electrical companies in Indonesia began at the end of 19th century when Dutch colonialists established the first electrical generator. The electrical energy enterprise then expanded into the public company, NV.NIGM, formerly dealing in gas area only, which enlarged its business into the area of electrical energy. In World War II, the Japanese took control of the electrical companies. After Indonesian Independence day on 17 August 1945, Indonesian youth took control of the electrical companies in September 1945 and handed them over to the government of the Republic of Indonesia. The history of the electricity sector since then has been one of continuing institutional change.

On 27 October 1945 President Sukarno established the Jawatan Listrik dan Gas (Bureau of Electricity And Gas) with a generation capacity of only 157.5 MW. On 1 January 1961, the bureau of Electricity and Gas was changed into BPU PLN (''Badan Pimpinan Umum Perusahaan Listrik Negara) which dealt in the areas of electricity, agas, and kokas (a type of fuel derived from the remains of coal). On 1 January 1965, BPU-PLN was closed and two governmental companies, were set up, Perusahaan Listrik Negara (PLN) handling the electrical energy and Perusahaan Gas Negara (PGN) handling gas. The capacity of the electrical-power generator of PLN, then, was 300 MW. There were further institutional changes during the 1970s, 1980s, and 1990s.

In September 2002 a new electricity law, Law No 20/2002, was introduced which foreshadowed major changes in the structure of the electricity supply industry. The new law required an end to PLN's monopoly on electricity distribution within five years after which time private companies (both foreign and domestic) were to be permitted to sell electricity directly to consumers. All companies were to use PLN's existing transmission network. However, the law was annulled in 2004 by the Constitutional Court. As a result, the electricity sector was in an uncertain legal situation for some years. A new electricity law, Law No 30/2009, was introduced to provide greater legal certainty although this law, too, was controversial because, as was the case with the earlier 2002 law, it legislated to end PLN's monopoly in the sector.

Operations

In the first half of 2011, the PLN generated 88 terawatt-hours (TWh). The firm generated around 24% of its output using oil-based fuel with plans to reduce the share to 3% by 2013 and 1.7% by 2014. The forecast for the full year (2011) is around 182 tWh (equivalent to around 760 kWh per capita).

Capacity and organisation

At the end of 2011, the PLN's total generating capacity (produced by a many different plants across Indonesia) was estimated at around 28,500 MW. In 2012, a combined capacity of 3,351 megawatts will come online from 23 new power plants.

Main indicators have been increasing along with overall economic growth in Indonesia although the growth of revenue per unit sold (Rp/kWh) has been slow:

Source: Indonesian Statistics Bureau, Statistik Indonesia (annual publication: various years), Jakarta.

(a) PLN only. Does not include generation capacity in the main independent power producers which had an approximate capacity of another 5,600 MW at the end of 2012.

(b) Includes wholesale electricity purchases by PLN from independent power producers (who had a total combined capacity of around 4,200 MW in 2011) and resold to consumers.

(c) Average revenue shown (a proxy for the average price of electricity) = Output value divided by sales.

(d) Estimate in US cents = Average Rp revenue adjusted by the end-year exchange rate.

Source: Calculated from previous table.
Growth = annual production growth. Capacity utilisation = kWh generated per kW of generation capacity (theoretical maximum load at 100% capacity = 8,760); calculations assume that there is 4,200 MW of generating capacity in the independent power producers which sell electricity to the PLN. Labor productivity = Total GWh generated per employee in the PLN. Losses = sales as a % of production.

The Indonesian Government, and the senior management of the PLN, are officially committed to ongoing reforms designed to improve the efficiency of operations of the electricity supply sector in Indonesia. Performance indicators show some significant improvements in certain key measures in recent years (see previous table on Performance indicators). However, the overall reform process is often slow, hampered by the fact that the environment within which the state-owned PLN operates is closely regulated and often politicised.

Management

The PLN is Indonesia's second-largest state company by assets. The top level management, headed by the president director, reports to a government-appointed board. The board and the PLN management in turn report to the Minister of State-Owned Companies. President directors of PLN since 1979 have been as follows:

Difficulties came to light during early 2011 over arrangements during the management period of the long-serving (2001-2008) PLN president director Eddie Widiono Suwondho. Questions arose over certain procurement procedures which he supported. He was taken into questioning by Indonesia's Corruption Eradication Commission in March 2011. In December 2011 he was convicted to five years imprisonment for charges that centred on the appointment of a company to handle the provision of outsourced services for the PLN.

Policies

In late 2011, the new president director of the PLN, Nur Pamudji listed three milestones for PLN as targets for 2012:

Service

The reliability and quality of electricity supply has steadily improved in Indonesia in recent decades. Supply is more reliable in Java because the grid is relatively well-developed compared to the situation in the Outer Islands (such as Sumatra, Sulawesi and Kalimantan) where most areas are serviced by localised systems often powered by small diesel plants. However power outages are still common, even in Java . There was, for example, a particularly severe power outage in 2005 which reportedly affected around 100 million people across Java and Bali for over five hours.

Finances

The PLN has—and has had, for many years—considerable trouble with internal revenue flows. For one thing, government-regulated tariffs are often too low to cover operational costs and have not been set at a level sufficient to make a reasonable contribution towards capital costs for many years. For another thing, there is widespread consumer resistance to payment of electricity bills. The cash flows of the company are often weighed down with overdue debts from consumers.

Theft of electricity is common in many parts of Indonesia as well. In recent years, the PLN has been moving to tighten up on problems of non-payment of bills as well as theft. Prepaid meters are now required for all new housing units.

Apart from internal revenue flows, the PLN relies on large government subsidies to support operations and, especially, capital expenditure. The average tariff for electricity at the end of 2011 was estimated to be around Rp 729 per kWh (around US 8.1 cents) while PLN's average cost of production was put at around Rp 1,100 (US 12.2 cents). The electricity subsidy provided from the national budget in 2011 was initially budgeted at Rp 65.6 trillion (around $US 8 billion at the time) but the amount increased to Rp 91 trillion (around $US 10 billion) by the end of 2011. In March 2012 the government proposed a reduction in the electricity subsidies (which involved an increase in the price of electricity to consumers) to the national parliament but the proposal was rejected. As a result, the PLN came under pressure to try to find economies to reduce the ballooning level of subsidies.

In recent years, as economic conditions in Indonesia have improved following the Asian financial crisis of 1997-98, PLN has also been able to undertake significantly increased borrowings through bond issues. In November 2011, for example, PLN issued $1 billion of debt at reasonable market prices (10 years at 5.5% coupon value). Demand for the debt (estimated at $5.5 billion) significantly exceeded the supply of bonds on offer. In October 2012 it was reported that the PLN planned to issue 30-year USD bonds which had been graded BB by Standard and Poor's rating agency. Through the issuance of debt of this kind the PLN is both raising funds and participating in the development of the domestic debt market in Indonesia.

The PLN also accesses other government-supported sources of financing. In December 2011 the company received a Rp 7.5 trillion soft loan (around $US800 million at the prevailing exchange rate) from the Indonesian state investment agency PIP (Pusat Investasi Pemerintah or the government investment unit, known as the Indonesia Investment Agency). The soft loan was provided for a total period of 15 years with a 5-year grace period for capital payments at a relatively low interest rate of 5.25% per annum

Investment programs

The overall investment program in the public electricity sector in Indonesia is largely dependent on two fast-track 10,000 MW investment programs initiated in recent years. The programs are behind schedule.

First 10,000 MW fast track program (FTP-1)

The first 10,000 MW fast track program (FTP-1) commenced in 2006 and was originally scheduled to be completed by 2010. As of mid-2012, except for one plant (PLTU Labuan) all the power plants were behind schedule. The program was still incomplete towards the end of 2014.

The FTP-1 comprises 35 power plants, mostly coal-fired. Ten of the plants are in Java-Bali. The other 35 mainly-smaller plants are in the Outer Islands.

Main plants in the program include the following:

Second 10,000 MW fast track program (FTP-2)

A second 10,000 MW program (FTP-2) was announced in 2010 but implementation is lagging following delays in FTP-1. The initial deadline for the second track was end-2016.

PLN Investment financing

At the end of 2011 it was announced that expected expenditures for PLN during 2012 would be around Rp 260 trillion (around $29 billion) made up of Rp 191 trillion (around $21 billion) for operational costs and Rp 69 billion (around $7.6 billion) for capital expenditures. Financing flows for the capital expenditures were forecast as follows:

PLN Investment projects and plans

The PLN has plans to build a significant number of coal mine-mouth power plants in Sumatra and Kalimantan. These include the following:

Long-term plans (2013-2022)

The PLN has issued an Electricity Supply Business Plan (undated) for the period 2013-2022. The plan talks of an additional generating capacity generating need of 59.5 GW over the period. Total estimated expenditure (public and private) is put at around $125 billion. Useful details are set out in the Executive Summary of the Business Plan.

Sumatra-Java Grid

To provide power from plants in Sumatra to the main Indonesian electricity market in Java, in April 2012 PLN began the tender process for a Rp 20 trillion (approx $US 2.18 billion) project expected to be completed in 2017 which would provide 3,000 MW of power. The plan is for AC current to be converted to DC current in the Muara Enim Converter Station, South Sumatra and be converted back into AC current in the Bogor Converter Station, West Java. Between these sites, a 40 km 500 kv submarines cable would connect Ketapang in Lampung and Salira in Banten.