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Major losses make PLN a risky bet
PLN’s aggressive coal power growth plans will lead to a sharp increase in required subsidies and rates over the next four years, with their required support nearly tripling by 2021.
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Employees of state electricity firm PLN's West Nusa Tenggara branch carry equipment to lay down an undersea cable network in Gili Gede, Lombok, in this Feb. 22 file photo. Connectivity and access has long been a challenge in the archipelagic province. (JP/Panca Nugraha)
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n early May, one of Japan’s major insurers, the Dai-ichi Life Insurance Company, became the first Japanese financial institution to restrict lending to coal-fired power plants.
This came only days after Allianz, Europe’s largest insurer, announced it would immediately pull its coverage from coal-fired power plants and coal mines, and barely a fortnight since banking giant HSBC ruled out coal power financing.
Nowhere will the importance of these announcements resonate more strongly than within the corridors of Indonesia’s state electricity company PLN, which has launched a US$5 billion global medium-term note program to raise money to expand its largely coal-based power business.
While European and United States institutions have been clamping down on coal lending for some time, Japanese financiers, both public and private, had seemed steadfastly in the fossil fuel camp until now. But the Dai-ichi move should come as no surprise, since no institution is immune to the inevitable global transition from coal to clean energy.
What’s more, since Japanese financial players tend to move as a pack, quieter but more determined shifts are undoubtedly already in the pipeline.
At a recent annual Coaltrans Conference, PT Adaro Power deputy CEO Dharma Djojonegoro told an audience packed with industry executives that “it is getting more difficult to find financing for coal power plants, with many European banks and export credit agencies ruling out coal financing, and the Japanese trailing behind”.
The timing could not be much worse for PLN, which began road shows in late April offering US dollar bonds and/or offshore rupiah bonds that will be issued in the near future.
