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PLN hopes to hedge 20% of yearly investment needs
State-owned electricity firm PLN is aiming to hedge almost a quarter of its yearly investment to offset potential losses caused by exchange rate volatility, the firmâs senior executive has said
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tate-owned electricity firm PLN is aiming to hedge almost a quarter of its yearly investment to offset potential losses caused by exchange rate volatility, the firm's senior executive has said.
PLN finance director Sarwono Sudarto said that his firm aimed to hedge 20 percent of the total funds needed by the company to finance its investments.
'Our needed investment reaches around US$7 billion each year and we want to hedge at least 20 percent of that,' he told reporters on the sidelines of a meeting of state enterprises' finance directors on Monday.
The electricity company's foreign exchange (forex) needs revolve at around $600 million per month.
As of the first four months of this year, PLN's foreign currency-denominated liabilities totaled between $12 billion and $13 billion.
Previously in April, PLN signed a hedging facility worth $950 million with state lenders Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI).
PLN has so far become one of the state-owned enterprises with a huge portion of foreign currency-denominated loans, posing a risk for forex losses when the rupiah weakens against foreign currencies, such as the US dollar.
The company pocketed Rp 10.5 trillion (US$778.8 million) in net losses in the first half of this year, a stark contrast to the Rp 14.5 trillion in net profits made during the same period last year, according to the firm's financial report.
The net losses were attributed to its rising forex losses that hit Rp 16.9 trillion in the January to June period of this year, almost threefold from the Rp 4.4 trillion over the same period last year.
PLN has a huge need for forex debts to partly finance the government's 35,000-megawatt (MW) power plants project over the next four years, along with independent power producers (IPP).
The electricity company's share in the project was initially set at 10,000 MW, but the Energy and Mineral Resources Ministry has recently stated that the share would be reduced to only 5,000 MW.
State-Owned Enterprises Minister Rini Soemarno said during the finance directors meeting that she encouraged PLN to reduce its forex risk in regards to contracts with IPPs.
'We're now facing the weakening of the rupiah, so we have to thoroughly manage liabilities [if it's in forex]. It has to be carefully managed so that it won't cause any trouble in the future' she said.
In another development, the state-owned oil and gas giant will also enlarge a portion of its hedged liabilities.
'We've just started one [hedging] transaction below $10 million. If everything goes smoothly, we will start enlarging the portion next month,' said Pertamina finance director Arif Budiman.
State lenders Bank Mandiri and Bank Rakyat Indonesia (BRI) have stated their readiness to support hedging measures. Both lenders have also stated that they are ready to hedge loans received by state enterprises from the Chinese Development Bank (CDB).
