F

inancial difficulties are forcing publicly listed energy company Indika Energy to withdraw from a mega power plant project that was initially estimated to cost about US$1.4 billion.

Indika vice president for corporate finance and investor relations Retina Rosabai said in Jakarta on Wednesday that with the company'€™s current financial condition, it would be difficult to continue the project, which was to have been located in Cirebon, West Java.

'€œWe have decided that it might not be the right time for us to participate in the project and we have decided to divert our portion in the consortium to Indika Mitra Energi [IME], our parent company,'€ Retina said.

The company'€™s cash balance as of December 2014 stood at around $411 million, while its debt reached $1.02 billion. IME holds a 63.5-percent stake in the company.

Indika, as previously reported, had been planning to work on a 1,000-megawatt (MW) power plant through a consortium that includes Marubeni Corporation, South Korean electricity production and supply company Korea Midland Power and South Korean resources and energy company Santan Corporation.

The company has previously cited that it aimed at having around a 25 to 30 percent stake in the project.

The project, president director Wishnu Wardhana said previously, was expected to be one of the government'€™s numerous infrastructure projects designed to generate an additional 35,000 MW of electricity in the next five years.

Out of the total figure, around 25,000 MW is expected to come from independent power producers (IPP), while the remainder is to come from state electricity company PT PLN.

Indika and its three foreign partners had previously worked on a 660-MW power plant, also in Cirebon, through Cirebon Electric Power (CEP), in which it holds a 20 percent stake. The power plant has been operating since 2013.

Indika has 20 percent stake in CEP, which is one of the IPPs in Indonesia, while Marubeni Corporation owned the biggest stake with 32.5 percent, followed by Korea Midland with 27.5 percent.

With plunging coal prices, Indika, however, has been facing a difficult year, having continuously booked net losses that make it difficult for the company to provide cash for the massive expansion.

Indika ended its financial performance in the red with $27.58 million in net losses last year, after registering a net loss of $53.8 million in the previous year.

The company'€™s business comprises coal mining, mining infrastructure and energy services. Indonesia'€™s coal price reference (HBA) dropped by 27 percent last year, thus affecting the company'€™s business.