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Indonesia introduces three baby-step methods to axe coal plants
There are three options to retire coal-fired power plants earlier: write-off from PLN’s book, a spin-off with blended financing and independent power producer (IPP) refinancing.
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Dirty energy: Smoke rises from chimneys at the Suralaya coal power plant in Cilegon, Banten, on Sept. 21, 2021. The government has delayed implementing a carbon tax on the energy sector despite its pledge to significantly reduce greenhouse gas emissions. (AFP/Bay Ismoyo)
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ndonesia takes baby steps toward the country’s net-zero emissions goal by introducing three schemes to retire coal-fired power plants early. Experts have expressed optimism that stakeholders would be able to move forward with the plan despite the long-winded process.
Hartanto Wibowo, state-owned electricity monopoly PLN’s director of corporate planning and business development, introduced on Oct. 18 three options to retire coal-fired power plants earlier: write-off from PLN’s book, a spin-off with blended financing and independent power producer (IPP) refinancing.
PLN and state-owned coal miner PT Bukit Asam signed on the same day a principal framework agreement (PFA), which “probably” would be carried out using the spin-off blended financing scheme, Hartanto said in a statement.
The PFA, aimed to technically slash its operational life from 24 years to 15 years, would be followed by Bukit Asam’s acquisition of PLN’s Pelabuhan Ratu coal-fired power plant.
However, to date, the deals are still undergoing a due diligence process.
Elrika Hamdi, an energy economist with the Institute for Energy Economics and Financial Analysis (IEEFA), said challenges to implement the deal would include the complex valuation process and the coal mining company’s financial condition.
“It could be a lengthy process. Meanwhile, questions remain on how Bukit Asam will pay for the coal-fired power plant -- whether they will use their cash equity, look for lenders or have access to the government’s blended finance scheme, which would lower the financing cost,” she told The Jakarta Post on Wednesday. “We need more details [on how the scheme will be implemented].”
