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How PLN is dragging down Indonesia
Its huge miscalculation over our future energy needs is not only miring PLN in debt, it’s putting pressure on the state budget.
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A PLN customer checks an electricity meter at a low-cost apartment complex in Kendari, Southeast Sulawesi, on July 19. (Antara Foto/Jojon)
I
ndonesia’s state-owned utility company PT PLN has been given a sharp rap on the knuckles from the Minister of Finance. Its huge miscalculation over our future energy needs is not only miring PLN in debt, it’s putting pressure on the state budget.
That’s another way of saying ordinary Indonesians will have to pick up the bill through higher electricity prices. We will be paying the price for PLN’s recklessness.
Let’s look at how this might play out: a state-owned electricity company over-reaches itself by spending billions of dollars on coal-fired power plants which fall behind schedule or are under-utilized. Its finances deteriorate rapidly, so it begins to siphon money from the state budget, the state bank and national pension funds.
Electricity prices quadruple in less than ten years to try to cover its rising debts, the country suffers blackouts, it slips into repeated recessions and international ratings agencies cut the nation’s debt to junk status making it much harder to raise money on the international money markets.
A country once seen as an economic rising star faces economic collapse.
“That could never happen,” PLN will say. But it already has — in South Africa.
South Africa is a richer country than Indonesia with a more developed economy. But reckless investment decisions by Eskom, the state-owned electricity company, have contributed to a huge economic crisis.
