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number of publicly listed firms are looking to venture into the power-supply business to cash in on more stable income as the government'€™s plan to boost the country'€™s electricity capacity has opened doors for expansion.

The companies, which are mostly from the construction and coal-mining sectors, have stated that they are mulling making an entry into the independent power producer (IPP) business, looking to tap opportunities offered by the new government'€™s 35,000 megawatt (MW) electricity procurement plan in the next five years, 20,000 MW of which is expected from IPPs.

Reza Nugraha, an analyst from MNC Securities, said that the companies'€™ move to indulge in the power-supply business was indeed a smart move, if not a must.

'€œAs we can see, most of the companies making an entry into the power-supply business are either coming from the construction sector or from the coal-mining sector. For construction firms, it is a move to diversify their business, and it'€™s only normal for them to seek out business that is currently booming,'€ he said.

'€œBut the case is different for coal miners, diversifying to power-plant business is a must for them amid a slowdown in their coal business. Becoming a coal-fired power plant operator means that there will be fixed customers that will absorb their coal output in the midst of oversupply and slowing demands such as now,'€ Reza continued.

Coal miners are facing sagging business following a sharp decline in coal prices, hauled by oversupply and slowing demand from China, one of the world'€™s largest coal importers.

Indonesia'€™s coal price reference (HBS) showed that coal prices have slumped by nearly 60 percent in the last three years to hover at around US$64 per ton as of January.

Energy company Indika Energy, for instance, is looking to develop a mega-power plant project, with at least US$1.2 billion in investment and 1,000 MW in capacity.

Indika president director Wishnu Wardhana said recently his company was considering joining a consortium to develop a power plant in Java and was currently approaching foreign partners to jointly operate the power plant, also to benefit from the government'€™s mega power project. The company is looking to own around a 30-percent stake in the consortium.

State-run construction company Wijaya Karya (Wika) is also looking to make an entry into the business, saying that it is ready to develop three power plants in an attempt to diversify its business and to generate recurring income.

Wika'€™s president director, Bintang Perbowo, said that the company aimed at starting three new projects this year '€” a 2 x 600 MW power plant in South Sumatra and two 2 x 1,000 MW power plants in Banten. The country'€™s largest construction firm is aiming to have around a 15-percent stake in each of the projects, which might cost the consortium around $1.5 million to $2 million per MW.

Wika has to keep expanding its business, and Bintang saw gold in the government'€™s electricity road map.

Desmon Silitonga from Millenium Danatama Asset Management said that the profit margin offered by the IPP business was quite significant given rising energy needs.

'€œIndonesia still needs a lot of electricity if it really wants to achieve annual growth of 7 percent. With continuing rising demand, IPP can be a good business to explore especially for construction firms, especially due to the nature of their core business that has been so developed with tightening competition, which has started to squeeze profit margins,'€ he explained.

The country needs to add 5,700 MW in new capacity a year and around Rp 200 trillion of investment or face a power crisis, as demand grows about 7 percent per year, according to the Energy and Mineral Resources Ministry. A number of power-plant projects have been delayed, mostly because of land-acquisition problems. Without acceleration in power projects, Java and Bali are expected to face a power crisis as early as 2016.